Mahindra & Mahindra Financial Services Net Income dropped on 15.4% and EBITDA Margin decreased on 4.7 pp from 67.5% to 62.7%
23-04-2016 • About Mahindra & Mahindra Financial Services (
$M&MFIN) • By InTwits
Mahindra & Mahindra Financial Services reported FY2016 financial results today. Here are the key drivers of the company's long term financial model:
- Mahindra & Mahindra Financial Services is a fast growth stock: FY2016 revenue growth was 8.8%, 5 year revenue CAGR was 26.0% at FY2016 ROIC 3.2%
- EBITDA Margin is declining: 62.7% in FY2016 vs. 67.5% in FY2015 vs. 72.9% in FY2012
- Mahindra & Mahindra Financial Services has low CAPEX intensity: 5 year average CAPEX/Revenue was 0.9%.
- The company has potentially unprofitable business model: ROIC is 3.2%
- It operates with high leverage: Net Debt/EBITDA is 8.1x while industry average is 2.7x
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
Mahindra & Mahindra Financial Services's Revenue increased on 8.8%. Revenue decline was accelerating on average at -9.0 pp per annum in FY2012-FY2016. Despite revenue decline the EBITDA margin expanded. EBITDA Margin increased slightly on 1.1 pp from 11.9% to 13.0% in FY2016. EBITDA Margin stuck to a declining trend at -2.6 pp per annum in the last 5 years.
Net Income margin decreased on 3.4 pp from 15.1% to 11.7% in FY2016. Net Income margin declined at -2.8 pp per annum in the last 5 years.
Investments (CAPEX, working capital and M&A)
In FY2016 the company had CAPEX/Revenue of 0.84%. Mahindra & Mahindra Financial Services showed almost no change in CAPEX/Revenue from FY2013 to FY2016. Average CAPEX/Revenue for the last three years was 0.78%. During the last 5 years CAPEX as a % of Revenue bottomed in FY2015 at 0.74%.
Return on investment
The company operates at good ROE (12.4%) while ROIC is low (3.2%). ROIC decreased slightly on 1.00 pp from 4.2% to 3.2% in FY2016. ROE decreased on 3.8 pp from 16.2% to 12.4% in FY2016. ROIC declined at -0.85 pp per annum in the last 5 years. ROE stuck to a declining trend at -2.9 pp per annum in the last 5 years.
Leverage (Debt)
Company's Net Debt / EBITDA is 8.1x and Debt / EBITDA is 8.2x. Net Debt / EBITDA surged on 1.1x from 7.0x to 8.1x in FY2016. Debt jumped on 16.5% while cash surged on 23.4%. During the last 5 years Net Debt/EBITDA bottomed in FY2013 at 6.6x and was growing since that time.
Mahindra & Mahindra Financial Services has short term refinancing risk: cash is only 4.4% of short term debt.
Financial and operational results
Mahindra & Mahindra Financial Services ($M&MFIN) key annual financial indicators| mln. INR | 2012 | 2013 | 2014 | 2015 | 2016 | 2016/2015 |
|---|
P&L
|
|---|
| Revenue | 29,084 | 41,130 | 53,005 | 60,608 | 65,964 | 8.8% |
| EBITDA | 21,195 | 30,164 | 37,685 | 40,883 | 41,372 | 1.2% |
| Net Income | 6,435 | 9,270 | 9,544 | 9,129 | 7,723 | -15.4% |
Balance Sheet
|
|---|
| Cash | 2,554 | 3,673 | 5,153 | 4,931 | 6,083 | 23.4% |
| Short Term Debt | 47,354 | 63,371 | 76,392 | 123,665 | 137,025 | 10.8% |
| Long Term Debt | 99,110 | 138,154 | 182,538 | 168,652 | 203,412 | 20.6% |
Cash flow
|
|---|
| Capex | 413 | 349 | 412 | 447 | 554 | 23.9% |
Ratios
|
|---|
| Revenue growth | 40.2% | 41.4% | 28.9% | 14.3% | 8.8% | |
| EBITDA growth | 49.9% | 42.3% | 24.9% | 8.5% | 1.2% | |
|
|---|
| EBITDA Margin | 72.9% | 73.3% | 71.1% | 67.5% | 62.7% | -4.7% |
| Net Income Margin | 22.1% | 22.5% | 18.0% | 15.1% | 11.7% | -3.4% |
