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Bharat Forge reports 53.0% Net Income growth and 3.4 pp EBITDA Margin growth from 15.5% to 18.9%

20-05-2015 • About Bharat Forge ($BHARATFORG) • By InTwits

Bharat Forge reported FY2015 financial results today. Overall the company's long term financial model is characterised by the following facts:
  • Bharat Forge has high CAPEX intensity: 5 year average CAPEX/Revenue was 11.3%. At the same time it's a lot of higher than industry average of 5.7%.
  • CAPEX is quite volatile: 2,493 in FY2015, 1,566 in FY2014, 862 in FY2013, 705 in FY2012, 2,276 in FY2011
  • The company has highly profitable business model: ROIC is at 18.5%
  • It operates with high leverage: Net Debt/EBITDA is 1.3x 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.

Bharat Forge ($BHARATFORG) key annual financial indicators

mln. INR201120122013201420152015/2014
P&L
Revenue49,68662,79150,98767,15876,22213.5%
EBITDA7,94910,0288,03310,41114,40938.4%
Net Income2,9024,1302,4764,9857,62553.0%
Balance Sheet
Cash2,2491,6414,0742,3976,794183.5%
Short Term Debt5,6438,4039,59210,4235,649-45.8%
Long Term Debt15,14519,20918,27415,21219,81530.3%
Cash flow
Capex5,0899,8215,6106,7517,1726.2%
Ratios
Revenue growth-44.0%26.4%-18.8%31.7%13.5%
EBITDA growth128.9%26.2%-19.9%29.6%38.4%
EBITDA Margin16.0%16.0%15.8%15.5%18.9%3.4%
Net Income Margin5.8%6.6%4.9%7.4%10.0%2.6%
CAPEX, % of revenue10.2%15.6%11.0%10.1%9.4%-0.6%
ROIC12.6%14.6%9.1%12.6%18.5%5.9%
ROE17.0%20.0%11.2%20.2%24.9%4.7%
Net Debt/EBITDA2.3x2.6x3.0x2.2x1.3x-0.9x

Revenue and profitability


Bharat Forge's Revenue surged on 13.5% in FY2015. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin increased on 7.4 pp from -1.3% to 6.1% in FY2015.

Net Income marign increased on 2.6 pp from 7.4% to 10.0% in FY2015.

Capital expenditures (CAPEX) and working capital investments


In FY2015 the company had CAPEX/Revenue of 9.4%. The company showed decline in CAPEX/Revenue of 6.2 pp from 15.6% in FY2012 to 9.4% in FY2015. Average CAPEX/Revenue for the last three years was 10.2%.

Return on investment


The company operates at high and attractive ROE (24.89%) while ROIC is a bit lower (18.55%). ROIC increased on 5.9 pp from 12.6% to 18.5% in FY2015. ROE increased on 4.7 pp from 20.2% to 24.9% in FY2015.

Leverage (Debt)


Debt level is 1.3x Net Debt / EBITDA and 1.8x Debt / EBITDA. Net Debt / EBITDA dropped on 0.9x from 2.2x to 1.3x in FY2015. Debt decreased slightly on 0.67% in FY2015 while cash jumped on 183% in FY2015.

Valuation


The company's trades at EV/EBITDA 21.2x and P/E 37.7x while industy averages are 10.5x and 26.1x. The company's EV/(EBITDA-CAPEX) is 42.3x with the industry average at 4.7x.

Appendix 1: Peers in Other Industrial Products


Below we provide Bharat Forge benchmarking against other companies in Other Industrial Products 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  FY2011 FY2012 FY2013 FY2014 FY2015
Carborundum Universal ($CARBORUNIV)24.1%-1.2%7.8%-3.5%
Welcast Steels ($ZWELCAST)8.3%11.1%-1.5%0.0%
Everest Kanto Cylinder ($EKC)41.0%-13.1%-19.8%-9.6%
Simplex Castings ($SIMPLEXCAS)4.0%6.9%-6.6%-21.9%
 
Median (4 companies)22.5%7.6%-3.9%-5.6%-1.8%
Bharat Forge ($BHARATFORG)26.4%-18.8%31.7%13.5%


Top companies by EBITDA margin, %

Top  FY2011 FY2012 FY2013 FY2014 FY2015
Carborundum Universal ($CARBORUNIV)18.2%19.7%12.3%12.2%13.2%
Lgb Forge ($LGBFORGE)4.6%
Welcast Steels ($ZWELCAST)3.5%3.1%2.6%2.6%
 
Median (3 companies)17.4%15.5%7.5%12.2%4.6%
Bharat Forge ($BHARATFORG)16.0%16.0%15.8%15.5%18.9%


Top companies by CAPEX/Revenue, %

Top  FY2011 FY2012 FY2013 FY2014 FY2015
Everest Kanto Cylinder ($EKC)9.4%5.7%0.4%4.0%
Carborundum Universal ($CARBORUNIV)5.0%8.5%10.9%3.6%3.8%
 
Median (2 companies)6.6%7.1%5.6%3.8%3.8%
Bharat Forge ($BHARATFORG)10.2%15.6%11.0%10.1%9.4%


Top companies by ROIC, %

Top 5 FY2011 FY2012 FY2013 FY2014 FY2015
Gujarat Intrux ($GUJINTRX)10.1%26.0%23.7%19.7%
Carborundum Universal ($CARBORUNIV)20.1%25.3%11.8%10.6%11.0%
Lgb Forge ($LGBFORGE)-4.7%8.6%2.5%-3.6%-0.6%
Everest Kanto Cylinder ($EKC)6.5%2.6%-7.3%-7.9%
Vishal Malleables ($VISHMEL)9.8%4.0%-28.0%
 
Median (12 companies)10.4%13.5%11.8%3.5%5.2%
Bharat Forge ($BHARATFORG)12.6%14.6%9.1%12.6%18.5%


Top companies by Net Debt / EBITDA

Top 5 FY2011 FY2012 FY2013 FY2014 FY2015
Lgb Forge ($LGBFORGE)5.8x4.4x3.7x4.0x5.9x
Carborundum Universal ($CARBORUNIV)1.2x0.8x1.5x1.2x0.7x
Steelcast ($STEELCAS)5.7x1.7x2.1x0.0x
Hilton Metal Forging ($HILTON)7.0x2.5x1.5x0.0x
Simplex Castings ($SIMPLEXCAS)1.7x2.1x0.0x0.0x
 
Median (6 companies)4.3x2.3x1.5x0.0x0.7x
Bharat Forge ($BHARATFORG)2.3x2.6x3.0x2.2x1.3x


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