Sobha Developers reports 127% CAPEX growth in 2016 while 23.6% Revenue decline

19-05-2016 • About Sobha Developers ($SOBHA) • By InTwits

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

Sobha Developers has medium CAPEX intensity: 5 year average CAPEX/Revenue was 5.6%. At the same time it's in pair with industry average of 6.6%
CAPEX is quite volatile: ₹960m in FY2016, ₹794m in FY2015, ₹5,025m in FY2014, ₹420m in FY2013, ₹921m in FY2012
The company has business model with low profitability: ROIC is 9.0%
It operates with high leverage: Net Debt/EBITDA is 4.2x while industry average is 6.8x

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

Revenue and profitability

Sobha Developers's Revenue dropped on 23.6%. During FY2012-FY2016 Revenue growth topped in FY2013 at 32.4% and was decelerating since that time. Revenue decline happened at the same time with EBITDA margin expansion. EBITDA Margin increased slightly on 1.7 pp from 25.3% to 27.0% in FY2016. EBITDA Margin declined at -1.8 pp per annum in FY2012-FY2016.

Net Income margin decreased slightly on 1.5 pp from 9.8% to 8.2% in FY2016. Net Income margin declined at -1.5 pp per annum in FY2012-FY2016.

Investments (CAPEX, working capital and M&A)

In FY2016 Sobha Developers had CAPEX/Revenue of 7.7%. The company showed CAPEX/Revenue growth of 3.0 pp from 4.7% in FY2013 to 7.7% in FY2016. It's average CAPEX/Revenue for the last three years was 5.3%.

Return on investment

The company operates at low ROIC (9.0%) and ROE (6.1%). ROIC decreased on 3.7 pp from 12.7% to 9.0% in FY2016. ROE decreased on 3.9 pp from 10.1% to 6.1% in FY2016. ROIC stuck to a declining trend at -2.4 pp per annum in FY2012-FY2016. During the last 5 years ROE topped in FY2013 at 10.7% and was declining since that time.

Leverage (Debt)

Company's Net Debt / EBITDA is 4.2x and Debt / EBITDA is 4.4x. Net Debt / EBITDA jumped on 1.1x from 3.1x to 4.2x in FY2016. Debt increased on 8.6% while cash decreased on 8.9%. Net Debt/EBITDA followed a growing trend at 0.8x per annum in the last 5 years.

Sobha Developers has short term refinancing risk: cash is only 7.4% of short term debt.

Management team

Subhash Mohan Bhat is a the company's CFO. Subhash Mohan Bhat has spent 5 years at the company.

Financial and operational results

Sobha Developers ($SOBHA) key annual financial indicators

mln. INR	2012	2013	2014	2015	2016	2016/2015
P&L
Revenue	14,079	18,645	21,734	24,406	18,651	-23.6%
SG&A					450
EBITDA	4,731	5,610	6,174	6,173	5,043	-18.3%
Net Income	2,060	2,215	2,350	2,380	1,533	-35.6%
Balance Sheet
Cash	415	573	801	1,411	1,285	-8.9%
Short Term Debt	1,973	13,261	13,255	18,233	17,281	-5.2%
Long Term Debt	244	526	789	2,355	5,081	115.7%
Cash flow
Capex	1,021	877	1,197	636	1,442	126.6%
Ratios
Revenue growth	1.0%	32.4%	16.6%	12.3%	-23.6%
EBITDA growth	29.3%	18.6%	10.1%	-0.0%	-18.3%

EBITDA Margin	33.6%	30.1%	28.4%	25.3%	27.0%	1.7%
SG&A, % of revenue					2.4%
Net Income Margin	14.6%	11.9%	10.8%	9.8%	8.2%	-1.5%
CAPEX, % of revenue	7.3%	4.7%	5.5%	2.6%	7.7%	5.1%

ROIC	18.8%	16.7%	14.6%	12.7%	9.0%	-3.7%
ROE	10.7%	10.7%	10.6%	10.1%	6.1%	-3.9%
Net Debt/EBITDA	0.4x	2.4x	2.1x	3.1x	4.2x	1.1x

Peers in Realty

Below you can find Sobha Developers benchmarking vs. other companies in Realty 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
Sspdl ($SSPDL)	16.2%	-11.8%	-43.4%	326.1%	-
Orbit Corporation ($ORBITCORP)	-	-21.9%	-88.0%	275.1%	-98.6%
Ajmera Realty & Infra India ($AJMERA)	-	-61.7%	-1.8%	109.9%	92.0%
Prajay Engineers Syndicate ($PRAENG)	-21.1%	42.0%	-30.1%	62.8%	-
Godrej Properties ($GODREJPROP)	-	34.7%	13.7%	56.3%	35.9%
Median (34 companies)	-3.6%	3.4%	-4.5%	12.3%	29.7%
Sobha Developers ($SOBHA)	-	32.4%	16.6%	12.3%	-23.6%

