R Systems International Net Income surged on 25.2% in 2015 while EBITDA Margin decreased on 2.2 pp from 14.5% to 12.3%

07-02-2016 • About R Systems International ($RSYSTEMS) • By InTwits

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

R Systems International is a company in decline: FY2015 revenue growth was -6.7%, 5 years revenue CAGR was -3.8%
R Systems International has low CAPEX intensity: 5 year average CAPEX/Revenue was 2.2%. At the same time it's in pair with industry average of 5.6%.
CAPEX is quite volatile: 163 in FY2015, 98.2 in FY2014, 169 in FY2013, 85.9 in FY2012, 79.9 in FY2011
The company has highly profitable business model: ROIC is at 25.7%

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

R Systems International ($RSYSTEMS) key annual financial indicators

mln. INR	2011	2012	2013	2014	2015	2015/2014
P&L
Revenue	4,095	4,650	5,961	6,485	6,050	-6.7%
EBITDA	338	326	795	938	744	-20.7%
Net Income	165	184	527	781	978	25.2%
Balance Sheet
Cash	348	324	794	1,022	851	-16.7%
Short Term Debt	4	3	6	3	5	59.6%
Long Term Debt	4	3	9	6	8	23.6%
Cash flow
Capex	80	86	169	98	163	65.5%
Ratios
Revenue growth	-44.3%	13.6%	28.2%	8.8%	-6.7%
EBITDA growth	57.5%	-3.4%	143.8%	17.9%	-20.7%
EBITDA Margin	8.2%	7.0%	13.3%	14.5%	12.3%	-2.2%
Net Income Margin	4.0%	3.9%	8.8%	12.0%	16.2%	4.1%
CAPEX, % of revenue	2.0%	1.8%	2.8%	1.5%	2.7%	1.2%
ROIC	9.9%	10.3%	29.1%	34.2%	25.7%	-8.5%
ROE	8.7%	9.3%	24.7%	35.1%	42.9%	7.8%
Net Debt/EBITDA	-1.0x	-1.0x	-1.0x	-1.1x	-1.1x	-0.0x

Revenue and profitability

The company's Revenue decreased on 6.7% in FY2015. Revenue decline was worsened by EBITDA margin decline. EBITDA Margin decreased on 2.2 pp from 14.5% to 12.3% in FY2015.

Net Income marign increased on 4.1 pp from 12.0% to 16.2% in FY2015.

Capital expenditures (CAPEX) and working capital investments

R Systems International's CAPEX/Revenue was 2.7% in FY2015. R Systems International's CAPEX/Revenue increased slightly on 0.84 pp from 1.8% in FY2012 to 2.7% in FY2015. It's average CAPEX/Revenue for the last three years was 2.3%.

Return on investment

The company operates at high and attractive ROIC (25.68%) and ROE (42.91%). ROIC decreased on 8.5 pp from 34.2% to 25.7% in FY2015. ROE increased on 7.8 pp from 35.1% to 42.9% in FY2015.

Leverage (Debt)

Debt level is -1.1x Net Debt / EBITDA and 0.0x Debt / EBITDA. Net Debt / EBITDA decreased on 0.048x from -1.1x to -1.1x in FY2015. Debt surged on 35.3% in FY2015 while cash dropped on 16.7% in FY2015.

Appendix 1: Peers in IT Consulting & Software

Below we provide R Systems International benchmarking against other companies in IT Consulting & Software 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
Ramco Systems ($RAMCOSYS)		9.3%	7.3%	9.9%	37.0%
Cyient ($CYIENT)		30.7%	20.6%	17.8%	24.0%
Empower India ($EMPOWER)		-3.7%	-13.2%	-32.6%	23.9%
Hexaware Technologies ($HEXAWARE)		34.3%	17.3%	13.0%	21.0%
Tech Mahindra ($TECHM)		6.8%	25.2%	174.0%	20.1%
Median (21 companies)		22.9%	20.4%	14.3%	10.1%
R Systems International ($RSYSTEMS)		13.6%	28.2%	8.8%	-6.7%

Top companies by Gross margin, %


Top	FY2011	FY2012	FY2013	FY2014	FY2015
Tata Consultancy Services ($TCS)				47.4%	42.4%
Infosys ($INFY)	45.3%	41.3%	98.1%	35.9%	38.3%
Mindtree ($MINDTREE)	32.8%	31.5%	36.2%		34.8%
Wipro ($WIPRO)	31.5%	29.2%	30.4%	32.0%	31.6%
Median (4 companies)	34.7%	32.7%	36.2%	35.9%	36.6%

