Pennar Industries CAPEX surged on 436% and Revenue increased on 3.4%

20-05-2016 • About Pennar Industries ($PENIND) • By InTwits

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

Pennar Industries has medium CAPEX intensity: 5 year average CAPEX/Revenue was 5.2%. At the same time it's in pair with industry average of 2.3%
CAPEX is quite volatile: ₹1,608m in FY2016, ₹300m in FY2015, ₹508m in FY2014, ₹205m in FY2013, ₹586m in FY2012
The company has highly profitable business model: ROIC is 16.6%

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

Revenue and profitability

Pennar Industries's Revenue increased on 3.4%. Revenue growth happened at the same time with EBITDA margin expansion. EBITDA Margin increased on 2.1 pp from 9.3% to 11.4% in FY2016. During the last 5 years EBITDA Margin bottomed in FY2014 at 8.0% and was growing since that time.

Net Income margin increased slightly on 0.52 pp from 2.8% to 3.4% in FY2016. During the last 5 years Net Income margin bottomed in FY2014 at 2.3% and was growing since that time.

Investments (CAPEX, working capital and M&A)

The company's CAPEX/Revenue was 12.3% in FY2016. CAPEX/Revenue jumped on 10.5 pp from 1.8% in FY2013 to 12.3% in FY2016. Average CAPEX/Revenue for the last three years was 6.4%. Pennar Industries investments to CAPEX were large: 108% of EBITDA.

Return on investment

The company operates at good ROIC (16.6%) while ROE is low (9.6%). ROIC increased slightly on 0.92 pp from 15.7% to 16.6% in FY2016. ROE showed almost no change in FY2016. During FY2012-FY2016 ROIC bottomed in FY2014 at 12.3% and was growing since that time. During FY2012-FY2016 ROE bottomed in FY2014 at 7.3% and was growing since that time.

Leverage (Debt)

Company's Net Debt / EBITDA is 0.9x and Debt / EBITDA is 1.7x. Net Debt / EBITDA dropped on 0.6x from 1.6x to 0.9x in FY2016. Debt jumped on 32.0% while cash surged on 1,364%. During FY2012-FY2016 Net Debt/EBITDA topped in FY2014 at 1.6x and was declining since that time.

Pennar Industries has short term refinancing risk: cash is only 68.5% of short term debt.

Valuation and dividends

The company's trades at EV/EBITDA 4.7x and P/E 12.8x while industy averages are 17.8x and 21.9x.

Financial and operational results

Pennar Industries ($PENIND) key annual financial indicators

mln. INR	2012	2013	2014	2015	2016	2016/2015
P&L
Revenue	12,186	11,151	11,209	12,634	13,064	3.4%
EBITDA	1,474	1,166	900	1,178	1,493	26.7%
Net Income	620	419	259	359	439	22.1%
Balance Sheet
Cash	132	344	116	80	1,173	1,364.2%
Short Term Debt	1,338	1,304	1,128	1,495	1,713	14.6%
Long Term Debt	403	327	430	454	859	89.2%
Cash flow
Capex	586	205	508	300	1,608	436.1%
Ratios
Revenue growth	0.9%	-8.5%	0.5%	12.7%	3.4%
EBITDA growth	-6.0%	-20.9%	-22.8%	31.0%	26.7%

EBITDA Margin	12.1%	10.5%	8.0%	9.3%	11.4%	2.1%
Net Income Margin	5.1%	3.8%	2.3%	2.8%	3.4%	0.5%
CAPEX, % of revenue	4.8%	1.8%	4.5%	2.4%	12.3%	9.9%

ROIC	26.8%	18.4%	12.3%	15.7%	16.6%	0.9%
ROE	21.9%	13.0%	7.3%	9.3%	9.6%	0.3%
Net Debt/EBITDA	1.1x	1.1x	1.6x	1.6x	0.9x	-0.6x

Peers in Iron & Steel/Interm.Products

Below we provide Pennar Industries benchmarking against other companies in Iron & Steel/Interm.Products 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
Uttam Galva Steels ($UTTAMSTL)	12.0%	11.0%	-13.2%	55.0%	-
Modern Steels ($MDRNSTL)	-2.6%	-22.7%	0.7%	20.3%	-
Maithan Alloys ($MAITHANALL)	-	59.1%	1.1%	15.0%	4.0%
Vaswani Industries ($VASWANI)	51.4%	-2.1%	5.6%	12.6%	-
S.A.L.Steel ($SALSTEEL)	2.3%	15.8%	-13.2%	10.9%	-
Median (32 companies)	15.4%	8.8%	3.4%	-1.6%	-16.9%
Pennar Industries ($PENIND)	-	-8.5%	0.5%	12.7%	3.4%

