Heg EBITDA dropped on 37.5% and EBITDA Margin decreased slightly on 1.0 pp from 16.3% to 15.2%
27-05-2016 • About Heg (
$HEG) • By InTwits
Heg reported FY2016 financial results today. Overall the company's long term financial model is characterised by the following facts:
- Heg is a company in decline: FY2016 revenue growth was -33.2%, 5 years revenue CAGR was -5.9%
- Heg has medium CAPEX intensity: 5 year average CAPEX/Revenue was 9.8%. At the same time it's a lot of higher than industry average of 2.9%.
- CAPEX is quite volatile: ₹317m in FY2016, ₹314m in FY2015, ₹2,722m in FY2014, ₹1,505m in FY2013, ₹2,055m in FY2012
- The company has potentially unprofitable business model: ROIC is 2.5%
- It operates with high leverage: Net Debt/EBITDA is 5.0x while industry average is 0.5x
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 dropped on 33.2%. Revenue decline was accelerating on average at -15.2 pp per annum in FY2012-FY2016. Revenue decline was worsened by EBITDA margin decline. EBITDA Margin decreased slightly on 1.0 pp from 16.3% to 15.2% in FY2016. During the last 5 years EBITDA Margin topped in FY2013 at 18.1% and was declining since that time.
Net Income margin decreased on 4.7 pp from 3.0% to -1.7% in FY2016. During FY2012-FY2016 Net Income margin topped in FY2013 at 6.2% and was declining since that time.
Investments (CAPEX, working capital and M&A)
Heg's CAPEX/Revenue was 3.9% in FY2016. CAPEX/Revenue decreased on 5.4 pp from 9.3% in FY2013 to 3.9% in FY2016. It's average level of CAPEX/Revenue for the last three years was 8.4%.
Return on investment
The company operates at low but positive ROIC (2.5%) and negative ROE (-1.4%). ROIC decreased on 3.0 pp from 5.5% to 2.5% in FY2016. ROE decreased on 5.0 pp from 3.6% to -1.4% in FY2016. ROIC stuck to a declining trend at -1.8 pp per annum in FY2012-FY2016. During the last 5 years ROE topped in FY2013 at 11.2% and was declining since that time.
Leverage (Debt)
Company's Net Debt / EBITDA is 5.0x and Debt / EBITDA is 5.0x. Net Debt / EBITDA surged on 0.9x from 4.1x to 5.0x in FY2016. Debt dropped on 23.9% while cash surged on 55.4%. During the last 5 years Net Debt/EBITDA bottomed in FY2014 at 3.3x and was growing since that time.
Heg has short term refinancing risk: cash is only 0.6% of short term debt.
Management team
Ravi Jhunjhunwala is a the company's CEO. Ravi Jhunjhunwala has spent 38 years with the company. The company's CFO Raju Rustogi has spent 7 years with the company.
Financial and operational results
Heg ($HEG) key annual financial indicators| mln. INR | 2012 | 2013 | 2014 | 2015 | 2016 | 2016/2015 |
|---|
P&L
|
|---|
| Revenue | 14,240 | 16,174 | 14,589 | 12,272 | 8,201 | -33.2% |
| EBITDA | 2,427 | 2,931 | 2,466 | 1,996 | 1,248 | -37.5% |
| Net Income | 572 | 1,004 | 807 | 364 | -142 | -139.1% |
Balance Sheet
|
|---|
| Cash | 159 | 125 | 97 | 19 | 29 | 55.4% |
| Short Term Debt | 9,163 | 8,554 | 6,644 | 5,759 | 4,738 | -17.7% |
| Long Term Debt | 3,527 | 3,597 | 1,690 | 2,524 | 1,566 | -38.0% |
Cash flow
|
|---|
| Capex | 2,055 | 1,505 | 2,722 | 314 | 317 | 0.9% |
Ratios
|
|---|
| Revenue growth | 27.9% | 13.6% | -9.8% | -15.9% | -33.2% | |
