Arcotech Debt decreased on 5.1% in 2015 and Net Debt / EBITDA dropped on 0.1x from 2.5x to 2.4x

29-05-2015 • About Arcotech ($ARCOTECH) • By InTwits

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

Arcotech has low CAPEX intensity: 5 year average CAPEX/Revenue was 4.1%. At the same time it's in pair with industry average of 3.5%.
CAPEX is quite volatile: 88.8 in FY2015, 222 in FY2014, 228 in FY2013, 101 in FY2012, 107 in FY2011
The company has highly profitable business model: ROIC is at 21.6%
It operates with high leverage: Net Debt/EBITDA is 2.4x while industry average is -0.1x

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

Arcotech ($ARCOTECH) key annual financial indicators

mln. INR	2011	2012	2013	2014	2015	2015/2014
P&L
Revenue	2,022	2,528	3,691	6,249	6,558	4.9%
EBITDA	332	384	474	848	853	0.5%
Net Income	142	177	229	331	338	2.0%
Balance Sheet
Cash	1	1	0	1	2	182.1%
Short Term Debt	575	716	1,248	1,961	1,966	0.2%
Long Term Debt	93	56	161	181	67	-63.0%
Cash flow
Capex	107	101	228	222	89	-59.9%
Ratios
Revenue growth	-74.3%	25.0%	46.0%	69.3%	4.9%
EBITDA growth	96.6%	15.6%	23.5%	78.9%	0.5%
EBITDA Margin	16.4%	15.2%	12.9%	13.6%	13.0%	-0.6%
Net Income Margin	7.0%	7.0%	6.2%	5.3%	5.1%	-0.1%
CAPEX, % of revenue	5.3%	4.0%	6.2%	3.5%	1.4%	-2.2%
ROIC	30.7%	25.8%	21.5%	25.7%	21.6%	-4.1%
ROE	27.2%	26.1%	25.2%	27.5%	22.3%	-5.2%
Net Debt/EBITDA	2.0x	2.0x	3.0x	2.5x	2.4x	-0.1x

Revenue and profitability

The company's Revenue increased on 4.9% in FY2015. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin increased on 9.8 pp from 7.0% to 16.9% in FY2015.

Net Income marign showed almost no change in FY2015.

Capital expenditures (CAPEX) and working capital investments

The company's CAPEX/Revenue was 1.4% in FY2015. Arcotech showed decline in CAPEX/Revenue of 2.7 pp from 4.0% in FY2012 to 1.4% in FY2015. It's average CAPEX/Revenue for the last three years was 3.7%.

Return on investment

The company operates at high and attractive ROIC (21.61%) and ROE (22.33%). ROIC decreased on 4.1 pp from 25.7% to 21.6% in FY2015. ROE decreased on 5.2 pp from 27.5% to 22.3% in FY2015.

Leverage (Debt)

Company's Net Debt / EBITDA is 2.4x and Debt / EBITDA is 2.4x. Net Debt / EBITDA dropped on 0.1x from 2.5x to 2.4x in FY2015. Debt decreased on 5.1% in FY2015 while cash surged on 182% in FY2015.

Valuation

The company's trades at EV/EBITDA 10.9x and P/E 21.5x while industy averages are 10.5x and 26.1x. The company's EV/(EBITDA-CAPEX) is 12.1x with the industry average at 4.7x.

Appendix 1: Peers in Copper

Below you can find Arcotech benchmarking vs. other companies in Copper 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
Hindustan Copper ($HINDCOPPER)		27.5%	-11.1%	12.5%	-32.5%
Median (1 company)		27.5%	-11.1%	12.5%	-32.5%
Arcotech ($ARCOTECH)		25.0%	46.0%	69.3%	4.9%

Top companies by EBITDA margin, %


Top	FY2011	FY2012	FY2013	FY2014	FY2015
Hindustan Copper ($HINDCOPPER)	34.0%	36.8%	23.9%	34.5%	12.6%
Median (1 company)	34.0%	36.8%	23.9%	34.5%	12.6%
Arcotech ($ARCOTECH)	16.4%	15.2%	12.9%	13.6%	13.0%

Top companies by CAPEX/Revenue, %


Top	FY2011	FY2012	FY2013	FY2014	FY2015
Hindustan Copper ($HINDCOPPER)	1.5%	1.4%	3.1%	6.0%	15.5%
Median (1 company)	1.5%	1.4%	3.1%	6.0%	15.5%
Arcotech ($ARCOTECH)	5.3%	4.0%	6.2%	3.5%	1.4%

Top companies by ROIC, %


Top	FY2011	FY2012	FY2013	FY2014	FY2015
Hindustan Copper ($HINDCOPPER)	25.0%	31.2%	10.7%	19.0%	0.8%
Baroda Extrusion ($BAROEXT)	11.8%	2.9%
Median (2 companies)	18.4%	17.1%	10.7%	19.0%	0.8%
Arcotech ($ARCOTECH)	30.7%	25.8%	21.5%	25.7%	21.6%

Top companies by Net Debt / EBITDA


Top	FY2011	FY2012	FY2013	FY2014	FY2015
Hindustan Copper ($HINDCOPPER)	-0.3x	-0.1x	-0.0x	-0.0x	-2.5x
Median (1 company)	3.6x	12.2x	-0.0x	-0.0x	-2.5x
Arcotech ($ARCOTECH)	2.0x	2.0x	3.0x	2.5x	2.4x

Arcotech stock price chart

Arcotech financials

mln.	FY2010	FY2011	FY2012

Revenue	7,868	2,022	2,528
EBITDA	169.0	332.1	384.0
Net income	76.750	141.7	177.4
CAPEX	213.0	106.7	101.4
Debt	452.2	668.0	772.0
Cash	3.336	1.162	1.103

About Arcotech

Arcotech Limited manufactures and sells non ferrous semis primarily in India. It offers copper and brass strips and foils, as well as semis, such as ingots, strips, sheets, plates, foils, copper bus bars, etc. The company also provides non ferrous alloy products, including phosphor bronze, nickel silver, nickel brass, cupro-nickel, aluminum bronze, tin bearing copper, silver bearing copper, etc. Its products are used in various applications, including automobile, electronic, electrical/power transmission, cable, air-conditioning, and housing industries. The company also offers its products for the manufacturers of torches and flash lights, zippers/buttons, lock and key, watch and clock, handicrafts and decorative items, mint for coins, and gas stoves; valves, riveting, and other general engineering users; and ordinance factories and defense sector. Arcotech Limited exports its products to various countries covering Far-East Asia, the Middle-East, and Latin America. The company was founded in 1981 and is based in New Delhi, India.