| CAPEX, % of revenue | 1.4% | 0.8% | 0.8% | 0.7% | 0.8% | 0.1% |
|
|---|
| ROIC | 6.4% | 6.3% | 5.3% | 4.2% | 3.2% | -1.0% |
| ROE | 23.1% | 24.4% | 19.3% | 16.2% | 12.4% | -3.8% |
| Net Debt/EBITDA | 6.8x | 6.6x | 6.7x | 7.0x | 8.1x | 1.1x |
Peers in Finance (including NBFCs)
Below you can find Mahindra & Mahindra Financial Services benchmarking vs. other companies in Finance (including NBFCs) 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 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Fortune Financial Services (India) ($FORTUNEF) | -11.7% | -24.9% | -7.1% | 188.4% | - |
| Motilal Oswal Financial Services ($MOTILALOFS) | -21.6% | 0.4% | -0.9% | 64.7% | - |
| Sks Microfinance ($SKSMICRO) | -62.8% | -25.6% | 55.0% | 47.3% | - |
| Bajaj Holdings & Investment ($BAJAJHLDNG) | - | 12.8% | 25.9% | 27.0% | -12.2% |
| Bajaj Finserv ($BAJAJFINSV) | 59.7% | 28.1% | 18.8% | 26.8% | - |
| |
|---|
| Median (23 companies) | 23.2% | 24.4% | 19.8% | 13.3% | 3.6% |
|---|
| Mahindra & Mahindra Financial Services ($M&MFIN) | - | 41.4% | 28.9% | 14.3% | 8.8% |
Top companies by EBITDA margin, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Microse India ($MICROSE) | - | - | - | 101.1% | - |
| Pnb Gilts ($PNBGILTS) | 94.0% | 96.4% | 96.4% | 96.1% | - |
| Jsw Holdings ($JSWHL) | - | - | - | 93.8% | - |
| Rural Electrification Corporation ($RECLTD) | 97.2% | 97.3% | 96.7% | 93.3% | - |
| Bajaj Holdings & Investment ($BAJAJHLDNG) | 96.1% | 95.4% | 92.3% | 92.7% | 91.4% |
| |
|---|
| Median (48 companies) | 64.8% | 65.4% | 65.5% | 49.0% | 74.8% |
|---|
| Mahindra & Mahindra Financial Services ($M&MFIN) | 72.9% | 73.3% | 71.1% | 67.5% | 62.7% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Fortune Financial Services (India) ($FORTUNEF) | 1.0% | 1.3% | 4.5% | 7.3% | - |
| Clarus Finance & Securities ($CLARUS) | - | - | 6.9% | 5.8% | - |
| Srei Infrastructure Finance ($SREINFRA) | 30.2% | 8.5% | 12.3% | 5.4% | - |
| Motilal Oswal Financial Services ($MOTILALOFS) | 15.5% | 5.3% | 1.7% | 3.4% | - |
| Bengal & Assam Company ($BENGALASM) | 15.9% | 4.5% | 1.2% | 2.1% | - |
| |
|---|
| Median (21 companies) | 0.6% | 0.7% | 1.1% | 0.7% | 0.3% |
|---|
| Mahindra & Mahindra Financial Services ($M&MFIN) | 1.4% | 0.8% | 0.8% | 0.7% | 0.8% |
Top companies by ROIC, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Motilal Oswal Financial Services ($MOTILALOFS) | - | 12.0% | 9.7% | 11.9% | - |
| Sks Microfinance ($SKSMICRO) | - | - | 4.1% | 6.6% | - |
| Shriram City Union Finance ($SHRIRAMCIT) | 6.1% | 5.8% | 5.8% | 5.7% | - |
| Rural Electrification Corporation ($RECLTD) | - | 4.7% | 5.2% | 4.7% | - |
| Bajaj Holdings & Investment ($BAJAJHLDNG) | 3.6% | 3.4% | 3.5% | 3.9% | 3.0% |
| |
|---|
| Median (52 companies) | 3.6% | 4.4% | 3.8% | 3.9% | 3.0% |
|---|
| Mahindra & Mahindra Financial Services ($M&MFIN) | 6.4% | 6.3% | 5.3% | 4.2% | 3.2% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Fortune Financial Services (India) ($FORTUNEF) | 9.0x | - | 10.8x | 8.9x | - |
| Pnb Gilts ($PNBGILTS) | 14.2x | 11.2x | 11.3x | 8.8x | - |
| Srei Infrastructure Finance ($SREINFRA) | 7.0x | 6.2x | 7.5x | 8.0x | - |
| Rural Electrification Corporation ($RECLTD) | 8.3x | 8.0x | 7.5x | 8.0x | - |
| Magma Fincorp ($MAGMA) | 7.7x | 8.5x | 7.0x | 7.7x | - |
| |
|---|
| Median (44 companies) | 4.4x | 3.6x | 2.9x | 0.0x | 1.6x |
|---|
| Mahindra & Mahindra Financial Services ($M&MFIN) | 6.8x | 6.6x | 6.7x | 7.0x | 8.1x |
