Centum Electronics Net Income surged on 25.0% in 2015 and EBITDA Margin showed almost no change

27-05-2015 • About Centum Electronics ($CENTUM) • By InTwits

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

Centum Electronics has low CAPEX intensity: 5 year average CAPEX/Revenue was 4.7%. At the same time it's a lot of higher than industry average of 12.1%.
CAPEX is quite volatile: 192 in FY2015, 285 in FY2014, 68.1 in FY2013, 141 in FY2012, 127 in FY2011
The company has highly profitable business model: ROIC is at 32.8%

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

Centum Electronics ($CENTUM) key annual financial indicators

mln. INR	2011	2012	2013	2014	2015	2015/2014
P&L
Revenue	2,539	2,574	2,826	4,252	4,880	14.8%
EBITDA	301	330	470	876	992	13.2%
Net Income	50	72	93	347	433	25.0%
Balance Sheet
Cash	5	5	40	129	453	251.5%
Short Term Debt	506	531	615	528	894	69.1%
Long Term Debt	107	109	5	0	0
Cash flow
Capex	127	141	68	285	192	-32.4%
Ratios
Revenue growth	-55.9%	1.4%	9.8%	50.4%	14.8%
EBITDA growth	121.2%	9.6%	42.5%	86.4%	13.2%
EBITDA Margin	11.9%	12.8%	16.6%	20.6%	20.3%	-0.3%
Net Income Margin	2.0%	2.8%	3.3%	8.2%	8.9%	0.7%
CAPEX, % of revenue	5.0%	5.5%	2.4%	6.7%	3.9%	-2.8%
ROIC	10.9%	10.6%	16.9%	35.8%	32.8%	-3.0%
ROE	5.5%	7.6%	9.4%	30.1%	29.0%	-1.1%
Net Debt/EBITDA	2.0x	1.9x	1.2x	0.5x	0.4x	-0.0x

Revenue and profitability

The company's Revenue jumped on 14.8% in FY2015. Revenue decline was accompanies by EBITDA margin decline. EBITDA Margin decreased on 4.2 pp from 3.2% to -0.99% in FY2015.

Net Income marign increased slightly on 0.73 pp from 8.2% to 8.9% in FY2015.

Capital expenditures (CAPEX) and working capital investments

The company's CAPEX/Revenue was 3.9% in FY2015. The company's CAPEX/Revenue decreased slightly on 1.5 pp from 5.5% in FY2012 to 3.9% in FY2015. For the last three years the average CAPEX/Revenue was 4.3%.

Return on investment

The company operates at high and attractive ROIC (32.80%) and ROE (29.00%). ROIC decreased on 3.0 pp from 35.8% to 32.8% in FY2015. ROE decreased slightly on 1.1 pp from 30.1% to 29.0% in FY2015.

Leverage (Debt)

Company's Net Debt / EBITDA is 0.4x and Debt / EBITDA is 0.9x. Net Debt / EBITDA decreased slightly on 0.011x from 0.5x to 0.4x in FY2015. Debt surged on 69.1% in FY2015 while cash jumped on 252% in FY2015.

Valuation

The company's trades at EV/EBITDA 8.9x and P/E 19.3x while industy averages are 10.5x and 26.1x. Centum Electronics's EV/(EBITDA-CAPEX) is 11.0x with the industry average at 4.7x.

Appendix 1: Peers in Misc.Commercial Services

Below we provide Centum Electronics benchmarking against other companies in Misc.Commercial Services 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
Crest Ventures Limited ($CREST)		-39.7%	9.2%	-0.8%	55.0%
Trinity Tradelink Limited ($TRITRADE)				408,047.0%	28.3%
Delta Corp ($DELTACORP)		-2.9%	16.6%	31.3%	-46.3%
Median (3 companies)	-60.9%	-2.9%	12.9%	23.0%	28.3%
Centum Electronics ($CENTUM)		1.4%	9.8%	50.4%	14.8%

