Mercator Debt dropped on 31.4% and Revenue dropped on 12.5%

27-05-2016 • About Mercator ($MERCATOR) • By InTwits

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

Mercator has medium CAPEX intensity: 5 year average CAPEX/Revenue was 9.4%. At the same time it's a lot of higher than industry average of 5.0%.
CAPEX is quite volatile: ₹0m in FY2016, ₹8,172m in FY2015, ₹3,937m in FY2014, ₹745m in FY2013, ₹2,745m in FY2012
The company has unprofitable business model: ROIC is -1.0%
It operates with high leverage: Net Debt/EBITDA is 6.9x while industry average is 2.1x

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 12.5%. Revenue decline was accelerating on average at -9.8 pp per annum in the last 5 years. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin increased on 6.0 pp from 15.0% to 20.9% in FY2016.

Net Income margin dropped on 18.3 pp from -14.5% to -32.9% in FY2016.

Return on investment

The company operates at negative ROIC (-1.0%) and ROE (-62.9%). ROIC decreased slightly on 1.9 pp from 0.88% to -1.0% in FY2016. ROE dropped on 42.1 pp from -20.8% to -62.9% in FY2016.

Leverage (Debt)

Company's Net Debt / EBITDA is 6.9x and Debt / EBITDA is 7.1x. Net Debt / EBITDA showed almost no change in FY2016. Debt dropped on 31.4% while cash dropped on 62.3%.

Mercator has short term refinancing risk: cash is only 9.0% of short term debt.

Management team

Shalabh Mittal is a Mercator's CEO. Shalabh Mittal has spent 4 years with the company.

Financial and operational results

Mercator ($MERCATOR) key annual financial indicators

mln. INR	2012	2013	2014	2015	2016	2016/2015
P&L
Revenue	36,999	37,334	34,578	30,916	27,064	-12.5%
SG&A					1
EBITDA	5,834	5,061	6,431	5,277	3,735	-29.2%
Net Income	206	-3,721	322	-4,495	-8,901
Balance Sheet
Cash	2,211	3,149	1,585	2,531	954	-62.3%
Short Term Debt	3,442	4,550	6,053	13,794	10,561	-23.4%
Long Term Debt	27,426	25,848	25,639	25,067	16,091	-35.8%
Cash flow
Capex	2,745	745	3,937	8,172	0	-100.0%
Ratios
Revenue growth	30.8%	0.9%	-7.4%	-10.6%	-12.5%
EBITDA growth	-9.5%	-13.2%	27.1%	-18.0%	-29.2%

EBITDA Margin	15.8%	13.6%	18.6%	17.1%	13.8%	-3.3%
SG&A, % of revenue					0.0%
Net Income Margin	0.6%	-10.0%	0.9%	-14.5%	-32.9%	-18.3%
CAPEX, % of revenue	7.4%	2.0%	11.4%	26.4%	0.0%

ROIC	3.4%	1.0%	3.5%	0.9%	-1.0%	-1.9%
ROE	0.9%	-15.8%	1.4%	-20.8%	-62.9%	-42.1%
Net Debt/EBITDA	4.9x	5.4x	4.7x	6.9x	6.9x	-0.0x

Peers in Diversified

Below we provide Mercator benchmarking against other companies in Diversified 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	FY2012	FY2013	FY2014	FY2015	FY2016
3M India ($3MINDIA)	-	12.0%	8.5%	7.7%	14.3%
Dcm Shriram ($DCMSHRIRAM)	-	10.2%	11.6%	-9.0%	3.4%
Aditya Birla Nuvo ($ABIRLANUVO)	-	16.7%	1.6%	2.4%	-12.8%
Empire Industries ($EMPIND)	-	15.3%	12.1%	12.9%	-25.2%
Median (4 companies)	-	13.7%	10.1%	5.1%	-4.7%
Mercator ($MERCATOR)	-	0.9%	-7.4%	-10.6%	-12.5%

