Centum Electronics demonstrates profitable growth

05-06-2014 • About Centum Electronics ($CENTUM) • By InTwits

Have you thought about Centum Electronics as a growth stock? Its revenue performance, profitability and healthy financial model stands it out vs. other public companies on the market.

Growth story

Centum Electronics showed growth in the last financial year. Centum Electronics's revenue surged on 50.4% in FY2014. EBITDA also increased considerably: 86.4% for the same period.

In the longer period the company showed fast revenue growth of 18.7% from FY2011 to FY2014 annually. EBITDA surged on 42.8% from FY2011 to FY2014 annually.

Centum Electronics ($CENTUM) financials for the last 5 years

mln. INR	FY2010	FY2011	FY2012	FY2013	FY2014
Revenue	5,756	2,539	2,574	2,826	4,252
Revenue growth, %		-55.9%	1.4%	9.8%	50.4%
SG&A, %
EBITDA	136	301	330	470	876
EBITDA growth, %		121.2%	9.6%	42.5%	86.4%
EBITDA margin, %	2.36%	11.9%	12.8%	16.6%	20.6%
Net Income	4	50	72	93	347
Net Income margin, %	0.0762%	1.96%	2.79%	3.28%	8.15%

CAPEX	61	127	141	68	285
CAPEX/Revenue, %	1.06%	5.00%	5.48%	2.41%	6.69%
Debt	415	613	640	621	528
Cash	17	5	5	40	129
Net Debt/EBITDA	2.9x	2.0x	1.9x	1.2x	0.5x

ROIC, %	0.7%	10.9%	10.6%	16.9%	35.8%
ROE, %	0.7%	5.5%	7.6%	9.4%	30.1%

Profitability and return on investment

EBITDA growth was partly attributed to margin expansion. The company's EBITDA margin surged on 4 pp from 16.6% to 20.6% in FY2014. If we look for the longer period the company's EBITDA margin surged on 8.70 pp from 11.9% in FY2011 to 20.6% in FY2014.

We call Centum Electronics an attractive growth stock as together with the growth it delivers high ROIC at 35.8%. During the last three years it surged - it was 10.9% in FY2011. It's average level of ROIC for the last three years was 21.1%.

Centum Electronics's Net Income margin surged on 4.90 pp from 3.30% to 8.20% in FY2014. In the last 3 years Centum Electronics's Net Income margin surged on 6.20 pp from 2% in FY2011 to 8.20% in FY2014.

Centum Electronics operates at ROE of 30.1%. For the last three years the average ROE was 15.7%.

Capital expenditures (CAPEX)

To fuel this fast growth Centum Electronics had to invest in CAPEX.In FY2014 the company had CAPEX/Revenue of 6.69%. CAPEX/Revenue surged on 1.69 pp from 5.00% in FY2011 to 6.69% in FY2014. Average CAPEX/Revenue for the last three years was 4.86%.

Leverage (Debt)

Centum Electronics has low debt level at 0.5x Net Debt/EBITDA - at the same time with high growth. In the longer period Centum Electronics's leverage dropped on 1.56x from 2.02x in FY2011 to 0.46x in FY2014.

Valuation vs. comparable companies

The company trades at 4.2x EV/EBITDA which is 74% lower than 16.0x Misc.Commercial Services industry avearge calculated based on 194 companies. The company trades at 9.3x P/E which is 63.3% lower than 25.4x Misc.Commercial Services industry avearge calculated based on 3 companies.

For capital intensive compnanies it's worth taking a look at EV/(EBITDA-CAPEX) multiple. The company trades at 6.2x EV/(EBITDA-CAPEX) which is not surprisingly 143% higher than 2.5x Misc.Commercial Services industry avearge calculated based on 2 companies.

Peers in Misc.Commercial Services

Below you can find Centum Electronics benchmarking vs. other companies in Misc.Commercial Services industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.