Top companies by Gross margin, %


Top	FY2012	FY2013	FY2014	FY2015	FY2016
Godrej Properties ($GODREJPROP)	24.9%	33.3%	28.9%	19.4%	14.7%
Median (1 company)	24.9%	33.3%	28.9%	19.4%	14.7%

Top companies by EBITDA margin, %


Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
Hubtown ($HUBTOWN)	53.3%	72.4%	67.6%	82.4%	-
Housing Development & Infrastructure ($HDIL)	75.8%	40.6%	102.5%	78.9%	-
Tci Developers ($TCIDEVELOP)	-	-	-	75.9%	-
Orbit Corporation ($ORBITCORP)	42.4%	53.3%	-127.2%	69.8%	-
Oberoi Realty ($OBEROIRLTY)	59.3%	58.9%	54.5%	56.4%	47.7%
Median (43 companies)	19.4%	13.4%	19.8%	19.4%	23.8%
Sobha Developers ($SOBHA)	33.6%	30.1%	28.4%	25.3%	27.0%

Top companies by CAPEX/Revenue, %


Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
Prozone Intu Properties ($PROZONINTU)	-	-	-	89.5%	-
Ashiana Housing ($ASHIANA)	-	-	-	26.7%	-
Brigade Enterprises ($BRIGADE)	45.7%	10.7%	17.0%	18.5%	56.3%
Prestige Estates Projects ($PRESTIGE)	37.7%	30.2%	18.8%	11.6%	-
Parsvnath Developers ($PARSVNATH)	15.9%	-	11.6%	10.6%	-
Median (30 companies)	4.7%	2.3%	3.5%	2.3%	2.1%
Sobha Developers ($SOBHA)	7.3%	4.7%	5.5%	2.6%	7.7%

Top companies by ROIC, %


Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
Ahluwalia Contracts (India) ($AHLUCONT)	-3.2%	-15.8%	5.6%	21.2%	-
Poddar Developers ($PODDARDEV)	3.9%	2.6%	12.9%	19.1%	7.5%
Lancor Holdings ($LANCORHOL)	18.0%	11.6%	19.5%	17.7%	-
Mahindra Lifespace Developers ($MAHLIFE)	10.4%	11.7%	6.6%	14.9%	4.6%
Arihant Superstructures ($ASL)	12.2%	4.9%	10.6%	12.0%	-
Median (50 companies)	5.7%	4.6%	5.6%	6.8%	6.7%
Sobha Developers ($SOBHA)	18.8%	16.7%	14.6%	12.7%	9.0%

Top companies by Net Debt / EBITDA


Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
D B Realty ($DBREALTY)	13.2x	135.4x	14.0x	54.8x	-
B.L.Kashyap And Sons ($BLKASHYAP)	8.2x	5.8x	12.7x	40.1x	-
Vipul ($VIPUL)	0.7x	3.0x	10.8x	26.0x	-
Ansal Properties & Infrastructure ($ANSALAPI)	12.8x	11.9x	11.4x	16.6x	-
Srs Real Infrastructure ($SRSREAL)	11.7x	10.0x	12.9x	14.7x	-
Median (37 companies)	5.3x	5.1x	5.0x	4.0x	4.1x
Sobha Developers ($SOBHA)	0.4x	2.4x	2.1x	3.1x	4.2x

Sobha Developers stock price chart

Sobha Developers financials

mln.	FY2010	FY2011	FY2012

Revenue	30,898	13,945	14,079
EBITDA	2,736	3,659	4,731
Net income	1,341	1,813	2,060
CAPEX	139.4	217.5	1,021
Debt	14,889	3,272	2,218
Cash	459.7	179.1	414.5

About Sobha Developers

Sobha Limited constructs and develops residential and commercial projects primarily in India. Its residential projects include luxury and super luxury apartments, semi-luxury apartments, villas, row houses, presidential apartments, and plotted developments; and contractual projects for corporate entities, including offices, convention centers, software development blocks, multiplex theatres, hostel facilities, hotels, guest houses, food courts, restaurants, research centers, club houses, and factory buildings. The company also manufactures doors and door frames; fitted and loose furniture for hotels and serviced apartments; panelings, partitions, discussion tables, office workstations, reception desks, lift claddings, etc.; and modular kitchens, wardrobes, sofas, dining tables, exclusive chairs, etc. In addition, it undertakes contracts for corporate interiors for offices and hospitals; manufactures wood and wood-based products; manufactures and markets aluminum doors, windows, structural glazing, aluminum composite panels, and stainless steel cladding products; and undertakes other architectural metal works. Further, it manufactures concrete products, such as concrete blocks, pavers, kerbs, water drainage channels, paving slabs, and related landscape products, as well as mattresses under the Restoplus brand. The company was formerly known as Sobha Developers Limited and changed its name to Sobha Limited in August 2014. Sobha Limited was founded in 1995 and is headquartered in Bengaluru, India.