Engineers India EBITDA dropped on 39.6% in 2015 and EBITDA Margin decreased on 7.6 pp from 21.1% to 13.5%

27-05-2015 • About Engineers India ($ENGINERSIN) • By InTwits

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

Engineers India is a company in decline: FY2015 revenue growth was -5.7%, 5 years revenue CAGR was -3.9%
Engineers India has low CAPEX intensity: 5 year average CAPEX/Revenue was 2.2%. At the same time it's in pair with industry average of 6.9%.
CAPEX is quite volatile: 632 in FY2015, 820 in FY2014, 799 in FY2013, 0 in FY2012, 0 in FY2011
The company has business model with low profitability: ROIC is at 8.5%

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

Engineers India ($ENGINERSIN) key annual financial indicators

mln. INR	2011	2012	2013	2014	2015	2015/2014
P&L
Revenue	28,482	37,234	25,290	18,465	17,412	-5.7%
EBITDA	6,645	7,222	5,980	3,889	2,347	-39.6%
Net Income	5,313	6,439	6,322	4,827	3,127	-35.2%
Balance Sheet
Cash	696	175	198	160	151	-5.6%
Short Term Debt	0	0	0	2	5	204.0%
Long Term Debt	0	0	0	0	0
Cash flow
Capex	0	0	799	820	632	-22.9%
Ratios
Revenue growth	34.1%	30.7%	-32.1%	-27.0%	-5.7%
EBITDA growth	31.4%	8.7%	-17.2%	-35.0%	-39.6%
EBITDA Margin	23.3%	19.4%	23.6%	21.1%	13.5%	-7.6%
Net Income Margin	18.7%	17.3%	25.0%	26.1%	18.0%	-8.2%
CAPEX, % of revenue	0.0%	0.0%	3.2%	4.4%	3.6%	-0.8%
ROIC	52.8%	44.2%	26.8%	14.4%	8.5%	-5.9%
ROE	40.2%	38.0%	30.1%	20.0%	12.1%	-7.9%
Net Debt/EBITDA	-0.1x	-0.0x	-0.0x	-0.0x	-0.1x	-0.0x

Revenue and profitability

The company's Revenue decreased on 5.7% in FY2015. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin increased on 2.5 pp from 17.5% to 20.0% in FY2015.

Net Income marign decreased on 8.2 pp from 26.1% to 18.0% in FY2015.

Capital expenditures (CAPEX) and working capital investments

In FY2015 the company had CAPEX/Revenue of 3.6%. CAPEX/Revenue increased3.6 pp from 0% in FY2012 to 3.6% in FY2015. Average CAPEX/Revenue for the last three years was 3.7%.

Return on investment

The company operates at good ROE (12.14%) while ROIC is low (8.47%). ROIC decreased on 5.9 pp from 14.4% to 8.5% in FY2015. ROE decreased on 7.9 pp from 20.0% to 12.1% in FY2015.

Leverage (Debt)

Debt level is -0.1x Net Debt / EBITDA and 0.0x Debt / EBITDA. Net Debt / EBITDA decreased on 0.022x from -0.041x to -0.1x in FY2015. Debt jumped on 204% in FY2015 while cash decreased on 5.6% in FY2015.

Valuation

Engineers India's trades at EV/EBITDA 28.2x and P/E 21.2x while industy averages are 10.5x and 26.1x. The company's EV/(EBITDA-CAPEX) is 38.6x with the industry average at 4.7x.

Appendix 1: Peers in Consulting Services

Below you can find Engineers India benchmarking vs. other companies in Consulting Services 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	FY2011	FY2012	FY2013	FY2014	FY2015
Veritas (India) ($VERITAS)	-65.8%	28.3%	15.7%	31.5%
Median (1 company)	-65.8%	28.3%	15.7%	31.5%
Engineers India ($ENGINERSIN)		30.7%	-32.1%	-27.0%	-5.7%

Top companies by EBITDA margin, %


Top	FY2011	FY2012	FY2013	FY2014	FY2015
Veritas (India) ($VERITAS)	5.0%	2.1%	2.9%	3.3%
Median (1 company)	5.0%	2.1%	2.9%	3.3%
Engineers India ($ENGINERSIN)	23.3%	19.4%	23.6%	21.1%	13.5%

Top companies by ROIC, %


Top	FY2011	FY2012	FY2013	FY2014	FY2015
Veritas (India) ($VERITAS)	27.5%	10.4%	11.9%	12.9%
Artefact Projects ($ARTEFACT)
Median (2 companies)	27.5%	10.4%	11.9%	12.9%
Engineers India ($ENGINERSIN)	52.8%	44.2%	26.8%	14.4%	8.5%

Top companies by Net Debt / EBITDA


Top	FY2011	FY2012	FY2013	FY2014	FY2015
Veritas (India) ($VERITAS)	0.3x	2.0x	3.8x	3.2x
Median (1 company)	2.0x	1.0x	3.7x	3.2x
Engineers India ($ENGINERSIN)	-0.1x	-0.0x	-0.0x	-0.0x	-0.1x

Engineers India stock price chart

Engineers India financials

mln.	FY2010	FY2011	FY2012

Revenue	21,243	28,482	37,234
EBITDA	5,057	6,645	7,222
Net income	4,405	5,313	6,439
CAPEX	217.0	0.000	0.000
Debt	0.000	0.000	0.000
Cash	1,250	695.8	175.5

About Engineers India

Engineers India Limited, an engineering consultancy company, provides design, engineering, procurement, construction, and integrated project management services principally for oil and gas, and petrochemical industries in India. The company operates in two segments, Consultancy and Engineering Services, and Turnkey Projects. It offers project management services, including developing project execution plans, detailed schedules, cost forecasts/controls, progress tracking and reporting, and the integration of design, engineering, procurement, logistics, and construction efforts; and develops process technologies for petroleum refining, oil and gas processing, and aromatics industries. The company also provides procurement services, such as contracts and purchase, inspection, expediting, transportation, and supplier/contractor enlistment. In addition, it offers construction services comprising pre-construction activities, including bid management process, plot plan review/heavy lift study, etc; and construction activities consisting of site construction management, liaison with statutory authorities, construction quality and warehouse management, contracts administration, pre commissioning and commissioning assistance, and contract closing. Further, company provides specialist services comprising heat and mass transfer equipment design, environment engineering, specialist materials and maintenance, and plant operations and safety services. Additionally, it offers technical services for projects in oil and gas and other industrial sectors; services related to certification, re-certification, safety audit, and HSE management systems for offshore and onshore oil and gas facilities; and third party inspection for equipment and installations in hydrocarbon and other sectors. The company also serves infrastructure, water and waste management, solar and nuclear power, and fertilizer sectors. Engineers India Limited was founded in 1965 and is headquartered in New Delhi, India.