Top companies by Revenue growth, %

Top
	FY2010	FY2011	FY2012	FY2013	FY2014
Trinity Tradelink Limited ($TRITRADE)		-95.1%			408,047.0%
Delta Corp ($DELTACORP)		5.9%	-2.9%	16.6%	31.3%
Crest Ventures Limited ($CREST)		-10.7%	-39.7%	9.2%	-0.8%

Median (3 companies)		-10.7%	-21.3%	12.9%	31.3%
Centum Electronics ($CENTUM)		-55.9%	1.4%	9.8%	50.4%

Top companies by EBITDA margin, %

Top
	FY2010	FY2011	FY2012	FY2013	FY2014
Delta Corp ($DELTACORP)	13.5%	49.3%	27.7%	23.7%	27.0%
Crest Ventures Limited ($CREST)	14.4%	-1.2%	4.9%	13.4%	21.8%
Trinity Tradelink Limited ($TRITRADE)	-0.0%	-1.3%			0.9%

Median (3 companies)	13.5%	-1.2%	16.3%	18.6%	21.8%
Centum Electronics ($CENTUM)	2.4%	11.9%	12.8%	16.6%	20.6%

Top companies by CAPEX/Revenue, %

Top
	FY2010	FY2011	FY2012	FY2013	FY2014
Delta Corp ($DELTACORP)	4.8%	32.0%	95.5%	74.3%	14.0%
Crest Ventures Limited ($CREST)	3.0%	4.5%	5.2%	4.0%	4.4%
Trinity Tradelink Limited ($TRITRADE)	0.0%	0.0%		0.0%	0.0%

Median (3 companies)	3.0%	4.5%	50.4%	4.0%	4.4%
Centum Electronics ($CENTUM)	1.1%	5.0%	5.5%	2.4%	6.7%

Top companies by ROIC, %

Top 5
	FY2010	FY2011	FY2012	FY2013	FY2014
Delta Corp ($DELTACORP)	7.0%	24.3%	8.5%	6.7%	10.1%
Trinity Tradelink Limited ($TRITRADE)		-52.6%	-138.6%	-242.1%	5.1%
Greencrest Financial Services ($GREENCREST)				1.8%	2.2%
Lifeline Drugs & Pharma ($LIFELINE)			3.3%	2.8%	1.2%
Sarvamangal Mercantile Co ($ZSARVAMA)

Median (7 companies)	7.0%	-14.2%	1.5%	1.8%	3.7%
Centum Electronics ($CENTUM)	0.7%	10.9%	10.6%	16.9%	35.8%

Top companies by Net Debt / EBITDA

Top
	FY2010	FY2011	FY2012	FY2013	FY2014
Crest Ventures Limited ($CREST)	-3.2x		-1.8x	0.2x	2.8x
Delta Corp ($DELTACORP)	5.0x	0.8x	3.2x	4.4x	2.1x
Lifeline Drugs & Pharma ($LIFELINE)			-0.7x	-0.5x	-1.1x
Trinity Tradelink Limited ($TRITRADE)					-2.9x

Median (4 companies)	0.9x	0.8x	-0.7x	0.2x	0.5x
Centum Electronics ($CENTUM)	2.9x	2.0x	1.9x	1.2x	0.5x

Centum Electronics stock price chart

Centum Electronics financials

mln.	FY2010	FY2011	FY2012

Revenue	5,756	2,539	2,574
EBITDA	136.1	301.0	329.8
Net income	4.389	49.723	71.899
CAPEX	60.726	127.1	141.1
Debt	414.8	612.9	639.8
Cash	17.136	4.597	5.452

About Centum Electronics

Centum Electronics Limited, together with its subsidiary, Centum Rakon India Private Limited, designs, develops, manufactures, sells, and exports electronic modules, subsystems, and microelectronic circuits for defense, aerospace, space, industrial, medical, and communications markets. It offers various products for defense, such as electronics for inertial systems, BLDC controllers, laser receivers, electronic delay units, missile interface units, DC-DC converters, high-wattage power supplies, onboard computers, microelectronic products, PIN diode drivers, and power OpAmps. The company also provides a range of products and services in the areas of satellite bus systems, satellite payload systems, and launch vehicle systems. In addition, it designs and develops power products, such as DC-DC and BLDC controllers, AC-DC converters, power supplies, power op-amps, and solid state relays. Further, the company offers frequency control products, including simple packages oscillators, voltage controlled crystal oscillators, temperature compensated crystal oscillators, and oven controlled crystal oscillators. Additionally, it provides design services, electric manufacturing solutions, and mechanical solutions. The company has operations in North America, Europe, India, and rest of Asia. Centum Electronics Limited was founded in 1993 and is headquartered in Bengaluru, India.