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Fast Retailing Co Ltd reports 32.2% EBITDA growth in 2018 and 1.8 pp EBITDA Margin growth from 11.5% to 13.2%

11/10/2018 • About Fast Retailing Co Ltd ($6288) • By InTwits

Fast Retailing Co Ltd reported FY2018 financial results today. Overall the company's long term financial model is characterised by the following facts:
  • Fast Retailing Co Ltd is a growth stock: FY2018 revenue growth was 14.4%, 5 year revenue CAGR was 13.3% at FY2018 ROIC 19.2%
  • Fast Retailing Co Ltd has low CAPEX intensity: 5 year average CAPEX/Revenue was 2.2%.
  • The company has highly profitable business model: ROIC is at 19.2%
Below you can find a comprehensive analysis of the key data driving the company's performance and stock price.

Fast Retailing Co Ltd ($6288) key annual financial indicators

mln. JPY201420152016201720182018/2017
Gross Profit699,774848,538864,998909,2491,049,93715.5%
Net Income74,546110,02748,052119,280154,81129.8%
Balance Sheet
Short Term Debt3,8944,1884,8215,5967,95242.1%
Long Term Debt27,60425,513274,090273,467502,67183.8%
Cash flow
Revenue growth21.0%21.6%6.2%4.2%14.4%
EBITDA growth-0.3%24.9%-16.5%30.0%32.2%
Gross Margin50.6%50.5%48.4%48.8%49.3%0.5%
EBITDA Margin11.4%11.7%9.2%11.5%13.2%1.8%
Net Income Margin5.4%6.5%2.7%6.4%7.3%0.9%
SG&A, % of revenue37.5%37.7%37.3%36.8%35.3%-1.5%
CAPEX, % of revenue3.0%2.7%1.9%1.8%1.5%-0.3%
Net Debt/EBITDA-1.8x-1.7x-0.6x-1.9x-1.7x0.2x

Revenue and profitability

The company's Revenue surged on 14.4%. Revenue growth happened at the same time with EBITDA margin expansion. EBITDA Margin increased slightly on 1.8 pp from 11.5% to 13.2% in FY2018.

Gross Margin showed almost no change in FY2018. SG&A as a % of Revenue decreased slightly on 1.5 pp from 36.8% to 35.3% in FY2018.

Net Income marign increased slightly on 0.86 pp from 6.4% to 7.3% in FY2018.

Capital expenditures (CAPEX) and working capital investments

In FY2018 the company had CAPEX/Revenue of 1.5%. Fast Retailing Co Ltd showed small CAPEX/Revenue decline of 1.2 pp from 2.7% in FY2015 to 1.5% in FY2018. It's average CAPEX/Revenue for the last three years was 1.7%.

Return on investment

The company operates at good ROIC (19.16%) and ROE (19.42%). ROIC increased slightly on 0.87 pp from 18.3% to 19.2% in FY2018. ROE increased slightly on 1.2 pp from 18.3% to 19.4% in FY2018.

Leverage (Debt)

Debt level is -1.7x Net Debt / EBITDA and 1.8x Debt / EBITDA. Net Debt / EBITDA jumped on 0.2x from -1.9x to -1.7x in FY2018. Debt surged on 83.0% while cash jumped on 46.2%.

Appendix 1: Peers in Retail

Below we provide Fast Retailing Co Ltd benchmarking against other companies in Retail industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.

Top companies by Revenue growth, %

Top  FY2014 FY2015 FY2016 FY2017 FY2018
Sun Art Retail Group Ltd ($6808)6.6%5.0%4.2%1.9%
Median (1 company)3.1%-1.0%-4.1%1.9%
Fast Retailing Co Ltd ($6288)21.6%6.2%4.2%14.4%

Top companies by Gross margin, %

Top  FY2014 FY2015 FY2016 FY2017 FY2018
Sun Art Retail Group Ltd ($6808)22.9%23.3%23.9%24.1%
Median (1 company)35.0%33.3%42.6%24.1%
Fast Retailing Co Ltd ($6288)50.6%50.5%48.4%48.8%49.3%

Top companies by EBITDA margin, %

Top  FY2014 FY2015 FY2016 FY2017 FY2018
Sun Art Retail Group Ltd ($6808)7.1%6.5%6.8%7.2%
Median (1 company)8.9%7.1%6.7%7.2%
Fast Retailing Co Ltd ($6288)11.4%11.7%9.2%11.5%13.2%

Top companies by CAPEX/Revenue, %

Top  FY2014 FY2015 FY2016 FY2017 FY2018
Sun Art Retail Group Ltd ($6808)6.0%5.0%3.6%2.5%
Median (1 company)3.8%3.5%2.2%2.5%
Fast Retailing Co Ltd ($6288)3.0%2.7%1.9%1.8%1.5%

Top companies by ROIC, %

Top  FY2014 FY2015 FY2016 FY2017 FY2018
Sun Art Retail Group Ltd ($6808)18.9%15.0%16.1%17.7%
Median (1 company)8.5%5.8%6.3%17.7%
Fast Retailing Co Ltd ($6288)17.9%19.8%14.8%18.3%19.2%

Top companies by Net Debt / EBITDA

Top  FY2014 FY2015 FY2016 FY2017 FY2018
Sun Art Retail Group Ltd ($6808)-0.8x-0.9x-1.2x-1.4x
Median (1 company)-0.2x-0.5x-0.4x-1.4x
Fast Retailing Co Ltd ($6288)-1.8x-1.7x-0.6x-1.9x-1.7x