Centum Electronics CAPEX jumped on 71.3% while Revenue dropped on 17.1%

27-05-2016 • About Centum Electronics ($CENTUM) • By InTwits

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

Centum Electronics has medium CAPEX intensity: 5 year average CAPEX/Revenue was 5.3%. At the same time it's a lot of higher than industry average of 2.5%.
CAPEX is quite volatile: ₹330m in FY2016, ₹192m in FY2015, ₹285m in FY2014, ₹68m in FY2013, ₹141m in FY2012
The company has business model with average profitability: ROIC is 10.7%

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

Revenue and profitability

Centum Electronics's Revenue dropped on 17.1%. During FY2012-FY2016 Revenue growth topped in FY2014 at 50.4% and was decelerating since that time. Revenue decline was worsened by EBITDA margin decline. EBITDA Margin decreased on 8.3 pp from 20.3% to 12.0% in FY2016. During the last 5 years EBITDA Margin topped in FY2014 at 20.6% and was declining since that time.

Net Income margin decreased on 2.4 pp from 8.9% to 6.5% in FY2016. During FY2012-FY2016 Net Income margin topped in FY2015 at 8.9%.

Investments (CAPEX, working capital and M&A)

In FY2016 Centum Electronics had CAPEX/Revenue of 8.2%. CAPEX/Revenue increased on 5.7 pp from 2.4% in FY2013 to 8.2% in FY2016. For the last three years the average CAPEX/Revenue was 6.3%. Battling declining revenue Centum Electronics invested a large share of EBITDA (68.0%) to CAPEX but that didn't help at least in this year.

Return on investment

The company operates at good ROE (14.6%) while ROIC is low (10.7%). ROIC dropped on 22.1 pp from 32.8% to 10.7% in FY2016. ROE dropped on 14.4 pp from 29.0% to 14.6% in FY2016. During the last 5 years ROIC topped in FY2014 at 35.8% and was declining since that time. During FY2012-FY2016 ROE topped in FY2014 at 30.1% and was declining since that time.

Leverage (Debt)

Company's Net Debt / EBITDA is 0.6x and Debt / EBITDA is 1.7x. Net Debt / EBITDA jumped on 0.1x from 0.4x to 0.6x in FY2016. Debt decreased on 8.9% while cash surged on 19.2%. During FY2012-FY2016 Net Debt/EBITDA bottomed in FY2015 at 0.4x.

Centum Electronics has short term refinancing risk: cash is only 66.3% of short term debt.

Valuation and dividends

The company's trades at EV/EBITDA 13.8x and P/E 24.3x while industy averages are 17.8x and 21.9x. The company's EV/(EBITDA-CAPEX) is 43.0x with the industry average at 22.8x.

Financial and operational results

Centum Electronics ($CENTUM) key annual financial indicators

mln. INR	2012	2013	2014	2015	2016	2016/2015
P&L
Revenue	2,574	2,826	4,252	4,880	4,045	-17.1%
EBITDA	330	470	876	992	485	-51.1%
Net Income	72	93	347	433	263	-39.4%
Balance Sheet
Cash	5	40	129	453	539	19.2%
Short Term Debt	531	615	528	894	814	-8.9%
Long Term Debt	109	5	0	0	0
Cash flow
Capex	141	68	285	192	330	71.3%
Ratios
Revenue growth	1.4%	9.8%	50.4%	14.8%	-17.1%
EBITDA growth	9.6%	42.5%	86.4%	13.2%	-51.1%

EBITDA Margin	12.8%	16.6%	20.6%	20.3%	12.0%	-8.3%
Net Income Margin	2.8%	3.3%	8.2%	8.9%	6.5%	-2.4%
CAPEX, % of revenue	5.5%	2.4%	6.7%	3.9%	8.2%	4.2%

ROIC	10.6%	16.9%	35.8%	32.8%	10.7%	-22.1%
ROE	7.6%	9.4%	30.1%	29.0%	14.6%	-14.4%
Net Debt/EBITDA	1.9x	1.2x	0.5x	0.4x	0.6x	0.1x

Peers in Misc.Commercial Services

Below you can find Centum Electronics benchmarking vs. other companies in Misc.Commercial Services 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	FY2012	FY2013	FY2014	FY2015	FY2016
Delta Corp ($DELTACORP)	-	16.6%	31.3%	-46.3%	26.0%
Ganesha Ecosphere ($GANECOS)	-	12.9%	14.7%	24.7%	3.9%
Sindhu Trade Links ($SINDHUTRAD)	-	-	-	-	-
Crest Ventures Limited ($CREST)	-	9.2%	-0.8%	55.0%	-68.6%
Median (4 companies)	-	12.9%	23.0%	26.5%	3.9%
Centum Electronics ($CENTUM)	-	9.8%	50.4%	14.8%	-17.1%