Top companies by EBITDA margin, %


Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
Jindal Steel & Power ($JINDALSTEL)	37.5%	30.5%	28.1%	29.8%	17.2%
Sarda Energy & Minerals ($SARDAEN)	16.3%	21.5%	21.3%	21.5%	-
Bhushan Steel ($BHUSANSTL)	31.2%	32.3%	28.1%	20.4%	-
Jsw Steel ($JSWSTEEL)	17.8%	17.1%	17.9%	17.7%	14.6%
Tata Metaliks ($TATAMETALI)	-9.6%	0.9%	6.8%	14.6%	16.8%
Median (29 companies)	9.4%	9.0%	7.0%	7.3%	14.1%
Pennar Industries ($PENIND)	12.1%	10.5%	8.0%	9.3%	11.4%

Top companies by CAPEX/Revenue, %


Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
Jindal Steel & Power ($JINDALSTEL)	34.2%	47.6%	69.6%	26.4%	21.8%
Jayaswal Neco Industries ($JAYNECOIND)	20.4%	44.0%	31.1%	17.3%	-
Steel Authority Of India ($SAIL)	20.9%	20.7%	19.3%	16.9%	17.3%
Bhushan Steel ($BHUSANSTL)	47.2%	44.0%	50.4%	16.2%	-
Jsw Steel ($JSWSTEEL)	11.9%	14.7%	11.3%	12.7%	12.4%
Median (17 companies)	9.7%	11.6%	7.7%	5.3%	9.6%
Pennar Industries ($PENIND)	4.8%	1.8%	4.5%	2.4%	12.3%

Top companies by ROIC, %


Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
Tata Metaliks ($TATAMETALI)	-23.5%	-3.7%	19.9%	57.4%	42.6%
Maithan Alloys ($MAITHANALL)	16.3%	15.1%	5.5%	15.3%	19.0%
Kirloskar Ferrous Industries ($KIRLFER)	19.1%	16.8%	12.4%	14.7%	15.9%
Gallantt Metal ($GALLANTT)	8.7%	11.7%	8.5%	11.7%	-
Sunflag Iron & Steel Co ($SUNFLAG)	7.2%	5.6%	8.3%	11.2%	-
Median (40 companies)	6.8%	5.5%	5.5%	4.6%	4.8%
Pennar Industries ($PENIND)	26.8%	18.4%	12.3%	15.7%	16.6%

Top companies by Net Debt / EBITDA


Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
Visa Steel ($VISASTEEL)	20.1x	-	24.4x	187.1x	-
Ismt ($ISMTLTD)	5.3x	9.8x	19.9x	48.3x	-
Kic Metaliks ($KAJARIR)	9.2x	3.0x	18.2x	19.8x	-
Bhushan Steel ($BHUSANSTL)	6.3x	8.6x	12.9x	17.7x	-
Prakash Industries ($PRAKASH)	2.5x	2.8x	2.5x	11.9x	-
Median (26 companies)	4.6x	4.4x	3.4x	2.2x	1.1x
Pennar Industries ($PENIND)	1.1x	1.1x	1.6x	1.6x	0.9x

Pennar Industries stock price chart

Pennar Industries financials

mln.	FY2010	FY2011	FY2012

Revenue	14,771	12,082	12,186
EBITDA	0.000	1,568	1,474
Net income	497.8	739.3	619.9
CAPEX	590.9	366.0	586.1
Debt	1,924	1,687	1,741
Cash	123.5	123.7	131.6

About Pennar Industries

Pennar Industries Limited provides specialized engineered steel solutions in India and internationally. It offers cold rolled steel strips; electrostatic precipitators electrodes; building components comprising purlins, roofing/cladding sheets, and decking profiles; metal crash barriers for flyover, bridges, national highway, and other projects; sheet piles for infrastructure projects; and automobile profiles for commercial vehicle companies. The company also provides solar module mounting structures for solar PV panels; railway wagons and passenger coaches; and storage products and solutions, such as pallet racking, narrow aisle, automated storage and retrieval, heavy duty shelving, multi-tier heavy duty shelving, long span shelving, drive-in and drive-thru, push back racking, mobile pallet racking, pallet flow, mezzanine storage, and cantilever storage systems, as well as storage accessories. In addition, it offers precision tubes, including electric resistance welded, cold drawn welded, air pre-heater, and Indian boiler regulations tubes for automobiles, general engineering, boilers and heaters, and other industries. Further, the company provides hydraulic cylinders, which include welded, telescopic, integrated valve, piggy back, and dump hoist cylinders for various sectors, such as agriculture, construction, mining, marine ship building, bulk cargo handling, earth moving equipment, etc.; critical auto components comprising braking and suspension, auto electrical, chassis and body, etc. for two and four wheelers; and compressor shells for refrigeration and air conditioning manufacturers. Additionally, it designs, manufactures, supplies, and installs pre-engineered steel buildings and building components; and manufactures and distributes fuel additives and water treatment chemicals; and provides water and waste water treatment solutions, and EPC services for water treatment projects. The company was incorporated in 1975 and is headquartered in Hyderabad, India.