Graphite India reports 55.7% Net Income decline and 14.9% Revenue decline

14-05-2015 • About Graphite India ($GRPHIDM) • By InTwits

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

Graphite India is a company in decline: FY2015 revenue growth was -14.9%, 5 years revenue CAGR was -3.6%
EBITDA Margin is declining: 8.2% in FY2015 vs. 12.7% in FY2014 vs. 21.7% in FY2011
Graphite India has low CAPEX intensity: 5 year average CAPEX/Revenue was 3.9%. At the same time it's a lot of higher than industry average of 2.2%.
CAPEX is quite volatile: 266 in FY2015, 246 in FY2014, 521 in FY2013, 1,349 in FY2012, 975 in FY2011
The company has potentially unprofitable business model: ROIC is at 4.2%
It operates with high leverage: Net Debt/EBITDA is 2.4x while industry average is 0.8x

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

Graphite India ($GRPHIDM) key annual financial indicators

mln. INR	2011	2012	2013	2014	2015	2015/2014
P&L
Revenue	14,439	19,124	19,488	20,093	17,107	-14.9%
EBITDA	3,132	3,230	2,748	2,543	1,409	-44.6%
Net Income	1,891	2,125	1,344	1,299	576	-55.7%
Balance Sheet
Cash	212	164	140	273	282	3.1%
Short Term Debt	2,665	5,122	6,164	3,631	3,250	-10.5%
Long Term Debt	746	1,576	1,269	1,002	417	-58.4%
Cash flow
Capex	975	1,349	521	246	266	8.3%
Ratios
Revenue growth	-29.6%	32.5%	1.9%	3.1%	-14.9%
EBITDA growth	-21.7%	3.1%	-14.9%	-7.4%	-44.6%
EBITDA Margin	21.7%	16.9%	14.1%	12.7%	8.2%	-4.4%
Net Income Margin	13.1%	11.1%	6.9%	6.5%	3.4%	-3.1%
CAPEX, % of revenue	6.8%	7.1%	2.7%	1.2%	1.6%	0.3%
ROIC	13.3%	12.6%	8.6%	8.0%	4.2%	-3.8%
ROE	13.5%	13.4%	8.0%	7.5%	3.3%	-4.2%
Net Debt/EBITDA	1.0x	2.0x	2.7x	1.7x	2.4x	0.7x

Revenue and profitability

Graphite India's Revenue dropped on 14.9% in FY2015. Revenue decline was accompanies by EBITDA margin decline. EBITDA Margin decreased on 4.4 pp from 12.7% to 8.2% in FY2015.

Net Income marign decreased on 3.1 pp from 6.5% to 3.4% in FY2015.

Capital expenditures (CAPEX) and working capital investments

Graphite India's CAPEX/Revenue was 1.6% in FY2015. The company's CAPEX/Revenue decreased on 5.5 pp from 7.1% in FY2012 to 1.6% in FY2015. It's average level of CAPEX/Revenue for the last three years was 1.8%.

Return on investment

The company operates at low ROIC (4.23%) and ROE (3.29%). ROIC decreased on 3.8 pp from 8.0% to 4.2% in FY2015. ROE decreased on 4.2 pp from 7.5% to 3.3% in FY2015.

Leverage (Debt)

Debt level is 2.4x Net Debt / EBITDA and 2.6x Debt / EBITDA. Net Debt / EBITDA jumped on 0.7x from 1.7x to 2.4x in FY2015. Debt dropped on 20.8% in FY2015 while cash increased on 3.1% in FY2015.

Valuation

Graphite India's trades at EV/EBITDA 13.9x and P/E 28.2x while industy averages are 10.5x and 26.1x. The company's EV/(EBITDA-CAPEX) is 17.2x with the industry average at 4.7x.

Appendix 1: Peers in Other Industrial Goods

Below we provide Graphite India benchmarking against other companies in Other Industrial Goods 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
Amd Industries ($AMDIND)	35.8%	31.8%	-15.5%	21.0%
Ifgl Refractories ($IFGLREFRAC)	-48.1%	28.2%	11.2%	15.9%
Vesuvius India ($VESUVIUS)	-34.2%	4.1%	6.9%	8.4%
Vhcl Industries ($VHCLINDUS)			110.4%	3.8%	-77.8%
Heg ($HEG)		27.9%	13.6%	-9.8%	-15.9%
Median (7 companies)	-27.7%	28.0%	11.2%	3.8%	-46.8%
Graphite India ($GRPHIDM)		32.5%	1.9%	3.1%	-14.9%

