Graphite India reports 10.4% revenue decline in FY2016 and 1.1 pp EBITDA Margin growth from 8.2% to 9.3%

12-05-2016 • About Graphite India ($GRPHIDM) • By InTwits

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

Graphite India has low CAPEX intensity: 5 year average CAPEX/Revenue was 3.2%. At the same time it's in pair with industry average of 2.8%
CAPEX is quite volatile: ₹557m in FY2016, ₹266m in FY2015, ₹246m in FY2014, ₹521m in FY2013, ₹1,349m in FY2012
The company has potentially unprofitable business model: ROIC is 4.3%
It operates with high leverage: Net Debt/EBITDA is 2.0x while industry average is 0.6x

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 dropped on 10.4%. Revenue decline was accelerating on average at -10.3 pp per annum in FY2012-FY2016. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin increased slightly on 1.1 pp from 8.2% to 9.3% in FY2016. EBITDA Margin stuck to a declining trend at -2.1 pp per annum in the last 5 years.

Net Income margin increased slightly on 0.64 pp from 3.4% to 4.0% in FY2016. Net Income margin followed a declining trend at -1.8 pp per annum in FY2012-FY2016.

Investments (CAPEX, working capital and M&A)

In FY2016 the company had CAPEX/Revenue of 3.6%. Graphite India showed small growth in CAPEX/Revenue of 0.96 pp from 2.7% in FY2013 to 3.6% in FY2016. It's average level of CAPEX/Revenue for the last three years was 2.1%. During the last 5 years CAPEX as a % of Revenue bottomed in FY2014 at 1.2% and was growing since that time.

Return on investment

The company operates at low ROIC (4.3%) and ROE (3.5%). ROIC showed almost no change in FY2016. ROE showed almost no change in FY2016. ROIC declined at -2.1 pp per annum in the last 5 years. ROE declined at -2.4 pp per annum in FY2012-FY2016.

Leverage (Debt)

Company's Net Debt / EBITDA is 2.0x and Debt / EBITDA is 2.1x. Net Debt / EBITDA dropped on 0.4x from 2.4x to 2.0x in FY2016. Debt dropped on 17.6% while cash dropped on 25.3%.

Graphite India has short term refinancing risk: cash is only 7.0% of short term debt.

Valuation and dividends

Graphite India's trades at EV/EBITDA 12.7x and P/E 25.0x while industy averages are 17.8x and 21.9x. Graphite India's EV/(EBITDA-CAPEX) is 20.8x with the industry average at 22.8x.

Management team

Sanjay Wamanrao Parnerkar is a Graphite India's CFO. Sanjay Wamanrao Parnerkar has spent 5 years at the company.

Financial and operational results

Graphite India ($GRPHIDM) key annual financial indicators

mln. INR	2012	2013	2014	2015	2016	2016/2015
P&L
Revenue	19,124	19,488	20,093	17,107	15,324	-10.4%
EBITDA	3,230	2,748	2,543	1,409	1,430	1.5%
Net Income	2,125	1,344	1,299	576	615	6.7%
Balance Sheet
Cash	164	140	273	282	210	-25.3%
Short Term Debt	5,122	6,164	3,631	3,250	3,023	-7.0%
Long Term Debt	1,576	1,269	1,002	417	0	-100.0%
Cash flow
Capex	1,349	521	246	266	557	109.1%
Ratios
Revenue growth	32.5%	1.9%	3.1%	-14.9%	-10.4%
EBITDA growth	3.1%	-14.9%	-7.4%	-44.6%	1.5%

EBITDA Margin	16.9%	14.1%	12.7%	8.2%	9.3%	1.1%
Net Income Margin	11.1%	6.9%	6.5%	3.4%	4.0%	0.6%
CAPEX, % of revenue	7.1%	2.7%	1.2%	1.6%	3.6%	2.1%

ROIC	12.6%	8.6%	8.0%	4.2%	4.3%	0.0%
ROE	13.4%	8.0%	7.5%	3.3%	3.5%	0.2%
Net Debt/EBITDA	2.0x	2.7x	1.7x	2.4x	2.0x	-0.4x

Peers in Other Industrial Goods

Below you can find Graphite India benchmarking vs. other companies in Other Industrial Goods 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
Gee ($GEE)	17.7%	7.6%	-10.2%	7.6%	-
Vesuvius India ($VESUVIUS)	4.1%	6.9%	8.4%	7.2%	-
Ifgl Refractories ($IFGLREFRAC)	28.2%	11.2%	15.9%	1.2%	-
Amd Industries ($AMDIND)	31.8%	-15.5%	21.0%	-9.9%	-
Heg ($HEG)	27.9%	13.6%	-9.8%	-15.9%	-
Median (7 companies)	28.0%	11.2%	3.8%	-9.9%	-
Graphite India ($GRPHIDM)	-	1.9%	3.1%	-14.9%	-10.4%

