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Bharat Forge CAPEX surged on 43.2% and Revenue showed almost no change

17-05-2016 • About Bharat Forge ($BHARATFORG) • By InTwits

Bharat Forge reported FY2016 financial results today. Overall the company's long term financial model is characterised by the following facts:
  • Bharat Forge has high CAPEX intensity: 5 year average CAPEX/Revenue was 11.9%. At the same time it's in pair with industry average of 10.7%
  • CAPEX is quite volatile: ₹1,358m in FY2016, ₹2,493m in FY2015, ₹1,566m in FY2014, ₹862m in FY2013, ₹705m in FY2012
  • The company has highly profitable business model: ROIC is 15.6%
  • It operates with high leverage: Net Debt/EBITDA is 1.7x 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


Bharat Forge's Revenue showed almost no change in FY2016. Revenue decline was accompanies by EBITDA margin decline. EBITDA Margin decreased on 6.6 pp from 6.1% to -0.47% in FY2016.

Net Income margin decreased slightly on 1.5 pp from 10.0% to 8.5% in FY2016.

Investments (CAPEX, working capital and M&A)


In FY2016 the company had CAPEX/Revenue of 13.4%. Bharat Forge's CAPEX/Revenue increased on 2.4 pp from 11.0% in FY2013 to 13.4% in FY2016. It's average level of CAPEX/Revenue for the last three years was 11.0%. Bharat Forge maintained rich investment policy and has spent a big chunk of EBITDA (72.0%) to CAPEX. During FY2012-FY2016 CAPEX as a % of Revenue bottomed in FY2015 at 9.4%.

Return on investment


The company operates at good ROIC (15.6%) and ROE (18.5%). ROIC decreased on 2.9 pp from 18.5% to 15.6% in FY2016. ROE decreased on 6.4 pp from 24.9% to 18.5% in FY2016.

Leverage (Debt)


Company's Net Debt / EBITDA is 1.7x and Debt / EBITDA is 2.1x. Net Debt / EBITDA jumped on 0.4x from 1.3x to 1.7x in FY2016. Debt surged on 16.2% while cash dropped on 30.7%.

Bharat Forge has short term refinancing risk: cash is only 52.4% of short term debt.

Valuation and dividends


The company's trades at EV/EBITDA 14.0x and P/E 26.8x while industy averages are 17.8x and 21.9x. Bharat Forge's EV/(EBITDA-CAPEX) is 49.8x with the industry average at 22.8x.

Management team


Kishore M Saletore is a the company's CFO. Kishore M Saletore has spent 6 years at the company.

Financial and operational results


Bharat Forge ($BHARATFORG) key annual financial indicators

mln. INR201220132014201520162016/2015
P&L
Revenue62,79150,98767,15876,22276,4650.3%
EBITDA10,0288,03310,41114,40914,265-1.0%
Net Income4,1302,4764,9857,6256,500-14.8%
Balance Sheet
Cash1,6414,0742,3976,7944,706-30.7%
Short Term Debt8,4039,59210,4235,6498,98159.0%
Long Term Debt19,20918,27415,21219,81520,6144.0%
Cash flow
Capex9,8215,6106,7517,17210,27043.2%
Ratios
Revenue growth26.4%-18.8%31.7%13.5%0.3%
EBITDA growth26.2%-19.9%29.6%38.4%-1.0%
EBITDA Margin16.0%15.8%15.5%18.9%18.7%-0.2%
Net Income Margin6.6%4.9%7.4%10.0%8.5%-1.5%
CAPEX, % of revenue15.6%11.0%10.1%9.4%13.4%4.0%
ROIC14.6%9.1%12.6%18.5%15.6%-2.9%
ROE20.0%11.2%20.2%24.9%18.5%-6.4%
Net Debt/EBITDA2.6x3.0x2.2x1.3x1.7x0.4x

Peers in Other Industrial Products


Below you can find Bharat Forge benchmarking vs. other companies in Other Industrial Products 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  FY2012 FY2013 FY2014 FY2015 FY2016
Simplex Castings ($SIMPLEXCAS)6.9%-6.6%-21.9%7.0%-
Welcast Steels ($ZWELCAST)8.3%11.1%-1.5%0.0%-
Carborundum Universal ($CARBORUNIV)--1.2%7.8%-3.5%1.7%
Everest Kanto Cylinder ($EKC)-13.1%-19.8%-9.6%-4.5%-
 
Median (4 companies)6.9%-3.9%-5.6%-1.8%1.7%
Bharat Forge ($BHARATFORG)--18.8%31.7%13.5%0.3%


Top companies by EBITDA margin, %

Top 5 FY2012 FY2013 FY2014 FY2015 FY2016
Hindustan Wires ($HINDWRS)---27.3%-
Carborundum Universal ($CARBORUNIV)19.7%12.3%12.2%13.2%16.0%
Hilton Metal Forging ($HILTON)---7.1%-
Lgb Forge ($LGBFORGE)---4.6%-
Welcast Steels ($ZWELCAST)3.1%2.6%-2.6%-
 
Median (8 companies)15.5%7.5%12.2%3.6%16.0%
Bharat Forge ($BHARATFORG)16.0%15.8%15.5%18.9%18.7%


Top companies by CAPEX/Revenue, %

Top  FY2012 FY2013 FY2014 FY2015 FY2016
Carborundum Universal ($CARBORUNIV)8.5%10.9%3.6%3.8%8.1%
 
Median (1 company)7.1%5.6%3.8%3.8%8.1%
Bharat Forge ($BHARATFORG)15.6%11.0%10.1%9.4%13.4%


Top companies by ROIC, %

Top 5 FY2012 FY2013 FY2014 FY2015 FY2016
Carborundum Universal ($CARBORUNIV)25.3%11.8%10.6%11.0%15.5%
Lgb Forge ($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%11.8%3.5%5.2%15.5%
Bharat Forge ($BHARATFORG)14.6%9.1%12.6%18.5%15.6%


Top companies by Net Debt / EBITDA

Top 5 FY2012 FY2013 FY2014 FY2015 FY2016
Lgb Forge ($LGBFORGE)4.4x3.7x4.0x5.9x0.0x
Carborundum Universal ($CARBORUNIV)0.8x1.5x1.2x0.7x0.6x
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)2.3x1.5x0.0x0.0x0.3x
Bharat Forge ($BHARATFORG)2.6x3.0x2.2x1.3x1.7x


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