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Usha Martin Net Debt / EBITDA jumped on 6.1x from 5.2x to 11.4x in 2016 and Debt increased on 2.2%

25-05-2016 • About Usha Martin ($USHAMART) • By InTwits

Usha Martin reported FY2016 financial results today. Here are the key drivers of the company's long term financial model:
  • Usha Martin has high CAPEX intensity: 5 year average CAPEX/Revenue was 19.3%. At the same time it's a lot of higher than industry average of 7.5%.
  • CAPEX is quite volatile: ₹3,810m in FY2016, ₹6,022m in FY2015, ₹11,831m in FY2014, ₹8,529m in FY2013, ₹7,246m in FY2012
  • The company has potentially unprofitable business model: ROIC is 0.7%
  • It operates with high leverage: Net Debt/EBITDA is 11.4x while industry average is 1.4x
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 9.1%. Revenue decline was accompanies by EBITDA margin decline. EBITDA Margin decreased on 7.9 pp from 16.5% to 8.5% in FY2016. During FY2012-FY2016 EBITDA Margin topped in FY2014 at 18.7% and was declining since that time.

Net Income margin decreased on 4.5 pp from -5.5% to -10.0% in FY2016. Net Income margin followed a declining trend at -2.8 pp per annum in the last 5 years.

Investments (CAPEX, working capital and M&A)


In FY2016 the company had CAPEX/Revenue of 9.2%. Usha Martin showed big decline in CAPEX/Revenue of 14.4 pp from 23.5% in FY2013 to 9.2% in FY2016. It's average CAPEX/Revenue for the last three years was 17.1%. Battling declining revenue Usha Martin made large investments to CAPEX (107% of EBITDA) but that didn't help at least in this year. During FY2012-FY2016 CAPEX as a % of Revenue topped in FY2014 at 29.0% and was declining since that time.

Return on investment


The company operates at low but positive ROIC (0.7%) and negative ROE (-26.6%). ROIC decreased on 4.9 pp from 5.6% to 0.75% in FY2016. ROE dropped on 13.1 pp from -13.5% to -26.6% in FY2016. During FY2012-FY2016 ROIC topped in FY2014 at 7.6% and was declining since that time. ROE declined at -7.1 pp per annum in FY2012-FY2016.

Leverage (Debt)


Company's Net Debt / EBITDA is 11.4x and Debt / EBITDA is 11.5x. Net Debt / EBITDA surged on 6.1x from 5.2x to 11.4x in FY2016. Debt increased on 2.2% while cash dropped on 21.6%. During the last 5 years Net Debt/EBITDA bottomed in FY2013 at 4.8x and was growing since that time.

Usha Martin has short term refinancing risk: cash is only 4.7% of short term debt.

Financial and operational results


Usha Martin ($USHAMART) key annual financial indicators

mln. INR201220132014201520162016/2015
P&L
Revenue33,60836,21840,73845,61141,479-9.1%
EBITDA4,4426,5437,6217,5123,545-52.8%
Net Income36788107-2,531-4,150
Balance Sheet
Cash944551378634497-21.6%
Short Term Debt5,3858,66510,89912,79810,652-16.8%
Long Term Debt40,18923,26426,42227,12830,15011.1%
Cash flow
Capex7,2468,52911,8316,0223,810-36.7%
Ratios
Revenue growth10.4%7.8%12.5%12.0%-9.1%
EBITDA growth-21.8%47.3%16.5%-1.4%-52.8%
EBITDA Margin13.2%18.1%18.7%16.5%8.5%-7.9%
Net Income Margin0.1%2.2%0.3%-5.5%-10.0%-4.5%
CAPEX, % of revenue21.6%23.5%29.0%13.2%9.2%-4.0%
ROIC4.3%6.5%7.6%5.6%0.7%-4.9%
ROE0.2%4.2%0.5%-13.5%-26.6%-13.1%
Net Debt/EBITDA10.0x4.8x4.8x5.2x11.4x6.1x

Peers in Iron & Steel Products


Below you can find Usha Martin benchmarking vs. other companies in Iron & Steel Products 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
Bedmutha Industries ($BEDMUTHA)--7.4%2.7%44.6%52.8%
Remi Edelstahl Tubulars ($REMIEDEL)40.9%-10.8%-24.4%40.7%-
Nile ($NILE)7.5%-19.1%6.9%38.7%-
Apl Apollo Tubes ($APLAPOLLO)54.5%44.2%24.3%25.7%-
Lakshmi Precision Screws ($LAKPRE)9.9%-6.2%7.5%7.9%-
 
Median (10 companies)20.4%-8.6%4.8%5.8%52.8%
Usha Martin ($USHAMART)-7.8%12.5%12.0%-9.1%


Top companies by EBITDA margin, %

Top 5 FY2012 FY2013 FY2014 FY2015 FY2016
Gandhi Special Tubes ($GANDHITUBE)---25.5%-
National Fittings ($NATFIT)---19.3%-
Shree Steel Wire Ropes ($SSWRL)---12.5%-
Lakshmi Precision Screws ($LAKPRE)15.9%16.2%7.0%12.4%-
Uni Abex Alloy Products ($UNIABEXAL)---7.5%-
 
Median (13 companies)5.2%5.6%6.3%5.7%2.4%
Usha Martin ($USHAMART)13.2%18.1%18.7%16.5%8.5%


Top companies by CAPEX/Revenue, %

Top  FY2012 FY2013 FY2014 FY2015 FY2016
Apl Apollo Tubes ($APLAPOLLO)5.6%4.2%5.1%5.9%-
Gandhi Special Tubes ($GANDHITUBE)---4.0%-
 
Median (2 companies)5.6%1.6%10.3%4.9%-
Usha Martin ($USHAMART)21.6%23.5%29.0%13.2%9.2%


Top companies by ROIC, %

Top 5 FY2012 FY2013 FY2014 FY2015 FY2016
Apl Apollo Tubes ($APLAPOLLO)18.2%19.5%16.0%16.6%-
Lakshmi Precision Screws ($LAKPRE)14.4%11.9%3.1%11.9%-
Gandhi Special Tubes ($GANDHITUBE)28.3%18.9%13.2%11.1%13.3%
Gujarat Containers ($GUJCONT)-20.0%---
National Fittings ($NATFIT)18.6%22.1%---
 
Median (23 companies)8.5%8.7%5.9%11.9%13.3%
Usha Martin ($USHAMART)4.3%6.5%7.6%5.6%0.7%


Top companies by Net Debt / EBITDA

Top 5 FY2012 FY2013 FY2014 FY2015 FY2016
Lakshmi Precision Screws ($LAKPRE)2.7x3.4x8.1x4.4x-
Apl Apollo Tubes ($APLAPOLLO)2.7x2.8x3.1x2.3x-
Uni Abex Alloy Products ($UNIABEXAL)0.0x1.6x0.0x0.0x-
National Fittings ($NATFIT)0.8x0.1x0.0x0.0x-
Remi Edelstahl Tubulars ($REMIEDEL)5.5x4.8x-0.0x-
 
Median (11 companies)2.6x3.4x0.0x0.0x0.0x
Usha Martin ($USHAMART)10.0x4.8x4.8x5.2x11.4x


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