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Garware Polyester reports 38.4% EBITDA growth in 2016 and 3.0 pp EBITDA Margin growth from 6.7% to 9.6%

25-05-2016 • About Garware Polyester ($GARWARPOLY) • By InTwits

Garware Polyester reported FY2016 financial results today. Here are the key drivers of the company's long term financial model:
  • Garware Polyester has medium CAPEX intensity: 5 year average CAPEX/Revenue was 5.1%. At the same time it's in pair with industry average of 6.2%
  • CAPEX is quite volatile: ₹98m in FY2016, ₹292m in FY2015, ₹856m in FY2014, ₹614m in FY2013, ₹251m in FY2012
  • The company has potentially unprofitable business model: ROIC is 6.9%
  • It operates with high leverage: Net Debt/EBITDA is 3.1x while industry average is 2.2x
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 decreased on 4.3%. During FY2012-FY2016 Revenue growth topped in FY2014 at 8.4% and was decelerating since that time. Despite revenue decline the EBITDA margin expanded. EBITDA Margin increased on 3.0 pp from 6.7% to 9.6% in FY2016. During the last 5 years EBITDA Margin bottomed in FY2015 at 6.7%.

Net Income margin showed almost no change in FY2016.

Investments (CAPEX, working capital and M&A)


The company's CAPEX/Revenue was 1.1% in FY2016. The company's CAPEX/Revenue decreased on 6.8 pp from 7.9% in FY2013 to 1.1% in FY2016. It's average level of CAPEX/Revenue for the last three years was 4.8%. During FY2012-FY2016 CAPEX as a % of Revenue topped in FY2014 at 10.1% and was declining since that time.

Return on investment


The company operates at low ROIC (6.9%) and ROE (2.9%). ROIC increased on 2.3 pp from 4.5% to 6.9% in FY2016. ROE showed almost no change in FY2016. During the last 5 years ROIC bottomed in FY2014 at 3.9% and was growing since that time.

Leverage (Debt)


Company's Net Debt / EBITDA is 3.1x and Debt / EBITDA is 3.8x. Net Debt / EBITDA dropped on 2.1x from 5.2x to 3.1x in FY2016. Debt dropped on 14.4% while cash showed almost no change in FY2016. During FY2012-FY2016 Net Debt/EBITDA topped in FY2015 at 5.2x.

Garware Polyester has short term refinancing risk: cash is only 21.2% of short term debt.

Valuation and dividends


Garware Polyester's trades at EV/EBITDA 6.0x and P/E 14.6x while industy averages are 17.8x and 21.9x. The company's EV/(EBITDA-CAPEX) is 6.8x with the industry average at 22.8x.

Financial and operational results


Garware Polyester ($GARWARPOLY) key annual financial indicators

mln. INR201220132014201520162016/2015
P&L
Revenue7,9647,7758,4328,9638,575-4.3%
EBITDA92871170159782638.4%
Net Income320283103178165-7.4%
Balance Sheet
Cash2082806905915930.3%
Short Term Debt1,9602,2192,7963,0732,803-8.8%
Long Term Debt327745731606347-42.8%
Cash flow
Capex25161485629298-66.5%
Ratios
Revenue growth-11.6%-2.4%8.4%6.3%-4.3%
EBITDA growth-67.7%-23.4%-1.4%-14.9%38.4%
EBITDA Margin11.6%9.1%8.3%6.7%9.6%3.0%
Net Income Margin4.0%3.6%1.2%2.0%1.9%-0.1%
CAPEX, % of revenue3.1%7.9%10.1%3.3%1.1%-2.1%
ROIC7.2%4.0%3.9%4.5%6.9%2.3%
ROE7.2%5.7%1.9%3.2%2.9%-0.3%
Net Debt/EBITDA2.2x3.8x4.0x5.2x3.1x-2.1x

