Arvind reports 10.4% CAPEX growth in 2016 and 7.6% Revenue growth

12-05-2016 • About Arvind ($ARVIND) • By InTwits

Arvind reported FY2016 financial results today. Overall the company's long term financial model is characterised by the following facts:

Arvind is a fast growth stock: FY2016 revenue growth was 7.6%, 5 year revenue CAGR was 15.6% at FY2016 ROIC 13.1%
EBITDA Margin is relatively stable: 13.0% in FY2016 vs. 12.7% in FY2015 vs. 12.3% in FY2012
Arvind has medium CAPEX intensity: 5 year average CAPEX/Revenue was 7.5%. At the same time it's in pair with industry average of 6.4%
CAPEX is quite volatile: ₹2,811m in FY2016, ₹4,488m in FY2015, ₹9,924m in FY2014, ₹5,139m in FY2013, ₹6,186m in FY2012
The company has highly profitable business model: ROIC is 13.1%
It operates with high leverage: Net Debt/EBITDA is 3.2x while industry average is 1.2x

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

Revenue and profitability

The company's Revenue increased on 7.6%. EBITDA Margin showed almost no change in FY2016.

SG&A as a % of Revenue showed almost no change in FY2016.

Net Income margin showed almost no change in FY2016.

Investments (CAPEX, working capital and M&A)

In FY2016 the company had CAPEX/Revenue of 7.3%. CAPEX/Revenue showed almost no change from FY2013 to FY2016. Average CAPEX/Revenue for the last three years was 7.0%. The company invested a large share of EBITDA (56.6%) to CAPEX. During FY2012-FY2016 CAPEX as a % of Revenue bottomed in FY2014 at 6.5% and was growing since that time.

Return on investment

The company operates at good ROIC (13.1%) and ROE (12.9%). ROIC showed almost no change in FY2016. ROE showed almost no change in FY2016.

Leverage (Debt)

Debt level is 3.2x Net Debt / EBITDA and 3.2x Debt / EBITDA. Net Debt / EBITDA dropped on 0.2x from 3.3x to 3.2x in FY2016. Debt increased on 4.2% while cash dropped on 34.7%.

Arvind has short term refinancing risk: cash is only 2.2% of short term debt.

Management team

Arvind's CFO Jayesh K Shah has spent 14 years with the company.

Financial and operational results

Arvind ($ARVIND) key annual financial indicators

mln. INR	2012	2013	2014	2015	2016	2016/2015
P&L
Revenue	49,251	52,925	68,621	78,514	84,504	7.6%
SG&A				1,578	1,762	11.7%
EBITDA	6,069	7,035	9,383	9,959	10,957	10.0%
Net Income	4,359	2,484	3,539	3,411	3,627	6.3%
Balance Sheet
Cash	405	1,609	1,359	686	448	-34.7%
Short Term Debt	13,512	14,557	16,465	20,026	20,485	2.3%
Long Term Debt	7,770	10,051	13,455	13,941	14,917	7.0%
Cash flow
Capex	4,638	3,683	4,445	5,623	6,206	10.4%
Ratios
Revenue growth	20.6%	7.5%	29.7%	14.4%	7.6%
EBITDA growth	14.5%	15.9%	33.4%	6.1%	10.0%

EBITDA Margin	12.3%	13.3%	13.7%	12.7%	13.0%	0.3%
SG&A, % of revenue				2.0%	2.1%	0.1%
Net Income Margin	8.8%	4.7%	5.2%	4.3%	4.3%	-0.1%
CAPEX, % of revenue	9.4%	7.0%	6.5%	7.2%	7.3%	0.2%

ROIC	11.3%	11.2%	13.7%	13.2%	13.1%	-0.1%
ROE	23.4%	11.6%	14.6%	12.9%	12.9%	0.0%
Net Debt/EBITDA	3.4x	3.3x	3.0x	3.3x	3.2x	-0.2x

Peers in Textiles

Below we provide Arvind 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	FY2012	FY2013	FY2014	FY2015	FY2016
Olympia Industries ($OLYMPTX)	-58.0%	-96.6%	74,809.1%	1,749.9%	-
Shri Dinesh Mills ($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 ($BLUECHIPT)	-	12.9%	29.9%	56.1%	23.7%
Median (74 companies)	4.5%	9.7%	14.3%	-0.3%	1.5%
Arvind ($ARVIND)	-	7.5%	29.7%	14.4%	7.6%

