Equity Research

Report Writing
Dheeraj Vaidya (IIT Delhi, IIM Lucknow) :: JPMorgan, CLSA India
Corporate Bridge
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 Table of Contents

What is Equity Research Report?

Who are you clients?
Equity Research Report
Initiation Report
Industry / Sector Report
Equity Research

Strategy/Economics Reports
Results Update Report
Flash Report
Anatomy of Equity Research Report First Page
Comparing Equity Research Report
Dos & Don'ts of Research Report Writing
Research Report Writing Case Studies
Readability Statistics - Flesch-Kincaid Grade
Useful Financial Websites

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 What is Equity Research Report?

A document prepared by an analyst or strategist who is a part of the investment

research team in a stock brokerage or investment bank. A research report may focus
on a specific stock or industry sector, a currency, commodity or fixed-income
instrument, or even on a geographic region or country. Research reports generally,
but not always, have "actionable" recommendations (i.e. investment ideas that
investors can act upon).
Equity Research

Source: Investopedia

The equity research report is a communication from a securities firm

to its clients with a very specific purpose:
It is intended to help an investor make a decision about the allocation of
resources.
All other purposes are secondary.

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 Who are you clients?

Brokerage Houses Clients

JPMorgan Pension Funds
Goldman Sachs Life Insurance Companies
Enam Securities Non-life insurance companies
Credit Suisse Equity Mutual Funds
Equity Research

Nomura Hedge Funds

Morgan Stanley FIIs
Brokerage Houses SELL Ideas to
UBS the Clients Banks
Deutsche Bank HNIs
many more Retail Investors

Investors are looking at ideas for directing their own inquiries

First thing First!
Investment professionals receive more than 100 emails a day
They dont have more than 1-2 minutes to read the research report
The reason to read the report
One paragraph on key investment conclusions
What investor should do with the stock and why?

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 Equity Research Report Initiation Report

Initiation Reports
Brokerage houses when first initiate the coverage write a detailed report on the
company and includes all details
This report is typically a detailed report and can vary from 20-50 page report
Equity Research

Industry / Sector Report

Theme based report or sector based report which deals with sector update

Strategy/Economics Reports
These reports contain information on general macro economic conditions and is useful
for portfolio managers to take decision on country specific fund flows

Quarterly / Annual Results Update Report

These are 2-3 page report highlighting key result updates. These reports on not detailed
reports and contain only key highlights of quarterly/annual results

Flash/News Report
These are short 1-2 page that highlights any major events or quick result update

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 Equity Research Report Initiation Report
Equity Research

Initiating Coverage Report

Generally a long Report (here it is 38

pages!)

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 Equity Research Report Industry / Sector Report

Sector Report,
Equity Research

A detailed report with some

discussions about the companies in
the sector

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 Equity Research Report - Strategy/Economics Reports

Comments on Economic Indicators

Equity Research

Economic Data Details

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 Equity Research Report Results Update Report

Quarterly Result Update Report

Equity Research

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 Equity Research Report Results Update Report
Equity Research

Flash Report

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Equity Research

Anatomy of Equity Research Report

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 Anatomy of Equity Research First Page1/4

Recommendation
Target Price
Equity Research

An Interesting
Headline

Stock Data

Investment
Report Summary

Stock vs Index
Graph

Estimates &
Valuations

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 Anatomy of Equity Research First Page2/4
Equity Research

This is important
data that needs
to be shown on
the front page
itself!

Free Float is extremely important.

This indicates the tradable shares
(non-promoter holdings)

Stock vs Index Graph for

performance comparison

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 Anatomy of Equity Research First Page3/4

1Q09 Results
Update
Equity Research

Crisp and to the

point language

One bullet point

that talks about
valuations

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 Anatomy of Equity Research First Page4/4

Actual and
Expected Results
Trends on Key
Equity Research

Metrics

Valuation
Methodologies
used and its
estimates

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Equity Research

Comparing Equity Research Report

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 Difference between EXCELLENT and GOOD
Equity Research

What do you think

about this First Page
of the report?

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 Difference between EXCELLENT and GOOD

Starts with Company

Background

Shareholding Pattern chart

Equity Research

may not be required

Share Price graph takes more

than 1/3rd space!

Key Data contains very less

information

Language used is NOT to the

point and crisp.uses
paragraphs

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 Difference between EXCELLENT and GOOD
Equity Research

This second page

looks Worse!....forget
about the 3rd and 4th
page.

Please download the

report provided at
our online portal
www.cbresearch.in

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Equity Research

Dos & Don'ts of Research Report Writing

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 Before you Write

Golden Rule
Expectations from Dan Brown Novels is different, climax comes at the last!
Your Research Report are NOT anywhere close to novels, is diagonally opposite, target
price/recommendations comes first!
Equity Research

KISS
Keep it simple silly!
Readers hardly have 1-2 minutes to read your full report. They may not even scan even
till the 2nd page

Timely Reports
Issuing the report in a timely fashion
For Example, a result update report after 2-3 days may not be considered for reading

Client is sophisticated and professional

Always use to the point and precise points

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 Report Format Standardization!

Report
Keep the report short (maximum 20 pages)
Use Headlines and comment flashes
Make the format and layout as uncluttered as you can

Style
Equity Research

Should be jargon free - Avoid clichs e.g. jack of all, lions share
Be precise, clear and concise
Use short words like buy rather than purchase
Use of active voice e.g. We forecast.. is better than it is forecasted to..