Top companies by EBITDA margin, %


Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
Snl Bearings ($SNL)	-	-	-	29.0%	-
Vesuvius India ($VESUVIUS)	17.7%	18.8%	15.6%	18.0%	-
Heg ($HEG)	17.0%	18.1%	16.9%	16.3%	-
Amd Industries ($AMDIND)	15.3%	12.3%	16.4%	15.3%	-
Ifgl Refractories ($IFGLREFRAC)	13.2%	8.5%	15.1%	11.3%	-
Median (8 companies)	13.2%	8.5%	15.3%	13.3%	-
Graphite India ($GRPHIDM)	16.9%	14.1%	12.7%	8.2%	9.3%

Top companies by CAPEX/Revenue, %


Top	FY2012	FY2013	FY2014	FY2015	FY2016
Vesuvius India ($VESUVIUS)	4.2%	4.0%	3.4%	2.7%	-
Heg ($HEG)	14.4%	9.3%	18.7%	2.6%	-
Ifgl Refractories ($IFGLREFRAC)	0.8%	2.9%	1.3%	2.5%	-
Insilco ($INSILCO)	-	-	-	1.6%	-
Median (4 companies)	3.5%	3.5%	3.1%	2.5%	-
Graphite India ($GRPHIDM)	7.1%	2.7%	1.2%	1.6%	3.6%

Top companies by ROIC, %


Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
Vesuvius India ($VESUVIUS)	25.0%	25.0%	19.3%	21.6%	-
Ifgl Refractories ($IFGLREFRAC)	20.0%	11.7%	23.5%	15.7%	-
Heg ($HEG)	9.0%	10.4%	8.3%	5.5%	-
De Nora India ($DENORA)	61.7%	19.1%	-	-	-
Snl Bearings ($SNL)	61.1%	48.2%	31.9%	-	-
Median (13 companies)	16.4%	12.4%	20.2%	15.7%	-
Graphite India ($GRPHIDM)	12.6%	8.6%	8.0%	4.2%	4.3%

Top companies by Net Debt / EBITDA


Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
Heg ($HEG)	5.2x	4.1x	3.3x	4.1x	-
Ifgl Refractories ($IFGLREFRAC)	1.2x	2.1x	0.7x	0.9x	-
Iykot Hitech Toolroom ($IYKOTHITE)	0.0x	-	-	0.0x	-
Snl Bearings ($SNL)	0.2x	0.6x	1.1x	0.0x	0.0x
Gee ($GEE)	3.2x	2.8x	0.0x	0.0x	-
Median (7 companies)	1.2x	1.3x	0.4x	0.0x	0.0x
Graphite India ($GRPHIDM)	2.0x	2.7x	1.7x	2.4x	2.0x

Graphite India stock price chart

Graphite India financials

mln.	FY2010	FY2011	FY2012

Revenue	20,502	14,439	19,124
EBITDA	4,002	3,132	3,230
Net income	2,348	1,891	2,125
CAPEX	263.9	975.4	1,349
Debt	3,552	3,410	6,698
Cash	143.6	212.0	164.3

About Graphite India

Graphite India Limited manufactures and sells graphite electrodes, and carbon and graphite specialty products in India and internationally. The company operates through: Graphite and Carbon, Steel, and Others segments. It provides graphite electrodes to manufacture steel and other non-ferrous metals through electric arc furnace and laddle furnace routes, as well as used as a consumable for conducting high current at low voltage for melting and/or alloying processes. The company also offers extruded graphite in the form of rods and blocks, mini rods, graphite tubes, heat exchanger tubes, molded mold graphite, isostatically molded graphite, carbon and graphite machined components, carbon graphite/bricks, and carbon-carbon composites/brake discs for steel, non-ferrous metal, metallurgy, solar, semi conductor, chemical, glass, quartz, and mechanical and other process industries. In addition, it provides calcined petroleum coke, carbon electrode paste, graphite granules and fines, and carbonaceous materials for aluminum, steel, ferro alloys, and foundry castings industries. Further, the company provides impervious graphite heat exchangers as condensers, coolers, heaters, re-boilers, evaporators, interchangers, and graphite columns for distillation, absorption and scrubbing, ejector systems, and centrifugal pumps; HCl synthesis and dry HCl gas generation units, and H2SO4/HCl concentration and acid dilution cooling units; and bursting discs, thermowells, pipes, and pipe fittings. Additionally, it offers glass fiber reinforced plastic (GRP) pipes; joints, such as GRP couplings, lamination joints, flanges, etc.; and GRP bends, tees, reducers, diffusers, valve tees, etc. In addition, the company provides high speed, alloy tool, and powder metallurgy steels for cutting tools. It is also involved in the generation and sale of electricity through hydel power plant to Karnataka power grid. Graphite India Limited was founded in 1962 and is based in Kolkata, India.