Geometric Net Income surged on 90.9% and EBITDA Margin increased on 2.2 pp from 12.1% to 14.3%

06-05-2016 • About Geometric ($GEOMETRIC) • By InTwits

Geometric reported FY2016 financial results today. Here are the key drivers of the company's long term financial model:

Geometric is a growth stock: FY2016 revenue growth was 11.6%, 5 year revenue CAGR was 14.7% at FY2016 ROIC 25.1%
Geometric has low CAPEX intensity: 5 year average CAPEX/Revenue was 3.7%. At the same time it's in pair with industry average of 3.3%
CAPEX is quite volatile: ₹119m in FY2016, ₹141m in FY2015, ₹236m in FY2014, ₹989m in FY2013, ₹1,199m in FY2012
The company has highly profitable business model: ROIC is 25.1%

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

Revenue and profitability

Geometric's Revenue surged on 11.6%. During the last 5 years Revenue growth bottomed in FY2015 at 1.4%. Revenue growth happened at the same time with EBITDA margin expansion. EBITDA Margin increased on 2.2 pp from 12.1% to 14.3% in FY2016.

Net Income margin increased on 3.6 pp from 5.0% to 8.5% in FY2016. During the last 5 years Net Income margin bottomed in FY2014 at 4.2% and was growing since that time.

Investments (CAPEX, working capital and M&A)

The company's CAPEX/Revenue was 2.2% in FY2016. CAPEX/Revenue decreased on 2.0 pp from 4.2% in FY2013 to 2.2% in FY2016. It's average CAPEX/Revenue for the last three years was 3.5%.

Return on investment

The company operates at high and attractive ROIC (25.1%) and ROE (23.9%). ROIC increased on 4.5 pp from 20.6% to 25.1% in FY2016. ROE increased on 9.0 pp from 14.9% to 23.9% in FY2016.

Leverage (Debt)

Company's Net Debt / EBITDA is -0.0x and Debt / EBITDA is 0.3x. Debt showed almost no change in FY2016 while cash jumped on 22.4%.

Geometric has no short term refinancing risk: cash is higher than short term debt (111.4%).

Management team

Manu Mahmud Parpia is a the company's CEO. Manu Mahmud Parpia has spent 9 years with the company. The company's CFO is Shashank Patkar. Shashank Patkar has 17 years tenure at the company.

Financial and operational results

Geometric ($GEOMETRIC) key annual financial indicators

mln. INR	2012	2013	2014	2015	2016	2016/2015
P&L
Revenue	8,079	10,150	10,896	11,053	12,335	11.6%
EBITDA	1,147	1,918	2,016	1,337	1,767	32.2%
Net Income	592	687	462	552	1,054	90.9%
Balance Sheet
Cash	532	313	790	536	656	22.4%
Short Term Debt	675	277	366	587	589	0.3%
Long Term Debt	0	0	0	0	0
Cash flow
Capex	282	431	440	479	274	-42.8%
Ratios
Revenue growth	30.2%	25.6%	7.3%	1.4%	11.6%
EBITDA growth	56.4%	67.2%	5.1%	-33.7%	32.2%

EBITDA Margin	14.2%	18.9%	18.5%	12.1%	14.3%	2.2%
Net Income Margin	7.3%	6.8%	4.2%	5.0%	8.5%	3.6%
CAPEX, % of revenue	3.5%	4.2%	4.0%	4.3%	2.2%	-2.1%

ROIC	29.9%	46.4%	41.1%	20.6%	25.1%	4.5%
ROE	29.3%	30.6%	15.5%	14.9%	23.9%	9.0%
Net Debt/EBITDA	0.1x	-0.0x	-0.2x	0.0x	-0.0x	-0.1x

Peers in IT Consulting & Software

Below you can find Geometric benchmarking vs. other companies in IT Consulting & Software 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
Ramco Systems ($RAMCOSYS)	9.3%	7.3%	9.9%	37.0%	-
Cyient ($CYIENT)	-	20.6%	17.8%	24.0%	13.1%
Empower India ($EMPOWER)	-3.7%	-13.2%	-32.6%	23.9%	-
Hexaware Technologies ($HEXAWARE)	34.3%	17.3%	13.0%	21.0%	-
Tech Mahindra ($TECHM)	6.8%	25.2%	174.0%	20.1%	-
Median (22 companies)	9.3%	20.4%	14.2%	9.1%	13.1%
Geometric ($GEOMETRIC)	-	25.6%	7.3%	1.4%	11.6%

Top companies by Gross margin, %


Top	FY2012	FY2013	FY2014	FY2015	FY2016
Tata Consultancy Services ($TCS)	-	-	47.4%	42.4%	43.9%
Infosys ($INFY)	41.3%	98.1%	35.9%	38.3%	37.4%
Mindtree ($MINDTREE)	31.5%	36.2%	-	34.8%	32.4%
Wipro ($WIPRO)	29.2%	30.4%	32.0%	31.6%	30.4%
Median (4 companies)	32.7%	36.2%	35.9%	36.6%	34.9%

