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Carborundum Universal reports 116% CAPEX growth in 2016 and 1.7% Revenue growth

04-05-2016 • About Carborundum Universal ($CARBORUNIV) • By InTwits

Carborundum Universal reported FY2016 financial results today. Overall the company's long term financial model is characterised by the following facts:
  • Carborundum Universal has medium CAPEX intensity: 5 year average CAPEX/Revenue was 7.0%. At the same time it's in pair with industry average of 8.7%
  • CAPEX is quite volatile: ₹1,679m in FY2016, ₹777m in FY2015, ₹775m in FY2014, ₹2,143m in FY2013, ₹1,695m in FY2012
  • The company has highly profitable business model: ROIC is 15.5%
  • It operates with high leverage: Net Debt/EBITDA is 0.6x while industry average is 0.3x
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.

Revenue and profitability


Carborundum Universal's Revenue increased slightly on 1.7%. Revenue growth happened at the same time with EBITDA margin expansion. EBITDA Margin increased on 2.8 pp from 13.2% to 16.0% in FY2016. During the last 5 years EBITDA Margin bottomed in FY2014 at 12.2% and was growing since that time.

Net Income margin showed almost no change in FY2016. During the last 5 years Net Income margin bottomed in FY2014 at 4.3% and was growing since that time.

Investments (CAPEX, working capital and M&A)


In FY2016 Carborundum Universal had CAPEX/Revenue of 8.1%. CAPEX/Revenue decreased on 2.8 pp from 10.9% in FY2013 to 8.1% in FY2016. It's average CAPEX/Revenue for the last three years was 5.2%. The company maintained rich investment policy and has spent a big chunk of EBITDA (50.2%) to CAPEX.

Return on investment


The company operates at good ROIC (15.5%) and ROE (12.6%). ROIC increased on 4.5 pp from 11.0% to 15.5% in FY2016. ROE showed almost no change in FY2016. During the last 5 years ROIC bottomed in FY2014 at 10.6% and was growing since that time. During FY2012-FY2016 ROE bottomed in FY2014 at 8.5% and was growing since that time.

Leverage (Debt)


Company's Net Debt / EBITDA is 0.6x and Debt / EBITDA is 0.9x. Net Debt / EBITDA decreased on 0.1x from 0.7x to 0.6x in FY2016. Debt surged on 12.3% while cash surged on 18.3%. During the last 5 years Net Debt/EBITDA topped in FY2013 at 1.5x and was declining since that time.

Carborundum Universal has short term refinancing risk: cash is only 41.2% of short term debt.

Valuation and dividends


Carborundum Universal's trades at EV/EBITDA 11.3x and P/E 25.2x while industy averages are 17.8x and 21.9x. Carborundum Universal's EV/(EBITDA-CAPEX) is 22.8x with the industry average at 22.8x.

Management team


Carborundum Universal's CFO is Sridharan Rangarajan. Sridharan Rangarajan has 9 years tenure at the company.

Financial and operational results


Carborundum Universal ($CARBORUNIV) key annual financial indicators

mln. INR201220132014201520162016/2015
P&L
Revenue19,95019,71421,25320,50220,8431.7%
SG&A79
EBITDA3,9212,4232,5842,7083,34323.5%
Net Income2,1938989151,3261,4287.7%
Balance Sheet
Cash8807247399791,15818.3%
Short Term Debt1,9292,3742,0512,2012,81327.8%
Long Term Debt2,0631,9751,873567295-47.9%
Cash flow
Capex1,6952,1437757771,679116.2%
Ratios
Revenue growth24.1%-1.2%7.8%-3.5%1.7%
EBITDA growth34.3%-38.2%6.6%4.8%23.5%
EBITDA Margin19.7%12.3%12.2%13.2%16.0%2.8%
SG&A, % of revenue0.4%
Net Income Margin11.0%4.6%4.3%6.5%6.9%0.4%
CAPEX, % of revenue8.5%10.9%3.6%3.8%8.1%4.3%
ROIC25.3%11.8%10.6%11.0%15.5%4.5%
ROE25.9%8.9%8.5%12.1%12.6%0.5%
Net Debt/EBITDA0.8x1.5x1.2x0.7x0.6x-0.1x

Peers in Other Industrial Products


Below we provide Carborundum Universal benchmarking against other companies in Other Industrial Products 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  FY2012 FY2013 FY2014 FY2015 FY2016
Bharat Forge ($BHARATFORG)26.4%-18.8%31.7%13.5%-
Simplex Castings ($SIMPLEXCAS)6.9%-6.6%-21.9%7.0%-
Welcast Steels ($ZWELCAST)8.3%11.1%-1.5%0.0%-
Everest Kanto Cylinder ($EKC)-13.1%-19.8%-9.6%-4.5%-
 
Median (4 companies)7.6%-12.7%-5.6%3.5%-
Carborundum Universal ($CARBORUNIV)--1.2%7.8%-3.5%1.7%


Top companies by EBITDA margin, %

Top 5 FY2012 FY2013 FY2014 FY2015 FY2016
Hindustan Wires ($HINDWRS)---27.3%-
Bharat Forge ($BHARATFORG)16.0%15.8%15.5%18.9%-
Hilton Metal Forging ($HILTON)---7.1%-
Lgb Forge ($LGBFORGE)---4.6%-
Welcast Steels ($ZWELCAST)3.1%2.6%-2.6%-
 
Median (8 companies)15.2%8.1%13.6%3.6%-
Carborundum Universal ($CARBORUNIV)19.7%12.3%12.2%13.2%16.0%


Top companies by CAPEX/Revenue, %

Top  FY2012 FY2013 FY2014 FY2015 FY2016
Bharat Forge ($BHARATFORG)15.6%11.0%10.1%9.4%-
 
Median (1 company)8.2%5.7%7.0%9.4%-
Carborundum Universal ($CARBORUNIV)8.5%10.9%3.6%3.8%8.1%


Top companies by ROIC, %

Top 5 FY2012 FY2013 FY2014 FY2015 FY2016
Bharat Forge ($BHARATFORG)14.6%9.1%12.6%18.5%-
Lgb Forge ($LGBFORGE)8.6%2.5%-3.6%-0.6%-
Expo Gas Containers ($EXPOGAS)15.4%12.0%---
Gujarat Intrux ($GUJINTRX)26.0%23.7%19.7%--
Vishal Malleables ($VISHMEL)4.0%-28.0%---
 
Median (12 companies)13.5%9.9%4.5%9.0%-
Carborundum Universal ($CARBORUNIV)25.3%11.8%10.6%11.0%15.5%


Top companies by Net Debt / EBITDA

Top 5 FY2012 FY2013 FY2014 FY2015 FY2016
Lgb Forge ($LGBFORGE)4.4x3.7x4.0x5.9x0.0x
Bharat Forge ($BHARATFORG)2.6x3.0x2.2x1.3x-
Hindustan Wires ($HINDWRS)---0.0x-
Welcast Steels ($ZWELCAST)1.1x-0.1x-0.0x-
Everest Kanto Cylinder ($EKC)4.5x--0.0x-
 
Median (6 companies)2.6x1.8x0.0x0.0x0.0x
Carborundum Universal ($CARBORUNIV)0.8x1.5x1.2x0.7x0.6x


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