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SRF reports 86.4% Net Income growth and 2.8 pp EBITDA Margin growth from 13.2% to 16.0%

11-05-2015 • About SRF ($SRF) • By InTwits

SRF reported FY2015 financial results today. Overall the company's long term financial model is characterised by the following facts:
  • SRF has high CAPEX intensity: 5 year average CAPEX/Revenue was 10.0%. At the same time it's in pair with industry average of 9.4%.
  • CAPEX is quite volatile: 5,118 in FY2015, 7,995 in FY2014, 7,042 in FY2013, 0 in FY2012, 0 in FY2011
  • The company has business model with low profitability: ROIC is at 9.7%
  • It operates with high leverage: Net Debt/EBITDA is 3.3x while industry average is 2.0x
Below you can find a comprehensive analysis of the key data driving the company's performance and stock price.

SRF ($SRF) key annual financial indicators

mln. INR201120122013201420152015/2014
Net Income4,8423,7882,5301,6253,02886.4%
Balance Sheet
Short Term Debt6,3958,0076,0794,6276,46739.8%
Long Term Debt5,6957,17110,96117,12617,8824.4%
Cash flow
Revenue growth-39.6%17.4%-5.3%5.9%12.5%
EBITDA growth44.3%1.2%-27.8%-22.4%36.3%
EBITDA Margin27.4%23.6%18.0%13.2%16.0%2.8%
Net Income Margin14.3%9.5%6.7%4.1%6.7%2.7%
CAPEX, % of revenue0.0%0.0%18.7%20.0%11.4%-8.6%
Net Debt/EBITDA1.2x1.5x2.2x4.0x3.3x-0.7x

Revenue and profitability

SRF's Revenue jumped on 12.5% in FY2015. Despite revenue decline the EBITDA margin expanded. EBITDA Margin increased on 2.7 pp from 12.4% to 15.1% in FY2015.

Net Income marign increased on 2.7 pp from 4.1% to 6.7% in FY2015.

Capital expenditures (CAPEX) and working capital investments

In FY2015 SRF had CAPEX/Revenue of 11.4%. The company showed fast CAPEX/Revenue growth11.4 pp from 0% in FY2012 to 11.4% in FY2015. For the last three years the average CAPEX/Revenue was 16.7%.To deliver this fast growth the company invested a large share of EBITDA (71.3%) to CAPEX.

Return on investment

The company operates at good ROE (13.88%) while ROIC is low (9.70%). ROIC increased on 2.6 pp from 7.1% to 9.7% in FY2015. ROE increased on 5.8 pp from 8.1% to 13.9% in FY2015.

Leverage (Debt)

Debt level is 3.3x Net Debt / EBITDA and 3.4x Debt / EBITDA. Net Debt / EBITDA dropped on 0.7x from 4.0x to 3.3x in FY2015. Debt surged on 11.9% in FY2015 while cash jumped on 32.8% in FY2015.

Appendix 1: Peers in Textiles

Below we provide SRF benchmarking against other companies in Textiles 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 5 FY2011 FY2012 FY2013 FY2014 FY2015
Olympia Industries ($OLYMPTX)-99.6%-58.0%-96.6%74,809.1%
Gujarat Cotex ($GUJCOTEX)625.9%-6.2%-66.0%176.2%
T T ($TTL)-39.2%-21.8%28.7%47.8%
Filatex India ($FILATEX)-74.3%-2.7%158.7%44.5%
Gtn Textiles ($GTNTEX)-27.7%-8.8%51.2%39.4%
Median (73 companies)-29.3%4.8%10.0%14.4%3.0%
SRF ($SRF)17.4%-5.3%5.9%12.5%

Top companies by EBITDA margin, %

Top 5 FY2011 FY2012 FY2013 FY2014 FY2015
Ruby Mills ($RUBYMILLS)25.2%28.3%25.1%28.6%
Vardhman Textiles ($VTL)24.9%13.8%20.1%24.3%16.5%
Welspun India ($WELSPUNIND)13.3%12.2%16.8%22.6%24.1%
Nitin Spinners ($NITINSPIN)23.7%10.5%19.7%19.3%17.0%
Shri Dinesh Mills ($SHRIDINE)24.7%22.4%18.5%18.7%
Median (53 companies)12.7%6.3%9.5%9.5%11.8%
SRF ($SRF)27.4%23.6%18.0%13.2%16.0%

Top companies by CAPEX/Revenue, %

Top 5 FY2011 FY2012 FY2013 FY2014 FY2015
Jindal Worldwide ($JINDWORLD)3.6%3.0%10.5%20.7%
Welspun India ($WELSPUNIND)11.3%5.6%7.8%16.4%10.9%
Sel Manufacturing Company ($SELMCL)54.2%53.9%25.1%14.0%
Grasim Industries ($GRASIM)7.8%17.7%21.7%11.6%10.2%
Dcm ($DCM)3.0%2.7%9.1%11.6%
Median (20 companies)4.5%3.4%5.3%6.7%8.9%
SRF ($SRF)0.0%0.0%18.7%20.0%11.4%

Top companies by ROIC, %

Top 5 FY2011 FY2012 FY2013 FY2014 FY2015
Nitin Spinners ($NITINSPIN)13.8%6.0%19.5%21.5%17.5%
Sutlej Textiles & Industries ($SUTLEJTEX)16.0%9.5%13.6%19.8%14.6%
Vardhman Textiles ($VTL)15.5%6.6%11.9%17.3%8.5%
Maral Overseas ($MARALOVER)4.6%14.1%16.0%
Rswm ($RSWM)17.4%2.2%15.2%15.5%11.8%
Median (126 companies)10.1%3.5%9.0%9.6%11.8%
SRF ($SRF)25.7%20.9%11.1%7.1%9.7%

Top companies by Net Debt / EBITDA

Top 5 FY2011 FY2012 FY2013 FY2014 FY2015
Jaybharat Textiles & Real Estate ($JAYTEX)8.4x10.9x53.6x23.8x
Sree Jayalakshmi Autospin ($SREEJAYA)3.4x9.7x12.8x
Bombay Rayon Fashions ($BRFL)5.9x4.9x4.9x11.6x
Sel Manufacturing Company ($SELMCL)5.6x9.4x6.6x11.5x
Ruby Mills ($RUBYMILLS)15.9x12.6x15.3x10.8x
Median (69 companies)3.9x3.8x3.2x0.0x1.2x
SRF ($SRF)1.2x1.5x2.2x4.0x3.3x