Nahar Spinning Mills Net Income dropped on 86.0% in 2015 and EBITDA Margin decreased on 6.0 pp from 16.3% to 10.2%

31-05-2015 • About Nahar Spinning Mills ($NAHARSPING) • By InTwits

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

• Nahar Spinning Mills is a company in decline: FY2015 revenue growth was -2.5%, 5 years revenue CAGR was -4.1%
• EBITDA Margin is quite volatile: 10.2% in FY2015, 16.3% in FY2014, 16.5% in FY2013, 1.0% in FY2012, 20.8% in FY2011
• Nahar Spinning Mills has medium CAPEX intensity: 5 year average CAPEX/Revenue was 8.8%. At the same time it's in pair with industry average of 8.3%.
• CAPEX is quite volatile: 1,279 in FY2015, 2,099 in FY2014, 547 in FY2013, 1,742 in FY2012, 2,182 in FY2011
• The company has potentially unprofitable business model: ROIC is at 4.6%
• It operates with high leverage: Net Debt/EBITDA is 4.9x while industry average is 1.4x

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

Nahar Spinning Mills ($NAHARSPING) key annual financial indicators

mln. INR	2011	2012	2013	2014	2015	2015/2014
P&L
Revenue	13,888	16,962	19,613	22,042	21,496	-2.5%
EBITDA	2,891	169	3,229	3,583	2,198	-38.6%
Net Income	1,215	-1,174	784	1,458	204	-86.0%
Balance Sheet
Cash	81	88	102	53	69	30.3%
Short Term Debt	9,651	8,046	8,883	7,930	7,312	-7.8%
Long Term Debt	3,704	4,038	3,386	3,661	3,463	-5.4%
Cash flow
Capex	2,182	1,742	547	2,099	1,279	-39.1%
Ratios
Revenue growth	-47.7%	22.1%	15.6%	12.4%	-2.5%
EBITDA growth	54.2%	-94.1%	1,806.0%	11.0%	-38.6%
EBITDA Margin	20.8%	1.0%	16.5%	16.3%	10.2%	-6.0%
Net Income Margin	8.7%	-6.9%	4.0%	6.6%	0.9%	-5.7%
CAPEX, % of revenue	15.7%	10.3%	2.8%	9.5%	5.9%	-3.6%
ROIC	12.2%	-3.5%	12.8%	13.7%	4.6%	-9.2%
ROE	19.9%	-19.3%	13.4%	21.0%	2.7%	-18.4%
Net Debt/EBITDA	4.6x	70.8x	3.8x	3.2x	4.9x	1.7x

Revenue and profitability

Nahar Spinning Mills's Revenue decreased on 2.5% in FY2015. Revenue decline was worsened by EBITDA margin decline. EBITDA Margin decreased on 6.0 pp from 16.3% to 10.2% in FY2015.

Net Income marign decreased on 5.7 pp from 6.6% to 0.95% in FY2015.

Capital expenditures (CAPEX) and working capital investments

In FY2015 Nahar Spinning Mills had CAPEX/Revenue of 5.9%. CAPEX/Revenue decreased on 4.3 pp from 10.3% in FY2012 to 5.9% in FY2015. It's average CAPEX/Revenue for the last three years was 6.1%.Battling declining revenue the company invested a large share of EBITDA (58.2%) to CAPEX but that didn't help at least in this year.

Return on investment

The company operates at low ROIC (4.57%) and ROE (2.67%). ROIC decreased on 9.2 pp from 13.7% to 4.6% in FY2015. ROE dropped on 18.4 pp from 21.0% to 2.7% in FY2015.

Leverage (Debt)

Company's Net Debt / EBITDA is 4.9x and Debt / EBITDA is 4.9x. Net Debt / EBITDA jumped on 1.7x from 3.2x to 4.9x in FY2015. Debt decreased on 7.0% in FY2015 while cash jumped on 30.3% in FY2015.

