Rico Auto Industries reports 80.8% Net Income decline in 2016 while 2.0 pp EBITDA Margin growth from 8.8% to 10.8%

19-05-2016 • About Rico Auto Industries ($RICOAUTO) • By InTwits

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

Rico Auto Industries is a company in decline: FY2016 revenue growth was -27.0%, 5 years revenue CAGR was -5.7%
Rico Auto Industries has medium CAPEX intensity: 5 year average CAPEX/Revenue was 8.8%. At the same time it's a lot of higher than industry average of 5.5%.
CAPEX is quite volatile: ₹724m in FY2016, ₹1,914m in FY2015, ₹845m in FY2014, ₹1,639m in FY2013, ₹871m in FY2012
The company has business model with low profitability: ROIC is 8.7%
It operates with high leverage: Net Debt/EBITDA is 2.1x while industry average is 0.9x

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

Revenue and profitability

Rico Auto Industries's Revenue dropped on 27.0%. Revenue decline was accelerating on average at -9.2 pp per annum in FY2012-FY2016. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin increased on 2.0 pp from 8.8% to 10.8% in FY2016.

Net Income margin decreased on 8.4 pp from 11.4% to 3.0% in FY2016.

Investments (CAPEX, working capital and M&A)

In FY2016 the company had CAPEX/Revenue of 7.4%. The company's CAPEX/Revenue decreased on 3.5 pp from 10.9% in FY2013 to 7.4% in FY2016. It's average CAPEX/Revenue for the last three years was 9.1%. Battling declining revenue the company invested a large share of EBITDA (68.2%) to CAPEX but that didn't help at least in this year.

Return on investment

The company operates at low ROIC (8.7%) and ROE (6.4%). ROIC increased on 3.9 pp from 4.8% to 8.7% in FY2016. ROE dropped on 32.0 pp from 38.4% to 6.4% in FY2016.

Leverage (Debt)

Company's Net Debt / EBITDA is 2.1x and Debt / EBITDA is 2.1x. Net Debt / EBITDA surged on 0.6x from 1.5x to 2.1x in FY2016. Debt surged on 22.0% while cash jumped on 11.3%.

Rico Auto Industries has short term refinancing risk: cash is only 3.9% of short term debt.

Financial and operational results

Rico Auto Industries ($RICOAUTO) key annual financial indicators

mln. INR	2012	2013	2014	2015	2016	2016/2015
P&L
Revenue	15,048	15,060	14,801	13,463	9,822	-27.0%
EBITDA	1,322	1,173	1,485	1,183	1,063	-10.2%
Net Income	225	54	27	1,534	294	-80.8%
Balance Sheet
Cash	61	107	89	48	53	11.3%
Short Term Debt	2,747	3,356	2,537	985	1,353	37.4%
Long Term Debt	2,047	1,635	958	877	917	4.7%
Cash flow
Capex	871	1,639	845	1,914	724	-62.1%
Ratios
Revenue growth	14.4%	0.1%	-1.7%	-9.0%	-27.0%
EBITDA growth	6.2%	-11.3%	26.6%	-20.3%	-10.2%

EBITDA Margin	8.8%	7.8%	10.0%	8.8%	10.8%	2.0%
Net Income Margin	1.5%	0.4%	0.2%	11.4%	3.0%	-8.4%
CAPEX, % of revenue	5.8%	10.9%	5.7%	14.2%	7.4%	-6.8%

ROIC	7.2%	3.5%	6.7%	4.8%	8.7%	3.9%
ROE	6.8%	1.6%	0.8%	38.4%	6.4%	-32.0%
Net Debt/EBITDA	3.6x	4.2x	2.3x	1.5x	2.1x	0.6x

Peers in Auto Parts & Equipment

Below you can find Rico Auto Industries benchmarking vs. other companies in Auto Parts & Equipment 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
Spectra Industries ($SPECTRA)	16.4%	40.2%	-10.1%	57.1%	-
India Nippon Electricals ($INDNIPPON)	13.6%	3.2%	-2.4%	24.8%	-
Amara Raja Batteries ($AMARAJABAT)	34.3%	25.1%	16.1%	22.6%	-
Enkei Wheels (India) ($ENKEIWHEL)	16.9%	1.3%	11.7%	21.6%	-
Ip Rings ($IPRINGLTD)	4.0%	2.4%	-0.1%	19.5%	-
Median (37 companies)	16.8%	2.6%	5.0%	8.8%	2.6%
Rico Auto Industries ($RICOAUTO)	-	0.1%	-1.7%	-9.0%	-27.0%

