Carborundum Universal reports 44.9% Net Income growth and 1.1 pp EBITDA Margin growth from 12.2% to 13.2%

02-05-2015 • About Carborundum Universal ($CARBORUNIV) • By InTwits

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

Carborundum Universal is a company in decline: FY2015 revenue growth was -3.5%, 5 years revenue CAGR was -3.9%
Carborundum Universal has medium CAPEX intensity: 5 year average CAPEX/Revenue was 6.4%. At the same time it's in pair with industry average of 5.9%.
CAPEX is quite volatile: 777 in FY2015, 775 in FY2014, 2,143 in FY2013, 1,695 in FY2012, 798 in FY2011
The company has business model with average profitability: ROIC is at 11.0%

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

Carborundum Universal ($CARBORUNIV) key annual financial indicators

mln. INR	2011	2012	2013	2014	2015	2015/2014
P&L
Revenue	16,075	19,950	19,714	21,253	20,502	-3.5%
EBITDA	2,920	3,921	2,423	2,584	2,708	4.8%
Net Income	1,708	2,193	898	915	1,326	44.9%
Balance Sheet
Cash	688	880	724	739	979	32.6%
Short Term Debt	1,649	1,929	2,374	2,051	2,201	7.3%
Long Term Debt	2,476	2,063	1,975	1,873	567	-69.7%
Cash flow
Capex	798	1,695	2,143	775	777	0.2%
Ratios
Revenue growth	-35.6%	24.1%	-1.2%	7.8%	-3.5%
EBITDA growth	29.5%	34.3%	-38.2%	6.6%	4.8%
EBITDA Margin	18.2%	19.7%	12.3%	12.2%	13.2%	1.1%
Net Income Margin	10.6%	11.0%	4.6%	4.3%	6.5%	2.2%
CAPEX, % of revenue	5.0%	8.5%	10.9%	3.6%	3.8%	0.1%
ROIC	20.1%	25.3%	11.8%	10.6%	11.0%	0.3%
ROE	25.5%	25.9%	8.9%	8.5%	12.1%	3.6%
Net Debt/EBITDA	1.2x	0.8x	1.5x	1.2x	0.7x	-0.6x

Revenue and profitability

The company's Revenue decreased on 3.5% in FY2015. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin increased slightly on 1.1 pp from 12.2% to 13.2% in FY2015.

Net Income marign increased on 2.2 pp from 4.3% to 6.5% in FY2015.

Capital expenditures (CAPEX) and working capital investments

In FY2015 the company had CAPEX/Revenue of 3.8%. CAPEX/Revenue decreased on 4.7 pp from 8.5% in FY2012 to 3.8% in FY2015. For the last three years the average CAPEX/Revenue was 6.1%.

Return on investment

The company operates at good ROE (12.08%) while ROIC is low (10.96%). ROIC showed almost no change in FY2015. ROE increased on 3.6 pp from 8.5% to 12.1% in FY2015.

Leverage (Debt)

Company's Net Debt / EBITDA is 0.7x and Debt / EBITDA is 1.0x. Net Debt / EBITDA dropped on 0.6x from 1.2x to 0.7x in FY2015. Debt dropped on 29.5% in FY2015 while cash surged on 32.6% in FY2015.

Appendix 1: Peers in Other Industrial Products

Below we provide Carborundum Universal benchmarking against other companies in Other Industrial Products 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	FY2011	FY2012	FY2013	FY2014	FY2015
Bharat Forge ($BHARATFORG)	-44.0%	26.4%	-18.8%	31.7%
Welcast Steels ($ZWELCAST)	-25.6%	8.3%	11.1%	-1.5%
Everest Kanto Cylinder ($EKC)	41.0%	-13.1%	-19.8%	-9.6%
Simplex Castings ($SIMPLEXCAS)	4.0%	6.9%	-6.6%	-21.9%
Median (4 companies)	-10.8%	7.6%	-12.7%	-5.6%
Carborundum Universal ($CARBORUNIV)		24.1%	-1.2%	7.8%	-3.5%

