Oil India reports 12.8% Net Income decline and 0.70 pp EBITDA Margin growth from 37.6% to 38.3%

29-05-2015 • About Oil India ($OIL) • By InTwits

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

Oil India is a company in decline: FY2015 revenue growth was -2.2%, 5 years revenue CAGR was -3.5%
Oil India has high CAPEX intensity: 5 year average CAPEX/Revenue was 20.0%. At the same time it's in pair with industry average of 25.8%.
CAPEX is quite volatile: 29,987 in FY2015, 28,520 in FY2014, 17,867 in FY2013, 9,260 in FY2012, 9,518 in FY2011
The company has business model with low profitability: ROIC is at 8.6%

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

Oil India ($OIL) key annual financial indicators

mln. INR	2011	2012	2013	2014	2015	2015/2014
P&L
Revenue	83,206	98,632	99,681	96,898	94,767	-2.2%
EBITDA	36,493	42,153	43,532	36,462	36,324	-0.4%
Net Income	28,838	34,465	35,921	29,903	26,084	-12.8%
Balance Sheet
Cash	2,452	780	3,424	2,416	88,173	3,549.2%
Short Term Debt	10,055	101	12,609	86,311	4,676	-94.6%
Long Term Debt	88	0	0	15,153	83,994	454.3%
Cash flow
Capex	9,518	9,260	17,867	28,520	29,987	5.1%
Ratios
Revenue growth	-26.6%	18.5%	1.1%	-2.8%	-2.2%
EBITDA growth	0.4%	15.5%	3.3%	-16.2%	-0.4%
EBITDA Margin	43.9%	42.7%	43.7%	37.6%	38.3%	0.7%
Net Income Margin	34.7%	34.9%	36.0%	30.9%	27.5%	-3.3%
CAPEX, % of revenue	11.4%	9.4%	17.9%	29.4%	31.6%	2.2%
ROIC	21.1%	19.8%	18.3%	10.5%	8.6%	-1.9%
ROE	19.6%	20.7%	19.4%	15.0%	12.4%	-2.6%
Net Debt/EBITDA	0.2x	-0.0x	0.2x	2.7x	0.0x	-2.7x

Revenue and profitability

Oil India's Revenue decreased on 2.2% in FY2015. Revenue decline happened at the same time with EBITDA margin expansion. EBITDA Margin increased slightly on 0.70 pp from 37.6% to 38.3% in FY2015.

Net Income marign decreased on 3.3 pp from 30.9% to 27.5% in FY2015.

Capital expenditures (CAPEX) and working capital investments

In FY2015 Oil India had CAPEX/Revenue of 31.6%. The company's CAPEX/Revenue jumped on 22.3 pp from 9.4% in FY2012 to 31.6% in FY2015. It's average level of CAPEX/Revenue for the last three years was 26.3%.The company invested a big chunk of EBITDA (82.6%) to CAPEX which didn't stop revenue from falling.

Return on investment

The company operates at good ROE (12.37%) while ROIC is low (8.63%). ROIC decreased slightly on 1.9 pp from 10.5% to 8.6% in FY2015. ROE decreased on 2.6 pp from 15.0% to 12.4% in FY2015.

Leverage (Debt)

Company's Net Debt / EBITDA is 0.0x and Debt / EBITDA is 2.4x. Net Debt / EBITDA dropped on 2.7x from 2.7x to 0.014x in FY2015. Debt dropped on 12.6% in FY2015 while cash jumped on 3,549% in FY2015.

Valuation

The company's trades at EV/EBITDA 7.7x and P/E 10.7x while industy averages are 10.5x and 26.1x. The company's EV/(EBITDA-CAPEX) is 44.2x with the industry average at 4.7x.

