Kirloskar Brothers EBITDA decreased on 7.4% in 2015 while Revenue increased slightly on 1.4%

27-04-2015 • About Kirloskar Brothers ($KIRLOSBROS) • By InTwits

Kirloskar Brothers reported FY2015 financial results today. Overall the company's long term financial model is characterised by the following facts:

Kirloskar Brothers has low CAPEX intensity: 5 year average CAPEX/Revenue was 3.2%. At the same time it's in pair with industry average of 4.0%.
CAPEX is quite volatile: 43.6 in FY2015, 2,284 in FY2014, 930 in FY2013, 3,745 in FY2012, 605 in FY2011
The company has business model with low profitability: ROIC is at 7.4%
It operates with high leverage: Net Debt/EBITDA is 1.5x while industry average is 0.9x

Below you can find a comprehensive analysis of the key data driving the company's performance and stock price.

Kirloskar Brothers ($KIRLOSBROS) key annual financial indicators

mln. INR	2011	2012	2013	2014	2015	2015/2014
P&L
Revenue	26,699	25,545	26,125	26,904	27,279	1.4%
EBITDA	2,549	1,444	2,093	2,082	1,928	-7.4%
Net Income	970	488	660	641	411	-35.9%
Balance Sheet
Cash	702	292	632	668	584	-12.7%
Short Term Debt	3,160	3,256	2,785	2,642	3,039	15.0%
Long Term Debt	746	501	555	324	515	59.0%
Cash flow
Capex	755	700	773	686	1,332	94.2%
Ratios
Revenue growth	-16.1%	-4.3%	2.3%	3.0%	1.4%
EBITDA growth	-8.1%	-43.4%	45.0%	-0.5%	-7.4%
EBITDA Margin	9.5%	5.7%	8.0%	7.7%	7.1%	-0.7%
Net Income Margin	3.6%	1.9%	2.5%	2.4%	1.5%	-0.9%
CAPEX, % of revenue	2.8%	2.7%	3.0%	2.5%	4.9%	2.3%
ROIC	16.4%	7.7%	12.5%	11.9%	7.4%	-4.5%
ROE	11.9%	5.6%	7.3%	6.7%	4.1%	-2.6%
Net Debt/EBITDA	1.3x	2.4x	1.3x	1.1x	1.5x	0.4x

Revenue and profitability

The company's Revenue increased slightly on 1.4% in FY2015. Revenue growth was financed by EBITDA margin decline. EBITDA Margin decreased slightly on 0.67 pp from 7.7% to 7.1% in FY2015.

Net Income marign decreased slightly on 0.87 pp from 2.4% to 1.5% in FY2015.

Capital expenditures (CAPEX) and working capital investments

The company's CAPEX/Revenue was 4.9% in FY2015. CAPEX/Revenue increased on 2.1 pp from 2.7% in FY2012 to 4.9% in FY2015. It's average CAPEX/Revenue for the last three years was 3.5%.Kirloskar Brothers invested a large share of EBITDA (69.1%) to CAPEX.

Return on investment

The company operates at low ROIC (7.37%) and ROE (4.09%). ROIC decreased on 4.5 pp from 11.9% to 7.4% in FY2015. ROE decreased on 2.6 pp from 6.7% to 4.1% in FY2015.

Leverage (Debt)

Debt level is 1.5x Net Debt / EBITDA and 1.8x Debt / EBITDA. Net Debt / EBITDA surged on 0.4x from 1.1x to 1.5x in FY2015. Debt surged on 19.8% in FY2015 while cash dropped on 12.7% in FY2015.

Valuation

Kirloskar Brothers's trades at EV/EBITDA 9.2x and P/E 35.8x while industy averages are 10.5x and 26.1x. Kirloskar Brothers's EV/(EBITDA-CAPEX) is 29.6x with the industry average at 4.7x.

Appendix 1: Peers in Industrial Machinery

Below we provide Kirloskar Brothers benchmarking against other companies in Industrial Machinery 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
Forbes & Company ($FORBESCO)	-66.3%	22.4%	13.0%	53.4%
Nitin Fire Protection Industries ($NITINFIRE)	-67.4%	22.3%	31.5%	44.2%
Gmm Pfaudler ($GMM)	-47.2%	-26.1%	47.8%	31.0%
Kabra Extrusiontechnik ($KABRAEXTRU)	-32.6%	-13.3%	-8.7%	28.4%
Veejay Lakshmi Engineering Works ($VJLAXMIE)	27.9%	-28.8%	5.7%	26.6%
Median (26 companies)	-30.4%	20.1%	2.1%	1.9%	12.7%
Kirloskar Brothers ($KIRLOSBROS)		-4.3%	2.3%	3.0%	1.4%