Top companies by EBITDA margin, %


Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
Sil Investments ($SILINV)	-	-	-	93.8%	-
Swadeshi Polytex ($SWADPOL)	-	-	-	64.4%	-
Binny ($BINNY)	-	-	-	60.9%	-
Ruby Mills ($RUBYMILLS)	28.3%	25.1%	28.6%	29.3%	-
Premier Synthetics ($PREMSYN)	-	-	-	25.9%	-
Median (85 companies)	6.2%	9.3%	9.5%	7.0%	12.4%
Arvind ($ARVIND)	12.3%	13.3%	13.7%	12.7%	13.0%

Top companies by CAPEX/Revenue, %


Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
Nitin Spinners ($NITINSPIN)	1.9%	2.6%	8.0%	42.3%	4.7%
Maharaja Shree Umaid Mills ($MAHASHR)	18.6%	24.1%	6.8%	16.8%	-
Jindal Worldwide ($JINDWORLD)	3.0%	10.5%	20.7%	11.6%	-
SRF ($SRF)	0.0%	18.7%	20.0%	11.4%	13.0%
Welspun India ($WELSPUNIND)	5.6%	7.8%	16.4%	10.9%	17.7%
Median (20 companies)	3.2%	5.3%	7.4%	6.3%	6.3%
Arvind ($ARVIND)	9.4%	7.0%	6.5%	7.2%	7.3%

Top companies by ROIC, %


Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
Welspun India ($WELSPUNIND)	9.3%	15.6%	8.5%	21.9%	25.2%
Maharaja Shree Umaid Mills ($MAHASHR)	-0.5%	9.2%	8.3%	20.4%	-
Nitin Spinners ($NITINSPIN)	6.0%	19.5%	21.5%	17.5%	17.8%
Sutlej Textiles & Industries ($SUTLEJTEX)	9.5%	13.6%	19.8%	14.6%	14.4%
Visagar Polytex ($VIVIDHA)	8.7%	7.1%	7.1%	13.0%	-
Median (127 companies)	3.5%	8.9%	8.6%	9.0%	13.6%
Arvind ($ARVIND)	11.3%	11.2%	13.7%	13.2%	13.1%

Top companies by Net Debt / EBITDA


Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
Bombay Rayon Fashions ($BRFL)	4.9x	4.9x	11.6x	10.0x	-
Ruby Mills ($RUBYMILLS)	12.6x	15.3x	10.8x	8.6x	-
Dcm ($DCM)	13.5x	3.5x	3.7x	5.5x	-
Nahar Spinning Mills ($NAHARSPING)	70.8x	3.8x	3.2x	4.9x	-
Rai Saheb Rekhchand Mohota Spg.& Wvg.Mills ($RAIREKMOH)	10.0x	0.0x	0.0x	4.6x	-
Median (70 companies)	3.8x	3.2x	0.0x	0.0x	1.5x
Arvind ($ARVIND)	3.4x	3.3x	3.0x	3.3x	3.2x

Arvind stock price chart

Arvind financials

mln.	FY2010	FY2011	FY2012

Revenue	93,802	40,846	49,251
EBITDA	4,104	5,300	6,069
Net income	499.5	1,649	4,359
CAPEX	1,651	2,257	4,638
Debt	22,182	19,886	21,283
Cash	439.5	333.8	405.1

About Arvind

Arvind Limited, a textile company, manufactures cotton shirting, denim, knits and bottom weights, fabrics, jeans, and shirt garments in India and internationally. The company operates in Textiles, Brands and Retail, and Other segments. It also produces high performance industrial fabrics for sectors, such as general industrial manufacturing and processing, infrastructure, transport, energy, and personal protection. The company sells its products under the Mainstream, Excalibur Gant, and Flying Machine brand names; and licenses and retails other branded products. In addition, it operates apparel value retail stores under MEGAMART brand name; and specialty retail stores under the licensing arrangement with international brands of Debanhams & Next. Further, the company offers GPS based fleet automation and management; walky talky services; highway traffic management solutions with CSSI; and a range of analog and digital EPABX based enterprise communication solutions for SMEs and corporates. Additionally, it provides heat exchangers, pressure vessels, reactors, DE aerators, columns and towers, economizers, oxygen/nitrogen/chlorine storage, centrifuges, dished ends, and expansion bellows for refineries, gas plant suppliers, petrochemicals, chemicals, dyes intermediaries, drugs and pharmaceuticals, power plants, and aluminum and copper industries. It is also engaged in real estate development activities, including residential, shopping, and commercial complexes; and provision of engineering procurement and construction services for water, wastewater treatment, and recycling projects. Arvind Limited was founded in 1931 and is based in Ahmedabad, India.