Aarti Industries Net Income jumped on 26.7% in 2015 and EBITDA Margin increased slightly on 0.73 pp from 15.4% to 16.1%

13-05-2015 • About Aarti Industries ($AARTIIND) • By InTwits

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

Aarti Industries has medium CAPEX intensity: 5 year average CAPEX/Revenue was 9.1%. At the same time it's in pair with industry average of 7.6%.
CAPEX is quite volatile: 3,031 in FY2015, 2,909 in FY2014, 2,348 in FY2013, 1,331 in FY2012, 691 in FY2011
The company has highly profitable business model: ROIC is at 17.9%
It operates with high leverage: Net Debt/EBITDA is 2.5x 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.

Aarti Industries ($AARTIIND) key annual financial indicators

mln. INR	2011	2012	2013	2014	2015	2015/2014
P&L
Revenue	14,530	16,733	20,962	26,325	29,080	10.5%
EBITDA	2,013	2,545	3,650	4,058	4,694	15.7%
Net Income	815	1,033	1,344	1,624	2,059	26.7%
Balance Sheet
Cash	129	68	85	64	302	367.6%
Short Term Debt	2,850	5,243	7,317	7,837	7,832	-0.1%
Long Term Debt	2,435	1,035	1,173	2,553	4,191	64.2%
Cash flow
Capex	691	1,331	2,348	2,909	3,031	4.2%
Ratios
Revenue growth	-55.9%	15.2%	25.3%	25.6%	10.5%
EBITDA growth	-3.1%	26.4%	43.4%	11.2%	15.7%
EBITDA Margin	13.9%	15.2%	17.4%	15.4%	16.1%	0.7%
Net Income Margin	5.6%	6.2%	6.4%	6.2%	7.1%	0.9%
CAPEX, % of revenue	4.8%	8.0%	11.2%	11.0%	10.4%	-0.6%
ROIC	13.1%	15.9%	19.1%	17.2%	17.9%	0.7%
ROE	16.9%	18.8%	20.0%	20.0%	21.8%	1.9%
Net Debt/EBITDA	2.6x	2.4x	2.3x	2.5x	2.5x	-0.0x

Revenue and profitability

Aarti Industries's Revenue surged on 10.5% 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 increased slightly on 0.91 pp from 6.2% to 7.1% in FY2015.

Capital expenditures (CAPEX) and working capital investments

In FY2015 the company had CAPEX/Revenue of 10.4%. Aarti Industries showed CAPEX/Revenue growth of 2.5 pp from 8.0% in FY2012 to 10.4% in FY2015. It's average CAPEX/Revenue for the last three years was 10.9%.Aarti Industries invested a big chunk of EBITDA (64.6%) to CAPEX to secure its growth.

Return on investment

The company operates at high and attractive ROE (21.82%) while ROIC is a bit lower (17.91%). ROIC increased slightly on 0.66 pp from 17.2% to 17.9% in FY2015. ROE increased slightly on 1.9 pp from 20.0% to 21.8% in FY2015.

Leverage (Debt)

Company's Net Debt / EBITDA is 2.5x and Debt / EBITDA is 2.6x. Net Debt / EBITDA decreased on 0.047x from 2.5x to 2.5x in FY2015. Debt jumped on 15.7% in FY2015 while cash jumped on 368% in FY2015.

Valuation

The company's trades at EV/EBITDA 8.4x and P/E 13.4x while industy averages are 10.5x and 26.1x. Aarti Industries's EV/(EBITDA-CAPEX) is 23.7x with the industry average at 4.7x.

Appendix 1: Peers in Commodity Chemicals

Below we provide Aarti Industries benchmarking against other companies in Commodity Chemicals 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
Shree Hari Chemicals Export ($SHHARICH)	-52.2%	-2.5%	-78.0%	299.5%
Jindal Poly Films ($JINDPOLBBPH)	-66.5%	-17.2%	-6.3%	131.7%
Bodal Chemicals ($BODALCHEM)	-51.3%	5.4%	-12.6%	80.0%
Kanoria Chemicals & Industries ($KANORICHEM)	-22.3%	-40.7%	27.2%	47.9%
Camphor & Allied Products ($CAMPHOR)	-49.0%	-6.7%	7.2%	42.7%
Median (35 companies)	-42.0%	19.0%	10.9%	10.6%	1.8%
Aarti Industries ($AARTIIND)		15.2%	25.3%	25.6%	10.5%