Appendix 1: Peers in Exploration & Production

Below you can find Oil India benchmarking vs. other companies in Exploration & Production 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
Aban Offshore ($ABAN)		-5.5%	16.1%	7.2%	2.7%
Oil And Natural Gas Corporation ($ONGC)		24.5%	10.3%	7.3%	-8.0%
Cairn India ($CAIRN)		15.5%	48.3%	7.1%	-21.9%
Median (3 companies)	503.4%	8.5%	13.2%	7.1%	-8.0%
Oil India ($OIL)		18.5%	1.1%	-2.8%	-2.2%

Top companies by EBITDA margin, %


Top	FY2011	FY2012	FY2013	FY2014	FY2015
Cairn India ($CAIRN)	82.0%	78.6%	74.6%	73.3%	73.1%
Aban Offshore ($ABAN)	65.6%	59.7%	55.4%	57.0%	58.9%
Oil And Natural Gas Corporation ($ONGC)	36.1%	33.9%	27.3%	28.4%	26.7%
Median (3 companies)	56.8%	53.2%	50.2%	57.0%	58.9%
Oil India ($OIL)	43.9%	42.7%	43.7%	37.6%	38.3%

Top companies by CAPEX/Revenue, %


Top	FY2011	FY2012	FY2013	FY2014	FY2015
Cairn India ($CAIRN)	25.1%	25.0%	9.3%	15.3%	38.1%
Aban Offshore ($ABAN)	16.8%	20.9%	25.4%	36.1%	22.7%
Oil And Natural Gas Corporation ($ONGC)	16.8%	13.1%	11.1%	8.6%	10.6%
Median (3 companies)	16.8%	22.9%	11.1%	15.3%	22.7%
Oil India ($OIL)	11.4%	9.4%	17.9%	29.4%	31.6%

Top companies by ROIC, %


Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Cairn India ($CAIRN)	17.6%	16.6%	22.7%	21.3%	10.0%
Selan Exploration Technology ($SELAN)	19.6%	23.2%	21.9%	18.6%
Oil And Natural Gas Corporation ($ONGC)	24.3%	25.2%	18.6%	15.8%	10.2%
Aban Offshore ($ABAN)	10.7%	8.6%	9.2%	9.4%	9.1%
Shiv-Vani Oil & Gas Exploration Services ($SHIV-VANI)	13.1%	11.7%	8.0%
Median (5 companies)	17.6%	16.6%	18.6%	17.2%	10.0%
Oil India ($OIL)	21.1%	19.8%	18.3%	10.5%	8.6%

Top companies by Net Debt / EBITDA


Top	FY2011	FY2012	FY2013	FY2014	FY2015
Aban Offshore ($ABAN)	5.7x	7.1x	6.6x	6.5x	5.9x
Oil And Natural Gas Corporation ($ONGC)	-0.3x	-0.2x	0.0x	0.5x	1.1x
Cairn India ($CAIRN)	0.2x	-0.3x	-0.0x	-0.0x	-0.0x
Median (3 companies)	0.8x	-0.2x	0.0x	0.3x	1.1x
Oil India ($OIL)	0.2x	-0.0x	0.2x	2.7x	0.0x

Oil India stock price chart

Oil India financials

mln.	FY2010	FY2011	FY2012

Revenue	113,397	83,206	98,632
EBITDA	36,357	36,493	42,153
Net income	26,104	28,838	34,465
CAPEX	11,485	9,518	9,260
Debt	375.0	10,143	101.3
Cash	85,430	2,452	779.5

About Oil India

Oil India Limited explores, develops, and produces crude oil and natural gas in India and internationally. It operates through Crude Oil, Natural Gas, LPG, and Pipeline Transportation segments. The company is also involved in the transportation of crude oil; and production of liquefied petroleum gas, as well as in the provision of various E&P related services. In addition, it provides wireline logging services; and pipeline services, including pipeline maintenance, mechanical maintenance, oil movement, telecom, electrical and cathodic protection, pipeline business development, and project services. Further, the company generates energy through its wind energy power projects. It owns and operates 13 drilling rigs and 14 work-over rigs; operates a total network of 1,432 kilometers of crude oil pipelines; and owns 10 crude oil pumping stations and 17 repeater stations in Assam, West Bengal, and Bihar states. The company holds interests in various petroleum exploration license/mining lease areas that cover approximately one lakh square kilometers in India. It also has participating interests in NELP exploration blocks in Mahanadi Offshore, Mumbai Deepwater, Krishna Godavari Deepwater, etc., as well as in various overseas projects in Libya, Gabon, the United States, Nigeria, Sudan, Yemen, Egypt, Venezuela, Mozambique, Bangladesh, and Russia. The company was founded in 1889 and is based in Noida, India.