Pennar Industries EBITDA jumped on 31.0% in 2015 and EBITDA Margin increased slightly on 1.3 pp from 8.0% to 9.3%

13-05-2015 • About Pennar Industries ($PENIND) • By InTwits

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

Pennar Industries has low CAPEX intensity: 5 year average CAPEX/Revenue was 3.3%. At the same time it's a lot of higher than industry average of 7.9%.
CAPEX is quite volatile: 300 in FY2015, 508 in FY2014, 205 in FY2013, 586 in FY2012, 366 in FY2011
The company has highly profitable business model: ROIC is at 15.7%

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

Pennar Industries ($PENIND) key annual financial indicators

mln. INR	2011	2012	2013	2014	2015	2015/2014
P&L
Revenue	12,082	12,186	11,151	11,209	12,634	12.7%
EBITDA	1,568	1,474	1,166	900	1,178	31.0%
Net Income	739	620	419	259	359	38.4%
Balance Sheet
Cash	124	132	344	116	80	-30.9%
Short Term Debt	1,424	1,338	1,304	1,128	1,495	32.5%
Long Term Debt	264	403	327	430	454	5.6%
Cash flow
Capex	366	586	205	508	300	-41.0%
Ratios
Revenue growth	-18.2%	0.9%	-8.5%	0.5%	12.7%
EBITDA growth		-6.0%	-20.9%	-22.8%	31.0%
EBITDA Margin	13.0%	12.1%	10.5%	8.0%	9.3%	1.3%
Net Income Margin	6.1%	5.1%	3.8%	2.3%	2.8%	0.5%
CAPEX, % of revenue	3.0%	4.8%	1.8%	4.5%	2.4%	-2.2%
ROIC	31.6%	26.8%	18.4%	12.3%	15.7%	3.4%
ROE	31.7%	21.9%	13.0%	7.3%	9.3%	2.0%
Net Debt/EBITDA	1.0x	1.1x	1.1x	1.6x	1.6x	-0.0x

Revenue and profitability

The company's Revenue jumped on 12.7% in FY2015. Revenue decline was accompanies by EBITDA margin decline. EBITDA Margin decreased on 6.2 pp from 7.6% to 1.4% in FY2015.

Net Income marign increased slightly on 0.53 pp from 2.3% to 2.8% in FY2015.

Capital expenditures (CAPEX) and working capital investments

In FY2015 the company had CAPEX/Revenue of 2.4%. The company showed decline in CAPEX/Revenue of 2.4 pp from 4.8% in FY2012 to 2.4% in FY2015. It's average CAPEX/Revenue for the last three years was 2.9%.

Return on investment

The company operates at good ROIC (15.70%) while ROE is low (9.29%). ROIC increased on 3.4 pp from 12.3% to 15.7% in FY2015. ROE increased slightly on 2.0 pp from 7.3% to 9.3% in FY2015.

Leverage (Debt)

Company's Net Debt / EBITDA is 1.6x and Debt / EBITDA is 1.7x. Net Debt / EBITDA decreased slightly on 0.017x from 1.6x to 1.6x in FY2015. Debt surged on 25.1% in FY2015 while cash dropped on 30.9% in FY2015.

Valuation

The company's trades at EV/EBITDA 6.4x and P/E 15.9x while industy averages are 10.5x and 26.1x. Pennar Industries's EV/(EBITDA-CAPEX) is 8.6x with the industry average at 4.7x.

Appendix 1: Peers in Iron & Steel/Interm.Products

Below you can find Pennar Industries benchmarking vs. other companies in Iron & Steel/Interm.Products 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 5	FY2011	FY2012	FY2013	FY2014	FY2015
Inducto Steel ($INDCTST)			54.5%	150.2%
Kamdhenu Ispat ($KIL)	-65.5%	25.7%	13.7%	68.3%
Metkore Alloys & Industries ($METKORE)	-49.1%	43.7%	-10.9%	53.4%
Tata Metaliks ($TATAMETALI)		-7.0%	-19.0%	44.6%	-1.3%
Visa Steel ($VISASTEEL)	-12.5%	3.3%	-24.1%	42.0%
Median (31 companies)	-41.6%	12.5%	8.8%	3.4%	-1.3%
Pennar Industries ($PENIND)		0.9%	-8.5%	0.5%	12.7%