Top companies by EBITDA margin, %


Top	FY2011	FY2012	FY2013	FY2014	FY2015
Bharat Forge ($BHARATFORG)	16.0%	16.0%	15.8%	15.5%
Simplex Castings ($SIMPLEXCAS)	17.1%	16.4%	13.5%	13.6%
Everest Kanto Cylinder ($EKC)	17.7%	14.5%	-3.9%	-5.1%
Median (3 companies)	16.5%	15.2%	8.1%	13.6%	4.6%
Carborundum Universal ($CARBORUNIV)	18.2%	19.7%	12.3%	12.2%	13.2%

Top companies by CAPEX/Revenue, %


Top	FY2011	FY2012	FY2013	FY2014	FY2015
Bharat Forge ($BHARATFORG)	10.2%	15.6%	11.0%	10.1%
Everest Kanto Cylinder ($EKC)	9.4%	5.7%	0.4%	4.0%
Median (2 companies)	8.8%	8.2%	5.7%	7.0%
Carborundum Universal ($CARBORUNIV)	5.0%	8.5%	10.9%	3.6%	3.8%

Top companies by ROIC, %


Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Gujarat Intrux ($GUJINTRX)	10.1%	26.0%	23.7%	19.7%
Bharat Forge ($BHARATFORG)	12.6%	14.6%	9.1%	12.6%
Lgb Forge ($LGBFORGE)	-4.7%	8.6%	2.5%	-3.6%	-0.6%
Everest Kanto Cylinder ($EKC)	6.5%	2.6%	-7.3%	-7.9%
Vishal Malleables ($VISHMEL)	9.8%	4.0%	-28.0%
Median (12 companies)	10.4%	13.5%	9.9%	4.5%	-0.6%
Carborundum Universal ($CARBORUNIV)	20.1%	25.3%	11.8%	10.6%	11.0%

Top companies by Net Debt / EBITDA


Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Lgb Forge ($LGBFORGE)	5.8x	4.4x	3.7x	4.0x	5.9x
Bharat Forge ($BHARATFORG)	2.3x	2.6x	3.0x	2.2x
Steelcast ($STEELCAS)	5.7x	1.7x	2.1x	0.0x
Hilton Metal Forging ($HILTON)	7.0x	2.5x	1.5x	0.0x
Simplex Castings ($SIMPLEXCAS)	1.7x	2.1x	0.0x	0.0x
Median (6 companies)	4.3x	2.6x	1.8x	0.0x	5.9x
Carborundum Universal ($CARBORUNIV)	1.2x	0.8x	1.5x	1.2x	0.7x

Carborundum Universal stock price chart

Carborundum Universal financials

mln.	FY2010	FY2011	FY2012

Revenue	24,962	16,075	19,950
EBITDA	2,254	2,920	3,921
Net income	1,017	1,708	2,193
CAPEX	630.3	798.4	1,695
Debt	4,375	4,125	3,992
Cash	415.5	688.0	880.0

About Carborundum Universal

Carborundum Universal Limited, together with its subsidiaries, manufactures and sells abrasives, ceramics, and electro minerals in India. It operates through Abrasives, Ceramics, Electrominerals, IT Services, and Power segments. The Abrasive segment offers bonded and coated abrasives, processed cloth products, polymers, power tools, coolants, and metal working fluids for automobile, engineering, fabrication, wood working, home maintenance, construction, and infrastructure industries. The Ceramics segment provides super refractories, industrial ceramics, bio ceramics, ceramic fiber products, anti-corrosives, and calcia stabilized zirconia for power generation and transmission, coal washeries, grain handling, sanitary tiles and sanitary ware, ballistic protection, cement, non ferrous metals, iron and steel, carbon black, insulators, furnace building, glass, petrochemical, and construction industries. The Electrominerals segment offers abrasive/refractory grains and micro grits for the photovoltaic industry, such as silicon carbide, brown and white aluminum oxide, mullite, bubble alumina, and zirconia for abrasives, refractories, and steel industries. This segment also offers specialties, including semifriable, Azure-S, and plasma powders. The IT Services segment provides Web enabling services and digitized data capture. The Power segment generates power from natural gas. The company also exports its products to 43 countries in North America, Europe, Australia, South Africa, and Asia. Carborundum Universal Limited was founded in 1954 and is based in Chennai, India.