Top companies by EBITDA margin, %


Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Oracle Financial Services Software ($OFSS)	37.4%	35.3%	35.2%	37.4%	39.7%
Infosys ($INFY)	32.5%	31.6%	27.9%	26.3%	27.1%
Tata Consultancy Services ($TCS)	29.9%	29.5%	28.6%	30.7%	26.1%
Wipro ($WIPRO)	21.1%	19.1%	20.9%	22.4%	22.3%
Mindtree ($MINDTREE)	11.8%	15.1%	19.8%	20.6%	20.3%
Median (25 companies)	18.0%	15.1%	17.8%	18.5%	14.2%
R Systems International ($RSYSTEMS)	8.2%	7.0%	13.3%	14.5%	12.3%

Top companies by CAPEX/Revenue, %


Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Ramco Systems ($RAMCOSYS)	16.4%		22.1%	15.3%	12.4%
Niit Technologies ($NIITTECH)	4.1%	5.9%	4.6%	6.1%	7.9%
Financial Technologies (India) ($FINANTECH)	64.7%	8.6%	11.2%		6.5%
Mindtree ($MINDTREE)	5.6%	2.5%	4.5%	5.0%	5.6%
Tech Mahindra ($TECHM)	3.0%	5.4%	2.6%	5.0%	5.0%
Median (20 companies)	4.2%	3.9%	3.5%	3.5%	3.1%
R Systems International ($RSYSTEMS)	2.0%	1.8%	2.8%	1.5%	2.7%

Top companies by ROIC, %


Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Tata Consultancy Services ($TCS)	47.1%	48.6%	48.4%	50.2%	40.5%
Hexaware Technologies ($HEXAWARE)	23.8%	33.5%	39.2%	34.7%	35.7%
Mindtree ($MINDTREE)	14.9%	24.9%	34.6%	36.2%	32.0%
Sqs India Bfsi ($SQSBFSI)	0.1%	12.1%	27.0%	29.4%	30.6%
Tech Mahindra ($TECHM)	19.2%	15.4%	20.1%	43.0%	29.7%
Median (30 companies)	19.2%	19.6%	20.4%	22.9%	20.6%
R Systems International ($RSYSTEMS)	9.9%	10.3%	29.1%	34.2%	25.7%

Top companies by Net Debt / EBITDA


Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
3I Infotech ($3IINFOTECH)	3.5x	8.5x	20.3x	27.7x	14.7x
Ramco Systems ($RAMCOSYS)	4.0x	8.8x		27.6x	4.2x
Onward Technologies ($ONWARDTEC)	2.7x	2.4x	2.2x	4.1x	1.9x
Kpit Technologies ($KPIT)	-0.7x	0.3x	0.5x	0.7x	0.4x
Mphasis ($MPHASIS)	0.0x	-0.1x	0.2x		0.2x
Median (23 companies)	-0.1x	-0.0x	-0.2x	-0.2x	-0.2x
R Systems International ($RSYSTEMS)	-1.0x	-1.0x	-1.0x	-1.1x	-1.1x

R Systems International stock price chart

R Systems International financials

mln.	FY2010	FY2011	FY2012

Revenue	7,350	4,095	4,650
EBITDA	214.4	337.8	326.2
Net income	167.8	165.1	183.6
CAPEX	79.543	79.860	85.873
Debt	8.349	7.943	6.946
Cash	0.932	348.3	324.2

About R Systems International

R Systems International Ltd. offers IT consulting services and solutions to banking and finance, technology, independent software vendors, telecom and digital media, government, healthcare, manufacturing, and logistic industries in India and internationally. It operates through Information technology Services and Products, and Business Process Outsourcing Services segments. The company offers Indus Loan Origination system that handles loan processing applications; Indus Loan Servicing module for repayment transactions; Indus Collections module to track and recover non-performing loans; Indus Dealer/Inventory Funding module; Indus Collateral management module to capture demographic, valuation, and insurance related information about collaterals; and microfinance solutions. It also provides Indus Credit Management and Revenue Collections module to automate and streamline revenue collections, and delinquency management process; Indus Dealer Management solution to induct, monitor, promote, reward, and discipline network of dealers/agents; Indus Commissions and Incentive module that facilitates the calculation of commissions and incentives; Flodox, a Web-based workflow management system; R Space Portal, an enterprise portal; and iPerSyst, a renewals and retention system to retain customers and collect premiums. In addition, the company offers ECnet Pro, a supply chain management and business-to-business platform to collaborate and complete purchase related processes and transactions; Computaris Facebook Integration platform to enable operators to interact with customers; Computaris Convergent Charging solution to converge real-time rating, charging, and billing; mobile broadband management solutions; Computaris MVNO for MVNOs business exigencies; and value added services. Further, it provides integrated product lifecycle management, application, testing, and packaged services. R Systems International Ltd. was founded in 1993 and is headquartered in Noida, India.