Top companies by EBITDA margin, %


Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Shree Hari Chemicals Export ($SHHARICH)	8.3%	1.8%	-19.4%	29.4%
Chemfab Alkalis ($CHEMFALKAL)	19.0%	22.3%	32.9%	24.2%	19.8%
Aditya Birla Chemicals (India) ($ABCIL)	33.6%	26.8%	27.1%	23.6%	21.9%
Bodal Chemicals ($BODALCHEM)	10.6%	1.8%	5.6%	20.4%
Alkyl Amines Chemicals ($ALKYLAMINE)	13.3%	15.9%	16.0%	19.0%
Median (31 companies)	12.1%	10.9%	8.3%	8.5%	6.1%
Aarti Industries ($AARTIIND)	13.9%	15.2%	17.4%	15.4%	16.1%

Top companies by CAPEX/Revenue, %


Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Chemfab Alkalis ($CHEMFALKAL)	5.1%	2.2%	15.8%	55.6%
Aditya Birla Chemicals (India) ($ABCIL)	5.9%	136.9%	24.2%	30.8%	15.0%
Jindal Poly Films ($JINDPOLBBPH)	2.9%	6.9%	2.1%	27.5%
Polyplex Corporation ($POLYPLEX)	6.0%	10.7%	41.3%	19.2%
Kanoria Chemicals & Industries ($KANORICHEM)	12.9%	25.1%	6.0%	13.4%
Median (19 companies)	5.9%	5.2%	6.3%	5.4%	8.5%
Aarti Industries ($AARTIIND)	4.8%	8.0%	11.2%	11.0%	10.4%

Top companies by ROIC, %


Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Riddhi Siddhi Gluco Biols ($RIDDHI)	-0.2%	-1.3%	-0.6%	61.1%
Bodal Chemicals ($BODALCHEM)		-1.3%	3.3%	39.0%
Elantas Beck India ($ELANTAS)	17.5%	20.4%	33.9%	31.0%
Alkyl Amines Chemicals ($ALKYLAMINE)	10.3%	16.0%	18.7%	25.0%
Camphor & Allied Products ($CAMPHOR)	10.3%	5.7%	15.5%	17.0%
Median (59 companies)	10.5%	9.0%	9.5%	8.9%	8.4%
Aarti Industries ($AARTIIND)	13.1%	15.9%	19.1%	17.2%	17.9%

Top companies by Net Debt / EBITDA


Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
India Glycols ($INDIAGLYCO)	8.2x	4.8x	3.7x	8.5x
Godrej Industries ($GODREJIND)	6.8x	9.9x	5.7x	7.9x
Polyplex Corporation ($POLYPLEX)	0.6x	0.9x	6.8x	7.1x
Link Pharma Chem ($LINKPH)	71.1x	3.4x	4.1x	6.2x
Refnol Resins & Chemicals ($REFNOL)			4.1x	5.6x	0.0x
Median (41 companies)	2.4x	2.6x	3.2x	0.8x	0.0x
Aarti Industries ($AARTIIND)	2.6x	2.4x	2.3x	2.5x	2.5x

Aarti Industries stock price chart

Aarti Industries financials

mln.	FY2010	FY2011	FY2012

Revenue	32,980	14,530	16,733
EBITDA	2,077	2,013	2,545
Net income	682.9	814.8	1,033
CAPEX	628.6	690.5	1,331
Debt	4,385	5,285	6,278
Cash	48.859	128.6	67.803

About Aarti Industries

Aarti Industries Limited produces and sells benzene based basic and intermediate chemicals primarily in India. The company offers para nitro chloro benzene, ortho nitro chloro benzene, dinitro chloro benzene, para dichloro benzene, ortho dichloro benzene, nitro benzene, and nitro toluenes, as well as their derivatives. It also provides dimethyl sulfate, sulfuric acid and allied products, chloro phenols, polymer additives, refinery chemicals, plastisizers, alkylated anilines and toluidines, fluoro compounds, agrochemicals, and bulk drug intermediates/specialty chemicals. In addition, the company offers mono chloro benzene, single super phosphate, dilute sulfuric acids, hydro chloric acid, gypsum, calcium chloride, di-calcium phosphate, and nitrosyl sulfuric acid. Further, it develops active pharmaceutical ingredients, as well as their intermediates, including dextromethorphan, bazedoxifene, besifloxacin, saxagliptin, tetrabenazine, desvenlafaxine, asenapine, apixaben, rotigotine, vilazadone, and vardenafil intermediates. Aarti Industries Limited offers its products for various end-uses in agrochemicals, pharmaceuticals, high performance polymers, paints, pigments, printing inks, rubber chemicals, additives, surfactants, dyes, oil and gas additives, flavors and fragrances, etc. The company also exports its products to approximately 60 countries. Aarti Industries Limited was founded in 1975 and is based in Mumbai, India.