Usha Martin CAPEX dropped on 49.1% in 2015 while Revenue surged on 12.0%

25-05-2015 • About Usha Martin ($USHAMART) • By InTwits

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

• Usha Martin has high CAPEX intensity: 5 year average CAPEX/Revenue was 22.7%. At the same time it's a lot of higher than industry average of 9.6%.
• CAPEX is quite volatile: 4,099 in FY2015, 1,895 in FY2014, 1,081 in FY2013, 1,630 in FY2012, 1,275 in FY2011
• The company has potentially unprofitable business model: ROIC is at 5.6%
• It operates with high leverage: Net Debt/EBITDA is 5.2x while industry average is 1.5x

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

Usha Martin ($USHAMART) key annual financial indicators

mln. INR	2011	2012	2013	2014	2015	2015/2014
P&L
Revenue	30,446	33,608	36,218	40,738	45,611	12.0%
EBITDA	5,680	4,442	6,543	7,621	7,512	-1.4%
Net Income	1,370	36	788	107	-2,531	-2,465.6%
Balance Sheet
Cash	1,286	944	551	378	634	67.8%
Short Term Debt	2,364	5,385	8,665	10,899	12,798	17.4%
Long Term Debt	13,580	40,189	23,264	26,422	27,128	2.7%
Cash flow
Capex	7,906	7,246	8,529	11,831	6,022	-49.1%
Ratios
Revenue growth	-47.1%	10.4%	7.8%	12.5%	12.0%
EBITDA growth	28.7%	-21.8%	47.3%	16.5%	-1.4%
EBITDA Margin	18.7%	13.2%	18.1%	18.7%	16.5%	-2.2%
Net Income Margin	4.5%	0.1%	2.2%	0.3%	-5.5%	-5.8%
CAPEX, % of revenue	26.0%	21.6%	23.5%	29.0%	13.2%	-15.8%
ROIC	9.5%	4.3%	6.5%	7.6%	5.6%	-1.9%
ROE	7.9%	0.2%	4.2%	0.5%	-13.5%	-14.0%
Net Debt/EBITDA	2.6x	10.0x	4.8x	4.8x	5.2x	0.4x

Revenue and profitability

The company's Revenue surged on 12.0% in FY2015. Despite revenue decline the EBITDA margin expanded. EBITDA Margin increased on 2.7 pp from 12.4% to 15.1% in FY2015.

Net Income marign decreased on 5.8 pp from 0.26% to -5.5% in FY2015.

Capital expenditures (CAPEX) and working capital investments

In FY2015 the company had CAPEX/Revenue of 13.2%. CAPEX/Revenue decreased on 8.4 pp from 21.6% in FY2012 to 13.2% in FY2015. It's average level of CAPEX/Revenue for the last three years was 21.9%.Usha Martin invested a big chunk of EBITDA (80.2%) to CAPEX to fuel its growth.

Return on investment

The company operates at low but positive ROIC (5.61%) and negative ROE (-13.46%). ROIC decreased slightly on 1.9 pp from 7.6% to 5.6% in FY2015. ROE dropped on 14.0 pp from 0.54% to -13.5% in FY2015.

Leverage (Debt)

Company's Net Debt / EBITDA is 5.2x and Debt / EBITDA is 5.3x. Net Debt / EBITDA jumped on 0.4x from 4.8x to 5.2x in FY2015. Debt increased on 7.0% in FY2015 while cash surged on 67.8% in FY2015.

Appendix 1: Peers in Iron & Steel Products

Below you can find Usha Martin benchmarking vs. other companies in Iron & Steel 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
Msp Steel & Power ($MSPL)	-61.2%	19.7%	60.6%	29.4%
Apl Apollo Tubes ($APLAPOLLO)		54.5%	44.2%	24.3%	25.7%
Metal Coatings (India) ($METALCO)	-21.7%	20.4%	-15.8%	13.0%
Lakshmi Precision Screws ($LAKPRE)	-29.7%	9.9%	-6.2%	7.5%
Nile ($NILE)		7.5%	-19.1%	6.9%	38.7%
Median (10 companies)	-25.7%	20.1%	-8.6%	4.8%	38.7%
Usha Martin ($USHAMART)		10.4%	7.8%	12.5%	12.0%

Top companies by EBITDA margin, %

Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Msp Steel & Power ($MSPL)	15.8%	-1.1%	17.7%	13.8%
Lakshmi Precision Screws ($LAKPRE)	14.5%	15.9%	16.2%	7.0%
Apl Apollo Tubes ($APLAPOLLO)	10.6%	8.3%	7.9%	6.6%	5.9%
Nile ($NILE)	6.4%	5.5%	5.6%	6.0%	4.4%
Metal Coatings (India) ($METALCO)	4.2%	4.7%	4.5%	4.1%
Median (6 companies)	6.7%	5.2%	5.6%	6.3%	5.5%
Usha Martin ($USHAMART)	18.7%	13.2%	18.1%	18.7%	16.5%

Top companies by CAPEX/Revenue, %

Top	FY2011	FY2012	FY2013	FY2014	FY2015
Apl Apollo Tubes ($APLAPOLLO)	8.8%	5.6%	4.2%	5.1%	5.9%
Gandhi Special Tubes ($GANDHITUBE)					4.0%
Median (2 companies)	6.5%	5.6%	1.6%	10.3%	4.9%
Usha Martin ($USHAMART)	26.0%	21.6%	23.5%	29.0%	13.2%

Top companies by ROIC, %

Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Apl Apollo Tubes ($APLAPOLLO)	20.5%	18.2%	19.5%	16.0%	16.6%
Gandhi Special Tubes ($GANDHITUBE)	31.2%	28.3%	18.9%	13.2%	11.1%
Msp Steel & Power ($MSPL)	6.4%	-2.8%	7.2%	5.9%
Lakshmi Precision Screws ($LAKPRE)	13.7%	14.4%	11.9%	3.1%
Electrotherm (India) ($ELECTHERM)	7.1%	0.0%	-5.3%	0.0%
Median (23 companies)	9.4%	8.5%	8.7%	5.9%	13.8%
Usha Martin ($USHAMART)	9.5%	4.3%	6.5%	7.6%	5.6%

Top companies by Net Debt / EBITDA

Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Lakshmi Precision Screws ($LAKPRE)	2.4x	2.7x	3.4x	8.1x
Msp Steel & Power ($MSPL)	9.2x		6.4x	6.6x
Apl Apollo Tubes ($APLAPOLLO)	2.5x	2.7x	2.8x	3.1x	2.3x
National Fittings ($NATFIT)	0.6x	0.8x	0.1x	0.0x
Gujarat Containers ($GUJCONT)	0.0x	2.6x	2.6x	0.0x
Median (13 companies)	2.5x	2.6x	3.4x	0.0x	0.0x
Usha Martin ($USHAMART)	2.6x	10.0x	4.8x	4.8x	5.2x

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