All About Equity Research Report

What's an equity research report?

In the past few decades, India's financial system has undergone significant changes. As quality information is more readily available, so have small investors. Quality information has become a sign of quality for common investors. Equity research reports are now synonymous with high-quality information. Professional equity analysts create research reports that offer recommendations to investors on actions such as buy, sell or hold. Research reports can also include additional information such as an overview of the company, the industry, financial metrics and target price. There are two main types of equity research reports: fundamental and Technical.

Technical analysis is based upon the historical price movements of a security. Analysts attempt to spot a pattern in the movement of a security and recommend actions in technical reports.

The fundamental analysis relies on qualitative factors like the management quality, expected growth, and business strategy. Analysts use these factors to project future earnings and make recommendations in fundamental reports.

Technical reports are best suited for day traders while fundamental reports can be used for long-term investors.

Access to research reports is a time-consuming and expert task. Previously, only paid customers had access. Now, you can access research reports at most brokerage firms. Look for brokerage reports on the site of the brokerage firm.

Sections from research reports

Research reports can vary in structure from brokerage to brokerage. As they are more widely read by investors, we will only discuss fundamental research reports. For the sake of understanding, we will use an Angel One Report. This report analyzes UltraTech Cement's performance during the Oct-Dec quarter. Here is the link to the report.

  • Basic Description: Equity research reports usually start with basic information about the company. This section includes the company's name, ticker symbol and sector of operation. It also lists the market capitalisation, stock exchanges it is listed upon, as well as the ticker symbol. This section also contains the shareholding pattern. Any changes in the shareholding pattern should be monitored. An increase in institutional investors' shareholding is generally considered to be a positive sign for the long-term prospects. However, the most important part is the analyst's recommendation. It is prominently written at the top of the description.
  • - Business description: Here, analysts provide a brief overview of the company's business. The section provides information about the company's products and services, as well as the key factors that drive revenue growth and earnings growth. This section provides a good overview of the company and is especially important for investors new to the market. This information comes mainly from industry publications and regulatory filings. Angel One reports discuss a decrease in logistics and energy costs and an increase of the cost raw materials. This is the reason for an increase in the company's operating margin.
  • Industry overview: Without context, data is meaningless. Without an understanding of the industry dynamics, it would be impossible to know anything about the company's business. This section gives an overview of the industry as a whole and the company's competitive position. This section also includes information about the production capabilities of the company, as well as pricing strategies and market share.
  • - Management and governance: This section examines the management qualities of the company. This section is not available in all research reports. It includes the capital allocation track record and the history of senior managers. This section includes information about the key management personnel's shareholdings and remuneration.
  • - Financial analysis: This section contains a brief write-up in which the analysts give insight into their thinking. They explain why they made the recommendation. Analysts who recommend buying will give reasons for their recommendation. This is also true for a hold or sell rating. This section is dominated by conventional valuation metrics and formulas. The Angel One report shows that analysts are optimistic about the long-term prospects for UltraTech Cement. The reasons they give are higher production, price discipline and low freight prices.
  • - Investment risk: All investments are susceptible to risk. Analysts discuss the risks that may affect their recommendations. These risks could be operational or financial. Angel One analysts identified risks such as a lower demand and reduced government spending on infrastructure.

Research reports can be formatted in many ways. However, most have the sections listed above. The chronology of research reports can vary and sections can be added or deleted depending on the context. Angel One's report, for example, is based upon quarterly earnings. It therefore includes a section about con call highlights. Analysts are invited to join companies for discussions about financial results.

Things you should remember when acting on a report

Although it's easy to get a research report, investors must bear the risk of losing their investment. You should establish your own check-and-balances system. Relying solely on a report can lead to unproductive results. Verify the credibility of any brokerage before you read a report. Only use reports from credible and well-established brokerages.

Another important factor to consider is the report's date. Research reports include a time frame and the target price. Major brokerage reports are widely distributed and it is important that you act quickly. The stock price may react if a lot of investors adopt the same recommendation as you. You might not reap all the benefits. You should always verify the date and not act on old reports.

Follow the research reports of the same brokerage for a while to benefit from their advice. You will be able judge the quality of the recommendations by following them over time. Only after you have read the reports for a while, can you learn about the strengths and weaknesses of each brokerage or analyst.

Frequently Asked Question

1. All research reports are free of charge

You will not have the ability to access all reports for free. The best reports are generally only available to paying customers of a brokerage company.

2. Is a brokerage company liable for any loss that is incurred from acting on a report?

The brokerage firm is not liable for any losses incurred by investors who act on research reports. The disclaimer at end of research reports clearly states that investors should do their own evaluations before investing.

3. Is a research report considered to be an official source for financial information?

Although the information in a research report has been thoroughly reviewed at different levels, it is not considered to be an official source of financial data for companies. The stock exchanges allow companies to upload their financial results.

4. Do research reports only apply to a single company?

There are many types of research reports. There are many types of research reports. Some focus on a specific company while others cover the entire sector. Sectoral research reports provide recommendations on the top companies in a particular sector.

What is Share Market?

How Does the Share Market Works?

Benefits Of Stock Market

Everything On Indian Stock Market

How to Invest in Shares

Basics of Stock Market

Tips for Share Market

Investment Guide for Share market Investments

How to Invest in Indian share Market?

What are Shares?

All About Equity Market

All About Equity Derivatives

All About Dividends

Risk Management Strategies

Tips For Young Investor to Manage Portfolio

Analysis of Financial Statements

All About Investments

3 Key Benefits of Investing

Large caps vs Mid caps vs Small caps

Choosing Equity over Gold, FD, Real estate. Why?