Appendix 1: Peers in Textiles

Below we provide Nahar Spinning Mills benchmarking against other companies in Textiles 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 5	FY2011	FY2012	FY2013	FY2014	FY2015
Shri Dinesh Mills ($SHRIDINE)		5.0%	5.1%	-76.5%	304.9%
Santaram Spinners ($SANTASPN)		6.0%	60.7%	-40.9%	112.0%
Asahi Industries ($ASAHIIND)		36.2%	23.0%	24.4%	103.9%
Blue Chip Tex Industries ($BLUECHIPT)		303.8%	12.9%	29.9%	56.1%
Jaybharat Textiles & Real Estate ($JAYTEX)		17.2%	-26.3%	0.4%	38.0%
Median (71 companies)	-41.1%	4.8%	9.3%	14.4%	-0.1%
Nahar Spinning Mills ($NAHARSPING)		22.1%	15.6%	12.4%	-2.5%

Top companies by EBITDA margin, %

Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Sil Investments ($SILINV)					93.8%
Swadeshi Polytex ($SWADPOL)					64.4%
Binny ($BINNY)					60.9%
Ruby Mills ($RUBYMILLS)	25.2%	28.3%	25.1%	28.6%	29.3%
Premier Synthetics ($PREMSYN)					25.9%
Median (77 companies)	12.7%	6.5%	9.5%	9.5%	8.0%
Nahar Spinning Mills ($NAHARSPING)	20.8%	1.0%	16.5%	16.3%	10.2%

Top companies by CAPEX/Revenue, %

Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Nitin Spinners ($NITINSPIN)	0.2%	1.9%	2.6%	8.0%	42.3%
Maharaja Shree Umaid Mills ($MAHASHR)	2.4%	18.6%	24.1%	6.8%	16.8%
Jindal Worldwide ($JINDWORLD)	3.6%	3.0%	10.5%	20.7%	11.6%
SRF ($SRF)	0.0%	0.0%	18.7%	20.0%	11.4%
Welspun India ($WELSPUNIND)	11.3%	5.6%	7.8%	16.4%	10.9%
Median (20 companies)	4.5%	3.0%	5.9%	6.7%	6.7%
Nahar Spinning Mills ($NAHARSPING)	15.7%	10.3%	2.8%	9.5%	5.9%

Top companies by ROIC, %

Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Welspun India ($WELSPUNIND)	5.1%	9.3%	15.6%	8.5%	21.9%
Maharaja Shree Umaid Mills ($MAHASHR)	9.9%	-0.5%	9.2%	8.3%	20.4%
Nitin Spinners ($NITINSPIN)	13.8%	6.0%	19.5%	21.5%	17.5%
Sutlej Textiles & Industries ($SUTLEJTEX)	16.0%	9.5%	13.6%	19.8%	14.6%
Arvind ($ARVIND)	9.9%	11.3%	11.2%	13.7%	13.2%
Median (115 companies)	10.1%	3.6%	9.0%	8.9%	9.5%
Nahar Spinning Mills ($NAHARSPING)	12.2%	-3.5%	12.8%	13.7%	4.6%

Top companies by Net Debt / EBITDA

Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Bombay Rayon Fashions ($BRFL)	5.9x	4.9x	4.9x	11.6x	10.0x
Ruby Mills ($RUBYMILLS)	15.9x	12.6x	15.3x	10.8x	8.6x
Dcm ($DCM)	3.1x	13.5x	3.5x	3.7x	5.5x
Rai Saheb Rekhchand Mohota Spg.& Wvg.Mills ($RAIREKMOH)	6.1x	10.0x	0.0x	0.0x	4.6x
Raymond ($RAYMOND)	3.3x	3.7x	4.6x	3.7x	4.1x
Median (66 companies)	3.7x	3.8x	3.2x	0.0x	0.0x
Nahar Spinning Mills ($NAHARSPING)	4.6x	70.8x	3.8x	3.2x	4.9x

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