Top companies by EBITDA margin, %


Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Heg ($HEG)	20.7%	17.0%	18.1%	16.9%	16.3%
Amd Industries ($AMDIND)	15.4%	15.3%	12.3%	16.4%
Vesuvius India ($VESUVIUS)	18.0%	17.7%	18.8%	15.6%
Ifgl Refractories ($IFGLREFRAC)	8.6%	13.2%	8.5%	15.1%
Gee ($GEE)	13.1%	10.9%	8.4%	9.4%
Median (6 companies)	14.2%	13.2%	8.5%	15.3%	22.6%
Graphite India ($GRPHIDM)	21.7%	16.9%	14.1%	12.7%	8.2%

Top companies by CAPEX/Revenue, %


Top	FY2011	FY2012	FY2013	FY2014	FY2015
Heg ($HEG)	7.3%	14.4%	9.3%	18.7%	2.6%
Vesuvius India ($VESUVIUS)	7.1%	4.2%	4.0%	3.4%
Vhcl Industries ($VHCLINDUS)		7.1%	0.4%	2.9%
Ifgl Refractories ($IFGLREFRAC)	3.3%	0.8%	2.9%	1.3%
Median (4 companies)	6.1%	3.5%	3.5%	3.1%	2.6%
Graphite India ($GRPHIDM)	6.8%	7.1%	2.7%	1.2%	1.6%

Top companies by ROIC, %


Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Snl Bearings ($SNL)	54.6%	61.1%	48.2%	31.9%
Ifgl Refractories ($IFGLREFRAC)	11.8%	20.0%	11.7%	23.5%
Vhcl Industries ($VHCLINDUS)		56.8%	22.6%	20.2%
Vesuvius India ($VESUVIUS)	23.1%	25.0%	25.0%	19.3%
Heg ($HEG)	9.8%	9.0%	10.4%	8.3%	5.5%
Median (13 companies)	11.8%	16.4%	12.4%	20.2%	5.5%
Graphite India ($GRPHIDM)	13.3%	12.6%	8.6%	8.0%	4.2%

Top companies by Net Debt / EBITDA


Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Vhcl Industries ($VHCLINDUS)		1.4x	2.6x	4.0x
Heg ($HEG)	3.9x	5.2x	4.1x	3.3x	4.1x
Snl Bearings ($SNL)	0.3x	0.2x	0.6x	1.1x	0.0x
Ifgl Refractories ($IFGLREFRAC)	2.9x	1.2x	2.1x	0.7x
De Nora India ($DENORA)	-0.2x	-0.1x	-0.1x	0.0x
Median (8 companies)	1.7x	1.2x	1.3x	0.4x	2.1x
Graphite India ($GRPHIDM)	1.0x	2.0x	2.7x	1.7x	2.4x

Graphite India stock price chart

Graphite India financials

mln.	FY2010	FY2011	FY2012

Revenue	20,502	14,439	19,124
EBITDA	4,002	3,132	3,230
Net income	2,348	1,891	2,125
CAPEX	263.9	975.4	1,349
Debt	3,552	3,410	6,698
Cash	143.6	212.0	164.3

About Graphite India

Graphite India Limited manufactures and sells graphite electrodes, and carbon and graphite specialty products in India and internationally. The company operates through: Graphite and Carbon, Steel, and Others segments. It provides graphite electrodes to manufacture steel and other non-ferrous metals through electric arc furnace and laddle furnace routes, as well as used as a consumable for conducting high current at low voltage for melting and/or alloying processes. The company also offers extruded graphite in the form of rods and blocks, mini rods, graphite tubes, heat exchanger tubes, molded mold graphite, isostatically molded graphite, carbon and graphite machined components, carbon graphite/bricks, and carbon-carbon composites/brake discs for steel, non-ferrous metal, metallurgy, solar, semi conductor, chemical, glass, quartz, and mechanical and other process industries. In addition, it provides calcined petroleum coke, carbon electrode paste, graphite granules and fines, and carbonaceous materials for aluminum, steel, ferro alloys, and foundry castings industries. Further, the company provides impervious graphite heat exchangers as condensers, coolers, heaters, re-boilers, evaporators, interchangers, and graphite columns for distillation, absorption and scrubbing, ejector systems, and centrifugal pumps; HCl synthesis and dry HCl gas generation units, and H2SO4/HCl concentration and acid dilution cooling units; and bursting discs, thermowells, pipes, and pipe fittings. Additionally, it offers glass fiber reinforced plastic (GRP) pipes; joints, such as GRP couplings, lamination joints, flanges, etc.; and GRP bends, tees, reducers, diffusers, valve tees, etc. In addition, the company provides high speed, alloy tool, and powder metallurgy steels for cutting tools. It is also involved in the generation and sale of electricity through hydel power plant to Karnataka power grid. Graphite India Limited was founded in 1962 and is based in Kolkata, India.