Peers in Commodity Chemicals


Below you can find Garware Polyester benchmarking vs. other companies in Commodity Chemicals 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
Tuticorin Alkali Chemicals & Fertilisers ($TUTIALKA)--27.9%-83.3%408.0%18.3%
Jayshree Chemicals ($JAYCH)288.9%17.5%-75.2%262.3%-
Jagran Production ($JAGPRO)589.4%4.4%514.9%192.3%-
Shree Hari Chemicals Export ($SHHARICH)-2.5%-78.0%299.5%111.6%-
Jindal Poly Films ($JINDPOLBBPH)-17.2%-6.3%131.7%46.9%-
 
Median (37 companies)23.5%11.2%11.5%5.6%3.9%
Garware Polyester ($GARWARPOLY)--2.4%8.4%6.3%-4.3%


Top companies by EBITDA margin, %

Top 5 FY2012 FY2013 FY2014 FY2015 FY2016
Riddhi Siddhi Gluco Biols ($RIDDHI)---104.7%-
Mysore Petro Chemicals ($MYSORPETRO)---47.1%-
Aditya Birla Chemicals (India) ($ABCIL)26.8%27.1%23.6%21.9%-
Indo Borax & Chemicals ($INDOBORAX)---21.3%-
Chemfab Alkalis ($CHEMFALKAL)22.3%32.9%24.2%19.8%23.2%
 
Median (50 companies)9.6%8.3%8.6%6.6%11.2%
Garware Polyester ($GARWARPOLY)11.6%9.1%8.3%6.7%9.6%


Top companies by CAPEX/Revenue, %

Top 5 FY2012 FY2013 FY2014 FY2015 FY2016
Kanoria Chemicals & Industries ($KANORICHEM)25.1%6.0%13.4%40.3%-
Aditya Birla Chemicals (India) ($ABCIL)136.9%24.2%30.8%15.0%-
Aarti Industries ($AARTIIND)8.0%11.2%11.0%10.4%16.8%
Alkyl Amines Chemicals ($ALKYLAMINE)5.1%6.6%5.9%8.6%7.3%
Sukhjit Starch & Chemicals ($SUKHJITS)15.7%9.4%5.4%5.4%3.6%
 
Median (21 companies)5.3%6.3%5.4%3.2%5.0%
Garware Polyester ($GARWARPOLY)3.1%7.9%10.1%3.3%1.1%


Top companies by ROIC, %

Top 5 FY2012 FY2013 FY2014 FY2015 FY2016
Bodal Chemicals ($BODALCHEM)-1.3%3.3%39.0%38.3%-
Elantas Beck India ($ELANTAS)20.4%33.9%31.0%36.6%-
Alkyl Amines Chemicals ($ALKYLAMINE)16.0%18.7%25.0%23.7%24.7%
Aarti Industries ($AARTIIND)15.9%19.1%17.2%17.9%19.3%
Transpek Industry ($TRANSPEK)-1.7%14.2%11.0%17.8%26.9%
 
Median (60 companies)9.2%9.8%9.9%9.6%19.3%
Garware Polyester ($GARWARPOLY)7.2%4.0%3.9%4.5%6.9%


Top companies by Net Debt / EBITDA

Top 5 FY2012 FY2013 FY2014 FY2015 FY2016
Iol Chemicals & Pharmaceuticals ($IOLCP)5.8x4.5x3.7x35.4x8.8x
India Glycols ($INDIAGLYCO)4.8x3.7x8.5x14.2x-
Godrej Industries ($GODREJIND)9.9x5.7x7.9x10.7x10.0x
Kanoria Chemicals & Industries ($KANORICHEM)5.2x9.6x3.5x9.4x-
Polyplex Corporation ($POLYPLEX)0.9x6.8x7.1x4.7x-
 
Median (37 companies)2.6x3.0x0.8x0.9x1.0x
Garware Polyester ($GARWARPOLY)2.2x3.8x4.0x5.2x3.1x


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