Convention
Headings, Abbreviations
Bullet points, Currencies
Time, Dates
Names and Titles, Figures
Ranking, Upper Case, Lower Case and Title Case

Charts and Graphs

Use charts and graphs an appropriate picture really is worth thousand words
Put data in a table

Discuss the risks

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 Writing the FRONT PAGE! 1/2

Don't write one lengthy article. Rather, you should be prepared to do the
following things:
Summarize the entire article with a snappy headline, just like in a newspaper.
"Activision 1Q Beat, Raises Guidance for F10" or "Google: Robust Android Market Fuels
Growth
Your front page should have the three/four most important items in a bulletized,
Equity Research

headline format.
Write a headline for each, and a paragraph (or two) for each that lays out the facts and
describes your opinion. This is the main body of your report.
Each bullet should support your Buy/Sell/Hold recommendation.

The whole idea is to allow your client to skim your report's headlines in roughly
15-20 seconds.
By just reading the headlines, they should know all the main points of your article.
If they want to read further, they can read your text for your in-depth analysis

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 Writing the FRONT PAGE! 2/2

Typical items to look for and bulletize would be

Main reason that the company is enjoying success/failure, and what that means for the
future.
Secondary reason that the company is enjoying success/failure, or another big impact
item. "Google's acquisition of XYZ looks to add $0.10 to F10
Did the company issue "guidance" for the next quarter's results? If so, that's a bullet.
Equity Research

"GOOG reaffirmed F10 outlook

One point should be your valuation, although this might not be included in your report.
"GOOG is a Buy with $550 Price Target" would be the headline, and then you write a
few sentences about how you arrived at that conclusion, whether by using a DCF or
multiples, etc.

Avoid overly sensational language in your writing. Words like: amazing,

explosive, huge, etc should usually be avoided.

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Equity Research

Research Report Writing Case Studies

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 Case Study 1 General Guidelines

1Q FY09 GDP rose 7.9% v/s 8.8% last quarter and 9.2% in 1QFY08.
Growth was led by agri up 3%, industry up 6.9% and services up 10%.
GDP by expenditure indicates that while consumption growth at 7.9%
was higher than trends in 1QFY08, investments growth decelerated to
9%- the first time below double-digits since 4QFY03. We expect these
trends to continue in FY09.
Equity Research

Some things to note in the above example

1QFY09 is used for representing 1st quarter fiscal year 2009 (writing in this style saves
lot of space for the report)
Observe how the increase and decrease in growth rate
v/s = versus
We expect.

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 Case Study 2 Using Numbers

Heading - Solid 1Q Execution; But Orders Slow

Heading should be to the point and catch!

Solid 1Q09 Execution Drive Surprise; Rec. PAT +70%; Buy

We up L&T EPS by 3-4% over FY09-10E following Street-beating 1Q09 with Rec. PAT
Equity Research

Rs4.9bn, +70%YoY +30% ahead of consensus. Company hiked guidance on FY09 sales
growth to 30-35% v/s 30% earlier. However, key worry was slowed order inflows
(+24% v/s 30% guidance). An EPS CAGR of 36% (FY08-10E) & creation of vehicles of
future growth through high-end power equipment, shipyard, and big project wins at
IDPL, railways, defense, Nuke & Aerospace domains are potential triggers. We cut PO to
Rs3450 (3950) to factor in market/stock de-rating, higher risk-free rate (9% v/s 8%)
for Infra SPVs and discount to realty SPV.

Case Analysis
Always subordinate numerical information to a non-numerical idea.
Y-o-Y used year over year
+70% used to indicate growth of 70%
CAGR = cumulative average growth rate
Language used is very professional

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 Case Study 3 Using Graphs
Equity Research

Graphs included
should be very
professional
Include total
explanation within
the graph with some
additional
explanation as
comments

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 Case Study 4 Using Tables
Equity Research

Tables with
proper comments

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 Case Study 5 Valuation Discussion
Equity Research

Observe the way in which

Valuation paragraphs have
been included.

This is how you all should

include and discuss valuation
discussions

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 Case Study 6 Risk Discussion
Equity Research

Each report
should include
the Downside
Risks

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Equity Research

Useful Financial Websites

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 Useful Financial Websites

OFFICIAL WEBSITES
www.nseindia.com
www.bseindia.com
www.sebi.gov.in
www.rbi.org.in/
Equity Research

FINANCE BLOGS
www.cbacademy.in/blog
www.deadpresident.blogspot.com
http://www.rupya.com
http://www.finance30.com/

NEWS
www.moneycontrol.com
www.economictimes.indiatimes.com
www.livemint.com
www.bloombergutv.com
www.beta.profit.ndtv.com

ANALYSIS
www.myiris.com
www.equitymaster.com
www.123jump.com
www.macroscan.com
www.networkideas.org (For Editorials)
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 Useful Financial Websites

ANALYSIS
www.marketlive.in
www.sharesmarket.in
www.greymarket.co.in (Best For IPO)
www.banknetindia.com (All bank Related News)
www.fxstreet.com (For FOREX)
Equity Research

www.advfn.com (Almost Everything is there updated)

www.marketoracle.co.uk
www.marketwatch.com
www.fool.com

COMMODITIES:
www.kitco.com (Metal Prices)
www.thebulliondesk.com (Gold Prices)
www.commodityonline.com (Indian Commodities Market)
www.infodriveindia.com (For International Trade Basics, rules & Regulations)
www.rttnews.com
www.economywatch.com
www.opecnews.com
www.economy.com
www.portfolio.com

BOND MARKET UPDATE

www.sbidfhi.com (for Upcoming Bond Auctions & Auction Calendar)

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