Top companies by EBITDA margin, %


Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
Delta Corp ($DELTACORP)	27.7%	23.7%	27.0%	22.9%	33.6%
Greencrest Financial Services ($GREENCREST)	-	-	-	14.0%	-
Ganesha Ecosphere ($GANECOS)	10.8%	11.1%	11.0%	10.1%	11.5%
Crest Ventures Limited ($CREST)	4.9%	13.4%	21.8%	4.2%	15.3%
Sawaca Business Machines ($SAWABUSI)	-	-	-	3.9%	-
Median (7 companies)	10.8%	13.4%	16.4%	4.2%	15.3%
Centum Electronics ($CENTUM)	12.8%	16.6%	20.6%	20.3%	12.0%

Top companies by CAPEX/Revenue, %


Top	FY2012	FY2013	FY2014	FY2015	FY2016
Delta Corp ($DELTACORP)	95.5%	74.3%	14.0%	5.2%	2.8%
Ganesha Ecosphere ($GANECOS)	6.9%	23.4%	15.4%	4.6%	1.6%
Greencrest Financial Services ($GREENCREST)	-	-	-	0.0%	-
Lifeline Drugs & Pharma ($LIFELINE)	-	-	-	0.0%	-
Median (4 companies)	6.9%	13.7%	9.2%	2.3%	2.2%
Centum Electronics ($CENTUM)	5.5%	2.4%	6.7%	3.9%	8.2%

Top companies by ROIC, %


Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
Ganesha Ecosphere ($GANECOS)	18.6%	15.8%	13.2%	12.3%	14.6%
Trinity Tradelink Limited ($TRITRADE)	-138.6%	-242.1%	5.1%	12.3%	-
Greencrest Financial Services ($GREENCREST)	-	1.8%	2.2%	3.1%	-
Delta Corp ($DELTACORP)	8.5%	6.7%	10.1%	2.9%	8.2%
Lifeline Drugs & Pharma ($LIFELINE)	3.3%	2.8%	1.2%	-3.3%	-
Median (11 companies)	4.9%	4.8%	5.1%	3.1%	11.4%
Centum Electronics ($CENTUM)	10.6%	16.9%	35.8%	32.8%	10.7%

Top companies by Net Debt / EBITDA


Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
Delta Corp ($DELTACORP)	3.2x	4.4x	2.1x	4.6x	1.4x
Ganesha Ecosphere ($GANECOS)	2.1x	3.6x	3.9x	3.0x	2.0x
Trinity Tradelink Limited ($TRITRADE)	-	-	-2.9x	1.0x	-
Sawaca Business Machines ($SAWABUSI)	-	-	-1.0x	0.0x	-
Crest Ventures Limited ($CREST)	-1.8x	0.2x	2.8x	0.0x	0.0x
Median (6 companies)	1.7x	2.1x	0.6x	0.5x	1.4x
Centum Electronics ($CENTUM)	1.9x	1.2x	0.5x	0.4x	0.6x

Centum Electronics stock price chart

Centum Electronics financials

mln.	FY2010	FY2011	FY2012

Revenue	5,756	2,539	2,574
EBITDA	136.1	301.0	329.8
Net income	4.389	49.723	71.899
CAPEX	60.726	127.1	141.1
Debt	414.8	612.9	639.8
Cash	17.136	4.597	5.452

About Centum Electronics

Centum Electronics Limited, together with its subsidiary, Centum Rakon India Private Limited, designs, develops, manufactures, sells, and exports electronic modules, subsystems, and microelectronic circuits for defense, aerospace, space, industrial, medical, and communications markets. It offers various products for defense, such as electronics for inertial systems, BLDC controllers, laser receivers, electronic delay units, missile interface units, DC-DC converters, high-wattage power supplies, onboard computers, microelectronic products, PIN diode drivers, and power OpAmps. The company also provides a range of products and services in the areas of satellite bus systems, satellite payload systems, and launch vehicle systems. In addition, it designs and develops power products, such as DC-DC and BLDC controllers, AC-DC converters, power supplies, power op-amps, and solid state relays. Further, the company offers frequency control products, including simple packages oscillators, voltage controlled crystal oscillators, temperature compensated crystal oscillators, and oven controlled crystal oscillators. Additionally, it provides design services, electric manufacturing solutions, and mechanical solutions. The company has operations in North America, Europe, India, and rest of Asia. Centum Electronics Limited was founded in 1993 and is headquartered in Bengaluru, India.