Top companies by EBITDA margin, %


Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
Oracle Financial Services Software ($OFSS)	35.3%	35.2%	37.4%	39.7%	-
Infosys ($INFY)	31.6%	27.9%	26.3%	27.1%	27.1%
Tata Consultancy Services ($TCS)	29.5%	28.6%	30.7%	26.1%	28.2%
Wipro ($WIPRO)	19.1%	20.9%	22.4%	22.3%	21.1%
Mindtree ($MINDTREE)	15.1%	19.8%	20.6%	20.3%	17.7%
Median (25 companies)	15.1%	16.5%	18.3%	14.2%	17.7%
Geometric ($GEOMETRIC)	14.2%	18.9%	18.5%	12.1%	14.3%

Top companies by CAPEX/Revenue, %


Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
Ramco Systems ($RAMCOSYS)	-	22.1%	15.3%	12.4%	-
Niit Technologies ($NIITTECH)	5.9%	4.6%	6.1%	7.9%	6.0%
Financial Technologies (India) ($FINANTECH)	8.9%	11.4%	-	6.5%	5.4%
Mindtree ($MINDTREE)	2.5%	4.5%	5.0%	5.6%	3.4%
Tech Mahindra ($TECHM)	5.4%	2.6%	5.0%	5.0%	-
Median (20 companies)	3.9%	3.2%	2.6%	3.1%	3.6%
Geometric ($GEOMETRIC)	3.5%	4.2%	4.0%	4.3%	2.2%

Top companies by ROIC, %


Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
Tata Consultancy Services ($TCS)	48.6%	48.4%	50.2%	40.5%	44.4%
Hexaware Technologies ($HEXAWARE)	33.5%	39.2%	34.7%	35.7%	-
Mindtree ($MINDTREE)	24.9%	34.6%	36.2%	32.0%	28.9%
Sqs India Bfsi ($SQSBFSI)	12.1%	27.0%	29.4%	30.6%	39.9%
Tech Mahindra ($TECHM)	15.4%	20.1%	43.0%	29.7%	-
Median (30 companies)	19.1%	20.4%	22.9%	20.8%	22.9%
Geometric ($GEOMETRIC)	29.9%	46.4%	41.1%	20.6%	25.1%

Top companies by Net Debt / EBITDA


Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
3I Infotech ($3IINFOTECH)	8.5x	20.3x	27.7x	14.7x	-
Ramco Systems ($RAMCOSYS)	8.8x	-	27.6x	4.2x	-
Onward Technologies ($ONWARDTEC)	2.4x	2.2x	4.1x	1.9x	-
Kpit Technologies ($KPIT)	0.3x	0.5x	0.7x	0.4x	-0.3x
Mphasis ($MPHASIS)	-0.1x	0.2x	-	0.2x	-
Median (23 companies)	-0.1x	-0.2x	-0.3x	-0.4x	-0.4x
Geometric ($GEOMETRIC)	0.1x	-0.0x	-0.2x	0.0x	-0.0x

Geometric stock price chart

Geometric financials

mln.	FY2010	FY2011	FY2012

Revenue	13,014	6,206	8,079
EBITDA	855.3	733.3	1,147
Net income	466.6	575.2	591.6
CAPEX	218.0	233.9	281.8
Debt	185.3	44.619	674.6
Cash	113.2	81.116	532.0

About Geometric

Geometric Limited provides software and engineering services in India. It operates through Products, Software Services, and Engineering Services segments. The company offers product lifecycle management (PLM) services, including PLM consulting, PLM implementation, PLM data migration, and application management services; and PLM solutions comprising integrated quality management, integrated manufacturing process planning, and enterprise interoperability solutions. It also provides CAD/CAM/CAE solutions; software product engineering services, such as outsourced software product development and quality engineering services; and product engineering solutions, such as product design and development, design methods, dimension management, engineering change management, CAD data creation and migration, reverse engineering, product localization, and equipment design. In addition, the company offers manufacturing engineering services comprising process design and simulation, plant layout design, tool and equipment design, workstation design, assembly validation services, and computer aided manufacturing; industrial and production engineering services, such as methods engineering, line balancing, material flow, packaging/rack design, process improvement, and robotic simulation and ergonomics services; and should costing and technical publications solutions, as well as designs, implements, and verifies embedded systems. Further, it provides CAMWorks, DFMPro, eDrawings, Glovis, 3DPaintBrush, CAMWorksXpress, GeomCaliper, 3DSearchIT, Feature Recognition, NestLib, and GeomDiff products and technologies, as well as interoperability solutions. The company serves manufacturers in aerospace and defense, automotive, heavy engineering, machine tool, off highway, high tech, oil and gas, and software industries primarily in the United States, Europe, the Asia Pacific, the Middle East, and internationally. Geometric Limited was founded in 1984 and is headquartered in Navi Mumbai, India.