Top companies by Gross margin, %


Top	FY2011	FY2012	FY2013	FY2014	FY2015
Bell Agromachina ($BELAGRO)		0.0%	0.0%	0.0%	0.0%
Median (1 company)		0.0%	0.0%	0.0%	0.0%

Top companies by EBITDA margin, %


Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Lokesh Machines ($LOKESHMACH)	14.7%	18.9%	21.9%	24.0%
Wendt (India) ($WENDT)	30.8%	28.3%	21.6%	18.6%	19.0%
Mazda ($MAZDALTD)	14.4%	14.5%	16.2%	15.0%
Ksb Pumps ($KSBPUMPS)	9.9%	13.1%	14.1%	12.6%
Abc Bearings ($ABCBEARS)	22.6%	16.5%	12.9%	12.1%
Median (22 companies)	14.0%	11.2%	9.6%	10.5%	19.0%
Kirloskar Brothers ($KIRLOSBROS)	9.5%	5.7%	8.0%	7.7%	7.1%

Top companies by CAPEX/Revenue, %


Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Lokesh Machines ($LOKESHMACH)	18.5%	22.1%		12.9%
Elgi Equipments ($ELGIEQUIP)	2.8%	4.0%	24.0%	9.8%
Wendt (India) ($WENDT)	7.2%	13.5%	9.0%	8.8%	9.4%
Ksb Pumps ($KSBPUMPS)	3.3%	7.5%	3.5%	5.0%
Honda Siel Power Products ($HONDAPOWER)	4.3%	6.7%	8.0%	3.7%
Median (19 companies)	3.9%	5.8%	4.1%	3.0%	9.4%
Kirloskar Brothers ($KIRLOSBROS)	2.8%	2.7%	3.0%	2.5%	4.9%

Top companies by ROIC, %


Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Rexnord Electronics & Controls ($REXNORD)	10.4%			18.8%
Gmm Pfaudler ($GMM)	14.2%	-76.2%	6.8%	17.4%
Greaves Cotton ($GREAVESCOT)			24.8%	16.3%
Lakshmi Machine Works ($LAXMIMACH)	16.8%	18.0%	11.7%	16.2%
Wendt (India) ($WENDT)		38.2%	20.2%	16.2%	15.1%
Median (51 companies)	14.6%	13.1%	10.2%	9.2%	7.5%
Kirloskar Brothers ($KIRLOSBROS)	16.4%	7.7%	12.5%	11.9%	7.4%

Top companies by Net Debt / EBITDA


Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Chemtech Industrial Valves ($CHEMTECH)	7.7x	6.4x	5.3x	8.8x
Forbes & Company ($FORBESCO)	3.5x	2.2x	3.3x	4.7x
Lokesh Machines ($LOKESHMACH)	4.0x	3.7x	3.3x	4.6x
Elecon Engineering Co ($ELECON)	3.1x	3.0x	3.2x	4.0x
Lloyd Electric & Engineering ($LLOYDELENG)	4.0x	3.2x	3.0x	3.7x
Median (34 companies)	1.1x	0.6x	1.7x	0.0x	-0.2x
Kirloskar Brothers ($KIRLOSBROS)	1.3x	2.4x	1.3x	1.1x	1.5x

Kirloskar Brothers stock price chart

Kirloskar Brothers financials

mln.	FY2010	FY2011	FY2012

Revenue	31,821	26,699	25,545
EBITDA	2,773	2,549	1,444
Net income	1,128	970.2	488.1
CAPEX	636.4	754.8	700.2
Debt	4,533	3,907	3,757
Cash	579.4	701.7	292.1

About Kirloskar Brothers

Kirloskar Brothers Limited provides fluid management solutions in India. It manufactures various pumps, including end suction, split case, multi-stage, special and engineered, monobloc, submersible, and sump pumps. The company also offers valves, such as butterfly, sluice, non return, kinetic air, foot, gate, suction diffuser and triple duty, ball, steam trap, forged steel gate, and globe check valves, as well as cast steel globe, gate, and check valves. In addition, it provides hydro turbines comprising Francis, Kaplan, and Pelton wheel turbines; and mobile pump controllers to assist a pump user to monitor and operate the pump remotely with the help of a mobile. Further, the company offers packaged systems, which include pressure boosting hydro-pneumatic, pressure booster, fire fighting, solar pumping, and condition monitoring systems, as well as heating, ventilation, air conditioning, and refrigeration systems. Additionally, it undertakes turnkey projects for supply and application of coatings on various equipment; provides stators, rotors, and electric motors; steel castings for various industries, such as power sector, mining, cement, heavy engineering application, sugar, etc.; undertakes turnkey projects in power, water resource management, and irrigation sectors; provides energy audit services; and offers customer service and spares. The company serves industry, building and construction, gas oil and defense, irrigation, power, water resource management markets through a network of dealers and distributors; and exports its products to various countries. Kirloskar Brothers Limited was founded in 1888 and is headquartered in Pune, India.