Godrej Industries reports 30.0% EBITDA growth in 2016 and 0.61 pp EBITDA Margin growth from 5.3% to 5.9%

25-05-2016 • About Godrej Industries ($GODREJIND) • By InTwits

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

Godrej Industries is a fast growth stock: FY2016 revenue growth was 16.5%, 5 year revenue CAGR was 19.8% at FY2016 ROIC 4.6%
EBITDA Margin is relatively stable: 5.9% in FY2016 vs. 5.3% in FY2015 vs. 4.8% in FY2012
Godrej 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 6.2%
CAPEX is quite volatile: ₹3,974m in FY2016, ₹4,955m in FY2015, ₹4,272m in FY2014, ₹6,924m in FY2013, ₹831m in FY2012
The company has potentially unprofitable business model: ROIC is 4.6%
It operates with high leverage: Net Debt/EBITDA is 10.0x 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 jumped on 16.5%. Despite revenue decline the EBITDA margin expanded. EBITDA Margin increased on 5.6 pp from 23.5% to 29.1% in FY2016.

SG&A as a % of Revenue showed almost no change in FY2016.

Net Income margin showed almost no change in FY2016.

Investments (CAPEX, working capital and M&A)

In FY2016 Godrej Industries had CAPEX/Revenue of 3.7%. Godrej Industries's CAPEX/Revenue decreased on 6.2 pp from 9.9% in FY2013 to 3.7% in FY2016. It's average CAPEX/Revenue for the last three years was 4.8%. Godrej Industries invested a big chunk of EBITDA (62.8%) to CAPEX to fuel its growth. During the last 5 years CAPEX as a % of Revenue topped in FY2013 at 9.9% and was declining since that time.

Return on investment

The company operates at good ROE (14.4%) while ROIC is low (4.6%). ROIC showed almost no change in FY2016. ROE increased slightly on 0.94 pp from 13.5% to 14.4% in FY2016.

Leverage (Debt)

Debt level is 10.0x Net Debt / EBITDA and 10.4x Debt / EBITDA. Net Debt / EBITDA dropped on 0.7x from 10.7x to 10.0x in FY2016. Debt surged on 20.5% while cash decreased on 8.4%.

Godrej Industries has short term refinancing risk: cash is only 4.5% of short term debt.

Financial and operational results

Godrej Industries ($GODREJIND) key annual financial indicators

mln. INR	2012	2013	2014	2015	2016	2016/2015
P&L
Revenue	56,121	69,643	79,179	92,299	107,532	16.5%
Gross Profit		63,236
SG&A				731	1,021	39.7%
EBITDA	2,669	3,808	4,582	4,865	6,325	30.0%
Net Income	2,916	3,912	3,264	4,025	4,844	20.4%
Balance Sheet
Cash	2,094	5,775	3,057	2,418	2,214	-8.4%
Short Term Debt	16,760	18,109	27,810	37,236	48,834	31.1%
Long Term Debt	11,877	9,392	11,604	17,282	16,867	-2.4%
Cash flow
Capex	831	6,924	4,272	4,955	3,974	-19.8%
Ratios
Revenue growth	29.0%	24.1%	13.7%	16.6%	16.5%
EBITDA growth	19.2%	42.7%	20.3%	6.2%	30.0%

Gross Margin		90.8%
EBITDA Margin	4.8%	5.5%	5.8%	5.3%	5.9%	0.6%
SG&A, % of revenue				0.8%	0.9%	0.2%
Net Income Margin	5.2%	5.6%	4.1%	4.4%	4.5%	0.1%
CAPEX, % of revenue	1.5%	9.9%	5.4%	5.4%	3.7%	-1.7%

ROIC	4.2%	5.1%	5.3%	4.4%	4.6%	0.2%
ROE	13.6%	14.3%	11.2%	13.5%	14.4%	0.9%
Net Debt/EBITDA	9.9x	5.7x	7.9x	10.7x	10.0x	-0.7x