| EBITDA growth | 5.4% | 20.8% | -15.9% | -19.1% | -37.5% | |
|
|---|
| EBITDA Margin | 17.0% | 18.1% | 16.9% | 16.3% | 15.2% | -1.0% |
| Net Income Margin | 4.0% | 6.2% | 5.5% | 3.0% | -1.7% | -4.7% |
| CAPEX, % of revenue | 14.4% | 9.3% | 18.7% | 2.6% | 3.9% | 1.3% |
|
|---|
| ROIC | 9.0% | 10.4% | 8.3% | 5.5% | 2.5% | -3.0% |
| ROE | 6.5% | 11.2% | 8.3% | 3.6% | -1.4% | -5.0% |
| Net Debt/EBITDA | 5.2x | 4.1x | 3.3x | 4.1x | 5.0x | 0.9x |
Peers in Other Industrial Goods
Below we provide Heg benchmarking against other companies in Other Industrial Goods 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 |
|---|
| Orient Refractories ($ORIENTREF) | - | 20.0% | 11.9% | 11.9% | 1.7% |
| Gee ($GEE) | 17.7% | 7.6% | -10.2% | 7.6% | - |
| Vesuvius India ($VESUVIUS) | 4.1% | 6.9% | 8.4% | 7.2% | - |
| Ifgl Refractories ($IFGLREFRAC) | - | 11.2% | 15.9% | 1.2% | -8.9% |
| Amd Industries ($AMDIND) | - | -15.5% | 21.0% | -9.9% | -0.3% |
| |
|---|
| Median (8 companies) | 10.9% | 9.4% | 6.1% | -4.4% | -0.3% |
|---|
| Heg ($HEG) | - | 13.6% | -9.8% | -15.9% | -33.2% |
Top companies by EBITDA margin, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Snl Bearings ($SNL) | - | - | - | 29.0% | - |
| Vesuvius India ($VESUVIUS) | 17.7% | 18.8% | 15.6% | 18.0% | - |
| Orient Refractories ($ORIENTREF) | 16.7% | 18.7% | 19.7% | 17.9% | 18.6% |
| Amd Industries ($AMDIND) | 15.3% | 12.3% | 16.4% | 15.3% | 15.1% |
| Ifgl Refractories ($IFGLREFRAC) | 13.2% | 8.5% | 15.1% | 11.3% | 11.3% |
| |
|---|
| Median (9 companies) | 14.3% | 10.4% | 15.1% | 11.3% | 13.2% |
|---|
| Heg ($HEG) | 17.0% | 18.1% | 16.9% | 16.3% | 15.2% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Vesuvius India ($VESUVIUS) | 4.2% | 4.0% | 3.4% | 2.7% | - |
| Orient Refractories ($ORIENTREF) | 2.1% | 1.8% | 1.7% | 2.5% | 2.0% |
| Ifgl Refractories ($IFGLREFRAC) | 0.8% | 2.9% | 1.3% | 2.5% | 2.4% |
| Insilco ($INSILCO) | - | - | - | 1.6% | - |
| Graphite India ($GRPHIDM) | 7.1% | 2.7% | 1.2% | 1.6% | 3.6% |
| |
|---|
| Median (5 companies) | 2.8% | 2.7% | 1.7% | 2.5% | 2.4% |
|---|
| Heg ($HEG) | 14.4% | 9.3% | 18.7% | 2.6% | 3.9% |
Top companies by ROIC, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Orient Refractories ($ORIENTREF) | - | 62.1% | 59.3% | 46.3% | 40.9% |
| Vesuvius India ($VESUVIUS) | 25.0% | 25.0% | 19.3% | 21.6% | - |
| Ifgl Refractories ($IFGLREFRAC) | 20.0% | 11.7% | 23.5% | 15.7% | 13.5% |
| Graphite India ($GRPHIDM) | 12.6% | 8.6% | 8.0% | 4.2% | 4.3% |
| De Nora India ($DENORA) | 61.7% | 19.1% | - | - | - |
| |
|---|
| Median (14 companies) | 16.4% | 12.5% | 21.9% | 18.6% | 13.5% |
|---|
| Heg ($HEG) | 9.0% | 10.4% | 8.3% | 5.5% | 2.5% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Graphite India ($GRPHIDM) | 2.0x | 2.7x | 1.7x | 2.4x | 2.0x |
| Ifgl Refractories ($IFGLREFRAC) | 1.2x | 2.1x | 0.7x | 0.9x | 0.2x |
| Gee ($GEE) | 3.2x | 2.8x | 0.0x | 0.0x | - |
| Iykot Hitech Toolroom ($IYKOTHITE) | 0.0x | - | - | 0.0x | - |
| Amd Industries ($AMDIND) | 2.7x | 0.0x | 0.0x | 0.0x | 0.0x |
| |
|---|
| Median (8 companies) | 0.8x | 0.6x | 0.0x | 0.0x | 0.0x |
|---|
| Heg ($HEG) | 5.2x | 4.1x | 3.3x | 4.1x | 5.0x |
