Heg Net Income dropped on 54.9% in 2015 and Revenue dropped on 15.9%
14-05-2015 • About Heg (
$HEG) • By InTwits
Heg reported FY2015 financial results today. Overall the company's long term financial model is characterised by the following facts:
- Heg is a company in decline: FY2015 revenue growth was -15.9%, 5 years revenue CAGR was -3.0%
- Heg has high CAPEX intensity: 5 year average CAPEX/Revenue was 10.5%. At the same time it's a lot of higher than industry average of 2.2%.
- CAPEX is quite volatile: 314 in FY2015, 2,722 in FY2014, 1,505 in FY2013, 2,055 in FY2012, 816 in FY2011
- The company has potentially unprofitable business model: ROIC is at 5.5%
- It operates with high leverage: Net Debt/EBITDA is 4.1x while industry average is 0.8x
Below you can find a comprehensive analysis of the key data driving the company's performance and stock price.
Heg ($HEG) key annual financial indicators
| mln. INR | 2011 | 2012 | 2013 | 2014 | 2015 | 2015/2014 |
|---|
P&L
|
|---|
| Revenue | 11,136 | 14,240 | 16,174 | 14,589 | 12,272 | -15.9% |
| EBITDA | 2,302 | 2,427 | 2,931 | 2,466 | 1,996 | -19.1% |
| Net Income | 1,289 | 572 | 1,004 | 807 | 364 | -54.9% |
Balance Sheet
|
|---|
| Cash | 96 | 159 | 125 | 97 | 19 | -80.7% |
| Short Term Debt | 6,997 | 9,163 | 8,554 | 6,644 | 5,759 | -13.3% |
| Long Term Debt | 2,106 | 3,527 | 3,597 | 1,690 | 2,524 | 49.4% |
Cash flow
|
|---|
| Capex | 816 | 2,055 | 1,505 | 2,722 | 314 | -88.5% |
Ratios
|
|---|
| Revenue growth | -22.2% | 27.9% | 13.6% | -9.8% | -15.9% | |
| EBITDA growth | -32.5% | 5.4% | 20.8% | -15.9% | -19.1% | |
| EBITDA Margin | 20.7% | 17.0% | 18.1% | 16.9% | 16.3% | -0.6% |
| Net Income Margin | 11.6% | 4.0% | 6.2% | 5.5% | 3.0% | -2.6% |
| CAPEX, % of revenue | 7.3% | 14.4% | 9.3% | 18.7% | 2.6% | -16.1% |
| ROIC | 9.8% | 9.0% | 10.4% | 8.3% | 5.5% | -2.8% |
| ROE | 14.8% | 6.5% | 11.2% | 8.3% | 3.6% | -4.7% |
| Net Debt/EBITDA | 3.9x | 5.2x | 4.1x | 3.3x | 4.1x | 0.8x |
Revenue and profitability
Heg's Revenue dropped on 15.9% in FY2015. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin increased on 7.9 pp from 6.8% to 14.6% in FY2015.
Net Income marign decreased on 2.6 pp from 5.5% to 3.0% in FY2015.
Capital expenditures (CAPEX) and working capital investments
Heg's CAPEX/Revenue was 2.6% in FY2015. Heg showed big decline in CAPEX/Revenue of 11.9 pp from 14.4% in FY2012 to 2.6% in FY2015. Average CAPEX/Revenue for the last three years was 10.2%.
Return on investment
The company operates at low ROIC (5.48%) and ROE (3.62%). ROIC decreased on 2.8 pp from 8.3% to 5.5% in FY2015. ROE decreased on 4.7 pp from 8.3% to 3.6% in FY2015.
Leverage (Debt)
Company's Net Debt / EBITDA is 4.1x and Debt / EBITDA is 4.1x. Net Debt / EBITDA jumped on 0.8x from 3.3x to 4.1x in FY2015. Debt decreased slightly on 0.61% in FY2015 while cash dropped on 80.7% in FY2015.
Valuation
The company's trades at EV/EBITDA 8.4x and P/E 23.4x while industy averages are 10.5x and 26.1x. Heg's EV/(EBITDA-CAPEX) is 10.0x with the industry average at 4.7x.
Management team
Heg's CEO Ravi Jhunjhunwala has spent 36 years at the company. The company's CFO Raju Rustogi has spent 5 years at the company.
Appendix 1: Peers in Other Industrial Goods
Below we provide Heg 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% |
| Graphite India ($GRPHIDM) | | 32.5% | 1.9% | 3.1% | -14.9% |
| |
|---|
| Median (7 companies) | -27.7% | 30.0% | 7.6% | 3.8% | -46.3% |
|---|
| Heg ($HEG) | | 27.9% | 13.6% | -9.8% | -15.9% |
Top companies by EBITDA margin, %
| Top 5 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Amd Industries ($AMDIND) | 15.4% | 15.3% | 12.3% | 16.4% | |
| Vesuvius India ($VESUVIUS) | 18.0% | 17.7% | 18.8% | 15.6% | |
| Ifgl Refractories ($IFGLREFRAC) | 8.6% | 13.2% | 8.5% | 15.1% | |
| Graphite India ($GRPHIDM) | 21.7% | 16.9% | 14.1% | 12.7% | 8.2% |
| Gee ($GEE) | 13.1% | 10.9% | 8.4% | 9.4% | |
| |
|---|
| Median (6 companies) | 14.2% | 13.2% | 8.5% | 13.9% | 18.6% |
|---|
| Heg ($HEG) | 20.7% | 17.0% | 18.1% | 16.9% | 16.3% |
Top companies by CAPEX/Revenue, %
| Top | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Vesuvius India ($VESUVIUS) | 7.1% | 4.2% | 4.0% | 3.4% | |
| Vhcl Industries ($VHCLINDUS) | | 7.1% | 0.4% | 2.9% | |
| Ifgl Refractories ($IFGLREFRAC) | 3.3% | 0.8% | 2.9% | 1.3% | |
| Graphite India ($GRPHIDM) | 6.8% | 7.1% | 2.7% | 1.2% | 1.6% |
| |
|---|
| Median (4 companies) | 5.9% | 3.5% | 2.8% | 2.1% | 1.6% |
|---|
| Heg ($HEG) | 7.3% | 14.4% | 9.3% | 18.7% | 2.6% |
Top companies by ROIC, %
| Top 5 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Snl Bearings ($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 ($VESUVIUS) | 23.1% | 25.0% | 25.0% | 19.3% | |
| Graphite India ($GRPHIDM) | 13.3% | 12.6% | 8.6% | 8.0% | 4.2% |
| |
|---|
| Median (13 companies) | 13.3% | 16.4% | 12.4% | 20.2% | 4.2% |
|---|
| Heg ($HEG) | 9.8% | 9.0% | 10.4% | 8.3% | 5.5% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Vhcl Industries ($VHCLINDUS) | | 1.4x | 2.6x | 4.0x | |
| Graphite India ($GRPHIDM) | 1.0x | 2.0x | 2.7x | 1.7x | 2.4x |
| Snl Bearings ($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) | 1.0x | 1.2x | 1.3x | 0.4x | 1.2x |
|---|
| Heg ($HEG) | 3.9x | 5.2x | 4.1x | 3.3x | 4.1x |