Top companies by EBITDA margin, %


Top	FY2011	FY2012	FY2013	FY2014	FY2015
Delta Corp ($DELTACORP)	49.3%	27.7%	23.7%	27.0%	22.9%
Crest Ventures Limited ($CREST)	-1.2%	4.9%	13.4%	21.8%	4.2%
Trinity Tradelink Limited ($TRITRADE)	-1.3%			0.9%	2.6%
Median (3 companies)	5.4%	10.8%	13.4%	16.4%	4.2%
Centum Electronics ($CENTUM)	11.9%	12.8%	16.6%	20.6%	20.3%

Top companies by CAPEX/Revenue, %


Top	FY2011	FY2012	FY2013	FY2014	FY2015
Ganesha Ecosphere ($GANECOS)	11.0%	6.9%	23.4%	15.4%
Delta Corp ($DELTACORP)	32.0%	95.5%	74.3%	14.0%	5.2%
Crest Ventures Limited ($CREST)	4.5%	5.2%	4.0%	4.4%
Trinity Tradelink Limited ($TRITRADE)	0.0%		0.0%	0.0%
Median (4 companies)	7.7%	6.9%	13.7%	9.2%	5.2%
Centum Electronics ($CENTUM)	5.0%	5.5%	2.4%	6.7%	3.9%

Top companies by ROIC, %


Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Ganesha Ecosphere ($GANECOS)	20.8%	18.6%	15.8%	13.2%
Delta Corp ($DELTACORP)	24.3%	8.5%	6.7%	10.1%	2.9%
Trinity Tradelink Limited ($TRITRADE)	-52.6%	-138.6%	-242.1%	5.1%	12.3%
Greencrest Financial Services ($GREENCREST)			1.8%	2.2%
Lifeline Drugs & Pharma ($LIFELINE)		3.3%	2.8%	1.2%
Median (11 companies)	16.4%	4.9%	4.8%	5.1%	7.6%
Centum Electronics ($CENTUM)	10.9%	10.6%	16.9%	35.8%	32.8%

Top companies by Net Debt / EBITDA


Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Ganesha Ecosphere ($GANECOS)	2.1x	2.1x	3.6x	3.9x
Crest Ventures Limited ($CREST)		-1.8x	0.2x	2.8x	0.0x
Delta Corp ($DELTACORP)	0.8x	3.2x	4.4x	2.1x	4.6x
Sawaca Business Machines ($SAWABUSI)	-2.3x			-1.0x
Lifeline Drugs & Pharma ($LIFELINE)		-0.7x	-0.5x	-1.1x
Median (6 companies)	1.8x	1.7x	2.1x	0.6x	1.0x
Centum Electronics ($CENTUM)	2.0x	1.9x	1.2x	0.5x	0.4x

Centum Electronics stock price chart

Centum Electronics financials

mln.	FY2010	FY2011	FY2012

Revenue	5,756	2,539	2,574
EBITDA	136.1	301.0	329.8
Net income	4.389	49.723	71.899
CAPEX	60.726	127.1	141.1
Debt	414.8	612.9	639.8
Cash	17.136	4.597	5.452

About Centum Electronics

Centum Electronics Limited, together with its subsidiary, Centum Rakon India Private Limited, designs, develops, manufactures, sells, and exports electronic modules, subsystems, and microelectronic circuits for defense, aerospace, space, industrial, medical, and communications markets. It offers various products for defense, such as electronics for inertial systems, BLDC controllers, laser receivers, electronic delay units, missile interface units, DC-DC converters, high-wattage power supplies, onboard computers, microelectronic products, PIN diode drivers, and power OpAmps. The company also provides a range of products and services in the areas of satellite bus systems, satellite payload systems, and launch vehicle systems. In addition, it designs and develops power products, such as DC-DC and BLDC controllers, AC-DC converters, power supplies, power op-amps, and solid state relays. Further, the company offers frequency control products, including simple packages oscillators, voltage controlled crystal oscillators, temperature compensated crystal oscillators, and oven controlled crystal oscillators. Additionally, it provides design services, electric manufacturing solutions, and mechanical solutions. The company has operations in North America, Europe, India, and rest of Asia. Centum Electronics Limited was founded in 1993 and is headquartered in Bengaluru, India.