Top companies by EBITDA margin, %


Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
Ist ($ISTLTD)	-	-	-	71.6%	-
Tube Investments Of India ($TUBEINVEST)	18.4%	24.4%	28.3%	30.0%	21.4%
Shivam Autotech ($SHIVAMAUTO)	24.1%	24.1%	20.6%	18.7%	-
Amara Raja Batteries ($AMARAJABAT)	14.9%	15.7%	14.2%	17.0%	-
Suprajit Engineering ($SUPRAJIT)	16.2%	17.0%	17.2%	16.2%	-
Median (43 companies)	11.1%	9.8%	10.2%	10.3%	11.5%
Rico Auto Industries ($RICOAUTO)	8.8%	7.8%	10.0%	8.8%	10.8%

Top companies by CAPEX/Revenue, %


Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
Amtek Auto ($AMTEKAUTO)	18.9%	-	27.1%	30.3%	-
Jbm Auto ($JBMA)	9.8%	8.4%	-	14.4%	-
Shivam Autotech ($SHIVAMAUTO)	11.6%	4.1%	4.9%	12.5%	-
Amara Raja Batteries ($AMARAJABAT)	3.7%	2.5%	10.9%	9.6%	-
L.G.Balakrishnan & Bros ($LGBBROSLTD)	3.5%	6.5%	6.0%	8.9%	7.0%
Median (25 companies)	5.6%	4.5%	4.8%	4.5%	5.9%
Rico Auto Industries ($RICOAUTO)	5.8%	10.9%	5.7%	14.2%	7.4%

Top companies by ROIC, %


Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
Amara Raja Batteries ($AMARAJABAT)	32.1%	34.5%	30.3%	35.4%	-
Exide Industries ($EXIDEIND)	24.2%	24.3%	29.5%	26.9%	20.5%
Munjal Showa ($MUNJALSHOW)	29.9%	23.8%	22.5%	24.9%	-
Motherson Sumi Systems ($MOTHERSUMI)	13.5%	16.5%	25.0%	24.9%	25.1%
Gabriel India ($GABRIEL)	19.9%	15.5%	18.0%	24.0%	-
Median (49 companies)	16.4%	12.0%	14.5%	14.6%	13.8%
Rico Auto Industries ($RICOAUTO)	7.2%	3.5%	6.7%	4.8%	8.7%

Top companies by Net Debt / EBITDA


Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
Tube Investments Of India ($TUBEINVEST)	17.6x	17.8x	17.3x	16.4x	0.1x
Amtek Auto ($AMTEKAUTO)	4.8x	-	5.3x	5.8x	-
Remsons Industries ($REMSONSIND)	2.8x	4.3x	3.6x	5.7x	-
Steel Strips Wheels ($SSWL)	5.4x	6.3x	6.5x	5.6x	4.2x
Ucal Fuel Systems ($UCALFUEL)	4.3x	5.6x	5.7x	3.6x	-
Median (41 companies)	1.2x	1.7x	0.7x	0.0x	0.3x
Rico Auto Industries ($RICOAUTO)	3.6x	4.2x	2.3x	1.5x	2.1x

Rico Auto Industries stock price chart

Rico Auto Industries financials

mln.	FY2010	FY2011	FY2012

Revenue	15,884	13,150	15,048
EBITDA	791.3	1,245	1,322
Net income	-49.100	133.0	224.6
CAPEX	1,228	1,253	870.6
Debt	4,416	4,753	4,794
Cash	137.4	190.4	60.500

About Rico Auto Industries

Rico Auto Industries Limited, an engineering company, manufactures and supplies high precision fully machined aluminum and ferrous components and assemblies to automotive original equipment manufacturers worldwide. The company is involved in the design, development, tooling, casting, machining, and assembly of ferrous and aluminum products. Its products include oil pump assemblies, fuel system parts, lube oil filter heads, exhaust manifolds, turbine housings, center housings, back plates, crank cases and covers, cylinder head covers, oil pans, intake manifold covers, front covers, valve covers, side covers, balance shafts assemblies, gear housings, and main bearing caps, as well as water, air connections, and pressure plates. The company also provides flywheels, timing cases, oil filter adapters, engine brackets, cylinder blocks, cylinder heads, clutch assemblies, automatic transmission bracket assemblies, differential case housings, gear shifts forks, wheel hubs assemblies, brake panel assemblies, brake discs, drums, and steering knuckles. It markets its products to two wheeler, passenger car, and commercial vehicle customers, as well as to system suppliers. Rico Auto Industries Limited was incorporated in 1983 and is based in Gurgaon, India.