Rswm CAPEX surged on 204% in 2015 while Revenue decreased on 5.4%

08-05-2015 • About Rswm ($RSWM) • By InTwits

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

• Rswm is a company in decline: FY2015 revenue growth was -5.4%, 5 years revenue CAGR was -2.6%
• Rswm has medium CAPEX intensity: 5 year average CAPEX/Revenue was 7.1%. At the same time it's in pair with industry average of 9.8%.
• CAPEX is quite volatile: 2,638 in FY2015, 866 in FY2014, 946 in FY2013, 3,164 in FY2012, 1,214 in FY2011
• The company has business model with average profitability: ROIC is at 11.8%
• It operates with high leverage: Net Debt/EBITDA is 3.7x 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.

Rswm ($RSWM) key annual financial indicators

mln. INR	2011	2012	2013	2014	2015	2015/2014
P&L
Revenue	21,356	21,389	26,562	31,308	29,623	-5.4%
SG&A					28
EBITDA	3,455	1,328	3,726	3,878	3,459	-10.8%
Net Income	1,338	-427	717	1,007	849	-15.6%
Balance Sheet
Cash	60	14	14	24	28	18.8%
Short Term Debt	5,795	4,885	6,134	6,374	6,224	-2.4%
Long Term Debt	6,493	8,749	7,720	6,573	6,692	1.8%
Cash flow
Capex	1,214	3,164	946	866	2,638	204.5%
Ratios
Revenue growth	-37.0%	0.2%	24.2%	17.9%	-5.4%
EBITDA growth	78.6%	-61.6%	180.6%	4.1%	-10.8%
EBITDA Margin	16.2%	6.2%	14.0%	12.4%	11.7%	-0.7%
Net Income Margin	6.3%	-2.0%	2.7%	3.2%	2.9%	-0.3%
SG&A, % of revenue					0.1%	0.1%
CAPEX, % of revenue	5.7%	14.8%	3.6%	2.8%	8.9%	6.1%
ROIC	17.4%	2.2%	15.2%	15.5%	11.8%	-3.7%
ROE	54.4%	-15.7%	26.4%	30.6%	21.3%	-9.3%
Net Debt/EBITDA	3.5x	10.3x	3.7x	3.3x	3.7x	0.4x

Revenue and profitability

The company's Revenue decreased on 5.4% in FY2015. Revenue decline was accompanies by EBITDA margin decline. EBITDA Margin decreased slightly on 0.71 pp from 12.4% to 11.7% in FY2015.

Net Income marign showed almost no change in FY2015.

Capital expenditures (CAPEX) and working capital investments

The company's CAPEX/Revenue was 8.9% in FY2015. CAPEX/Revenue decreased on 5.9 pp from 14.8% in FY2012 to 8.9% in FY2015. For the last three years the average CAPEX/Revenue was 5.1%.Battling declining revenue Rswm invested a large share of EBITDA (76.3%) to CAPEX but that didn't help at least in this year.

Return on investment

The company operates at good ROE (21.25%) while ROIC is low (11.82%). ROIC decreased on 3.7 pp from 15.5% to 11.8% in FY2015. ROE decreased on 9.3 pp from 30.6% to 21.3% in FY2015.

Leverage (Debt)

Company's Net Debt / EBITDA is 3.7x and Debt / EBITDA is 3.7x. Net Debt / EBITDA jumped on 0.4x from 3.3x to 3.7x in FY2015. Debt showed almost no change in FY2015 while cash surged on 18.8% in FY2015.

Valuation

The company's trades at EV/EBITDA 5.5x and P/E 7.1x while industy averages are 10.5x and 26.1x. The company's EV/(EBITDA-CAPEX) is 23.0x with the industry average at 4.7x.

Appendix 1: Peers in Textiles

Below we provide Rswm 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 ($GTNTEX)	-27.7%	-8.8%	51.2%	39.4%
Median (73 companies)	-30.3%	5.0%	9.3%	14.2%	3.5%
Rswm ($RSWM)		0.2%	24.2%	17.9%	-5.4%

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 ($SHRIDINE)	24.7%	22.4%	18.5%	18.7%
Median (53 companies)	12.7%	6.5%	9.5%	9.5%	12.1%
Rswm ($RSWM)	16.2%	6.2%	14.0%	12.4%	11.7%

Top companies by CAPEX/Revenue, %

Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Jindal Worldwide ($JINDWORLD)	3.6%	3.0%	10.5%	20.7%
SRF ($SRF)	0.0%	0.0%	18.7%	20.0%
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 ($GRASIM)	7.8%	17.7%	21.7%	11.6%	10.2%
Median (20 companies)	4.5%	3.0%	5.9%	7.4%	8.4%
Rswm ($RSWM)	5.7%	14.8%	3.6%	2.8%	8.9%

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%
Mandhana Industries ($MANDHANA)	86.1%	12.1%	13.2%	14.2%
Median (126 companies)	10.1%	3.6%	9.0%	8.9%	10.7%
Rswm ($RSWM)	17.4%	2.2%	15.2%	15.5%	11.8%

Top companies by Net Debt / EBITDA

Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Jaybharat Textiles & Real Estate ($JAYTEX)	8.4x	10.9x	53.6x	23.8x
Sree Jayalakshmi Autospin ($SREEJAYA)	3.4x		9.7x	12.8x
Bombay Rayon Fashions ($BRFL)	5.9x	4.9x	4.9x	11.6x
Sel Manufacturing Company ($SELMCL)	5.6x	9.4x	6.6x	11.5x
Ruby Mills ($RUBYMILLS)	15.9x	12.6x	15.3x	10.8x
Median (69 companies)	3.9x	3.8x	3.2x	0.0x	1.7x
Rswm ($RSWM)	3.5x	10.3x	3.7x	3.3x	3.7x

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