Hello Muhammad,

You ask a great question, and I think your effort is a noble one and I guarantee that you will learn a lot! I will divulge a little bit of my secrets for such things : ) I confess have not read a Pakistani financial report before, but globally many are very similar in terms of what they disclose. If Pak statements are similar then I can help out : )

First, until you get comfortable with the ins and outs of an industry, read the annual reports from the first word to the very last word. Pay attention to the risk factors disclosed by the company. How does this company discuss its risks as compared with its competitors? Next, pay attention to the discussion about how the company makes money. Does this make sense to you? One way to frame this conversation is to assume that the company has raised capital on the liabilities side of its balance sheet, usually either debt or equity. They then purchase assets with that money. With the assets in place they make a product to sell. Then they sell that product, when they do the analysis switches to the income statement/profit and loss statement with revenues generated by a sale. Then they begin deducting all of the expenses of doing business. All of this leads hopefully to profits, which then go back into the equity portion of the balance sheet. As you are reading the annual report there should be clarity about this entire process. If you have any unanswered questions then that is an indication to get more information from the company, if possible. If not possible, what are analysts saying about the part you do not understand? What are journalists saying about it (though, most journalists usually do not do much analytical work or ask hard questions).

Once you have read these sections you have a qualitative appreciation for the business and can now turn your attention to the quantitative aspects, that is, the financial statements. Here you are looking to see if the numbers back up what management is claiming in its discussion of the business, as I wrote about above. Of course, of course, of course, read the financial statement footnotes!

After all of this reading you are very likely to have a firm grasp of the industry. Then you have to decide if you like the industry, if you like a company or companies within the industry. If so, then you can engage in a valuation of the business.

I hope this helps!

Jason