Top companies by EBITDA margin, %


Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Jindal Steel & Power ($JINDALSTEL)	48.3%	37.5%	30.5%	28.1%
Bhushan Steel ($BHUSANSTL)	29.0%	31.2%	32.3%	28.1%
Sarda Energy & Minerals ($SARDAEN)	15.2%	16.3%	21.5%	21.3%
Jsw Steel ($JSWSTEEL)	20.2%	17.8%	17.1%	17.9%
Jai Corp ($JAICORPLTD)	18.4%	14.1%	16.3%	16.0%	12.7%
Median (28 companies)	13.4%	9.4%	9.0%	7.0%	11.8%
Pennar Industries ($PENIND)	13.0%	12.1%	10.5%	8.0%	9.3%

Top companies by CAPEX/Revenue, %


Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Jindal Steel & Power ($JINDALSTEL)	64.7%	34.2%	47.6%	69.6%
Bhushan Steel ($BHUSANSTL)	81.1%	47.2%	44.0%	50.4%
Jayaswal Neco Industries ($JAYNECOIND)	27.9%	20.4%	44.0%	31.1%
Surana Industries ($SURANAIND)		41.3%	54.8%	21.5%
Steel Authority Of India ($SAIL)	25.3%	20.9%	20.7%	19.3%
Median (20 companies)	12.3%	9.7%	11.6%	7.7%	3.4%
Pennar Industries ($PENIND)	3.0%	4.8%	1.8%	4.5%	2.4%

Top companies by ROIC, %


Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Tata Metaliks ($TATAMETALI)	3.1%	-23.5%	-3.7%	19.9%	57.4%
Nova Iron & Steel ($NOVIS)				15.4%
Kirloskar Ferrous Industries ($KIRLFER)	20.0%	19.1%	16.8%	12.4%	14.7%
Jsw Steel ($JSWSTEEL)	9.7%	11.0%	10.3%	12.1%
Tata Steel ($TATASTEEL)	12.8%	7.6%	6.2%	8.9%
Median (40 companies)	9.4%	6.8%	5.5%	5.5%	14.7%
Pennar Industries ($PENIND)	31.6%	26.8%	18.4%	12.3%	15.7%

Top companies by Net Debt / EBITDA


Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Jai Balaji Industries ($JAIBALAJI)	5.5x			89.7x
Visa Steel ($VISASTEEL)	6.9x	20.1x		24.4x
Ismt ($ISMTLTD)	4.4x	5.3x	9.8x	19.9x
Kic Metaliks ($KAJARIR)	6.6x	9.2x	3.0x	18.2x
Bhushan Steel ($BHUSANSTL)	8.1x	6.3x	8.6x	12.9x
Median (29 companies)	3.8x	4.6x	4.4x	3.4x	0.5x
Pennar Industries ($PENIND)	1.0x	1.1x	1.1x	1.6x	1.6x

Pennar Industries stock price chart

Pennar Industries financials

mln.	FY2010	FY2011	FY2012

Revenue	14,771	12,082	12,186
EBITDA	0.000	1,568	1,474
Net income	497.8	739.3	619.9
CAPEX	590.9	366.0	586.1
Debt	1,924	1,687	1,741
Cash	123.5	123.7	131.6

About Pennar Industries

Pennar Industries Limited provides specialized engineered steel solutions in India and internationally. It offers cold rolled steel strips; electrostatic precipitators electrodes; building components comprising purlins, roofing/cladding sheets, and decking profiles; metal crash barriers for flyover, bridges, national highway, and other projects; sheet piles for infrastructure projects; and automobile profiles for commercial vehicle companies. The company also provides solar module mounting structures for solar PV panels; railway wagons and passenger coaches; and storage products and solutions, such as pallet racking, narrow aisle, automated storage and retrieval, heavy duty shelving, multi-tier heavy duty shelving, long span shelving, drive-in and drive-thru, push back racking, mobile pallet racking, pallet flow, mezzanine storage, and cantilever storage systems, as well as storage accessories. In addition, it offers precision tubes, including electric resistance welded, cold drawn welded, air pre-heater, and Indian boiler regulations tubes for automobiles, general engineering, boilers and heaters, and other industries. Further, the company provides hydraulic cylinders, which include welded, telescopic, integrated valve, piggy back, and dump hoist cylinders for various sectors, such as agriculture, construction, mining, marine ship building, bulk cargo handling, earth moving equipment, etc.; critical auto components comprising braking and suspension, auto electrical, chassis and body, etc. for two and four wheelers; and compressor shells for refrigeration and air conditioning manufacturers. Additionally, it designs, manufactures, supplies, and installs pre-engineered steel buildings and building components; and manufactures and distributes fuel additives and water treatment chemicals; and provides water and waste water treatment solutions, and EPC services for water treatment projects. The company was incorporated in 1975 and is headquartered in Hyderabad, India.