Peers in Commodity Chemicals

Below we provide Godrej Industries benchmarking against other companies in Commodity Chemicals 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
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 ($JINDPOLBBPH)	-17.2%	-6.3%	131.7%	46.9%	-
Median (37 companies)	23.5%	9.7%	10.6%	5.6%	1.5%
Godrej Industries ($GODREJIND)	-	24.1%	13.7%	16.6%	16.5%

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 ($CHEMFALKAL)	22.3%	32.9%	24.2%	19.8%	23.2%
Median (50 companies)	11.3%	8.4%	8.6%	6.6%	11.2%
Godrej Industries ($GODREJIND)	4.8%	5.5%	5.8%	5.3%	5.9%

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 ($SUKHJITS)	15.7%	9.4%	5.4%	5.4%	3.6%
Median (21 companies)	5.3%	6.3%	5.9%	3.2%	5.0%
Godrej Industries ($GODREJIND)	1.5%	9.9%	5.4%	5.4%	3.7%

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 ($TRANSPEK)	-1.7%	14.2%	11.0%	17.8%	26.9%
Median (60 companies)	9.2%	9.8%	9.9%	9.6%	19.3%
Godrej Industries ($GODREJIND)	4.2%	5.1%	5.3%	4.4%	4.6%

Top companies by Net Debt / EBITDA


Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
Iol Chemicals & Pharmaceuticals ($IOLCP)	5.8x	4.5x	3.7x	35.4x	8.8x
India Glycols ($INDIAGLYCO)	4.8x	3.7x	8.5x	14.2x	-
Kanoria Chemicals & Industries ($KANORICHEM)	5.2x	9.6x	3.5x	9.4x	-
Garware Polyester ($GARWARPOLY)	2.2x	3.8x	4.0x	5.2x	3.1x
Polyplex Corporation ($POLYPLEX)	0.9x	6.8x	7.1x	4.7x	-
Median (37 companies)	2.6x	3.0x	0.8x	0.9x	1.0x
Godrej Industries ($GODREJIND)	9.9x	5.7x	7.9x	10.7x	10.0x

Godrej Industries stock price chart

Godrej Industries financials

mln.	FY2010	FY2011	FY2012

Revenue	108,850	43,498	56,121
EBITDA	545.8	2,239	2,669
Net income	1,682	2,934	2,916
CAPEX	946.0	1,652	831.2
Debt	16,048	17,554	28,637
Cash	847.3	2,430	2,094

About Godrej Industries

Godrej Industries Limited manufactures and markets ole-chemicals, precursors and derivatives, and bulk edible oils in India and internationally. It provides fatty alcohols, including lauryl, cetyl, stearyl, cetostearyl, and behenyl for use in personal care, household detergents, industrial and hard-surface cleaning, and other industrial applications; and fatty acids comprising stearic acids, oleic acids, fractionated fatty acids, and coconut fatty acids. The company also offers surfactants, such as alpha olefin sulphonates; sodium lauryl sulphates for use in personal care products, detergents, pharmaceuticals, and agrochemicals; and sodium lauryl ether sulphates for use in home care, personal care, and industrial applications, as well as glycerine, an organic material for manufacturing pharmaceuticals. In addition, the company is engaged in producing and selling compound feeds for cattle, poultry, shrimp, and fish; processing and trading refined vegetable oils and vanaspati; oil palm plantation acitivities; and the development, sale, leasing, and licensing of real estate properties. Further, it is involved in the processing, production, and sale of fruit pulp, tomato puree, fruit juices, nectors and drinks, other beverages, and confectionary products, as well as in the sale of tea. Additionally, the company is engaged in the finance and investment activities; and integrated poultry, agri inputs and tissue culture, seeds business, and gourmet foods businesses, as well as in the energy generation through windmills. It operates 33 gourmet food stores. The company was formerly known as Godrej Soaps Limited and changed its name to Godrej Industries Limited in April 2001. Godrej Industries Limited was founded in 1988 and is headquartered in Mumbai, India. Godrej Industries Limited is a subsidiary of Godrej & Boyce Mfg. Co. Ltd.