Top companies by EBITDA margin, %


Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
Swasti Vinayaka Art And Heritage Corporation ($SVARTCORP)	-	-	-	38.3%	-
Aditya Birla Nuvo ($ABIRLANUVO)	13.5%	14.9%	17.7%	20.4%	26.5%
Empire Industries ($EMPIND)	25.2%	19.8%	19.1%	19.6%	23.0%
3M India ($3MINDIA)	8.7%	7.3%	7.2%	11.1%	16.3%
Raja Bahadur International ($RAJABAH)	-	-	-	9.0%	-
Median (6 companies)	11.1%	12.4%	13.1%	15.3%	19.7%
Mercator ($MERCATOR)	15.8%	13.6%	18.6%	17.1%	13.8%

Top companies by CAPEX/Revenue, %


Top	FY2012	FY2013	FY2014	FY2015	FY2016
Aditya Birla Nuvo ($ABIRLANUVO)	7.6%	6.5%	17.1%	7.2%	14.3%
Dcm Shriram ($DCMSHRIRAM)	1.3%	1.4%	1.5%	1.9%	8.0%
Empire Industries ($EMPIND)	19.4%	9.5%	15.2%	5.6%	2.5%
3M India ($3MINDIA)	0.0%	0.0%	0.0%	0.0%	0.0%
Median (4 companies)	4.5%	4.0%	8.4%	3.7%	5.3%
Mercator ($MERCATOR)	7.4%	2.0%	11.4%	26.4%	0.0%

Top companies by ROIC, %


Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
Empire Industries ($EMPIND)	-	27.3%	26.6%	24.8%	19.4%
3M India ($3MINDIA)	15.5%	10.4%	8.9%	18.1%	30.9%
Dcm Shriram ($DCMSHRIRAM)	5.9%	12.3%	12.1%	10.3%	12.9%
Aditya Birla Nuvo ($ABIRLANUVO)	10.3%	10.8%	10.3%	10.3%	9.3%
Advanced Micronic Devices ($ADVNCMIC)	9.1%	-2.8%	-	-	-
Median (8 companies)	10.3%	10.8%	11.2%	14.2%	16.2%
Mercator ($MERCATOR)	3.4%	1.0%	3.5%	0.9%	-1.0%

Top companies by Net Debt / EBITDA


Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
Aditya Birla Nuvo ($ABIRLANUVO)	3.3x	4.0x	3.9x	4.6x	5.9x
Dcm Shriram ($DCMSHRIRAM)	4.7x	2.6x	1.7x	1.6x	2.1x
Empire Industries ($EMPIND)	0.9x	1.0x	1.5x	1.2x	1.0x
Raja Bahadur International ($RAJABAH)	-	-	-	0.0x	-
Swasti Vinayaka Art And Heritage Corporation ($SVARTCORP)	2.8x	0.0x	0.0x	0.0x	-
Median (6 companies)	2.8x	1.8x	1.5x	0.6x	1.6x
Mercator ($MERCATOR)	4.9x	5.4x	4.7x	6.9x	6.9x

Mercator stock price chart

Mercator financials

mln.	FY2010	FY2011	FY2012

Revenue	36,537	28,289	36,999
EBITDA	6,566	6,444	5,834
Net income	532.4	940.0	205.6
CAPEX	1,930	13,710	2,745
Debt	39,675	32,734	30,869
Cash	4,729	891.8	2,211

About Mercator

Mercator Limited, together with its subsidiaries, is engaged in coal, shipping, dredging, and oil and gas businesses in India, Singapore, and Indonesia. It operates through Shipping; Offshore; and Coal Mining, Trading and Logistics segments. The company is involved in coal mining, procurement, and logistics activities. It holds licenses for three coal blocks in Petangis and Batuah, Indonesia; and a mining license in Mozambique, as well as exports coal. The company also explores for petroleum in two blocks covering an area of 180.22 square kilometers located in the Cambay Basin, Gujarat in India; and owns a mobile offshore production and a floating storage offloading unit. In addition, it has a fleet of tankers consisting of very large crude carriers, and aframax and product tankers to transport wet bulk cargo; and dry bulk carrier fleet of geared and gearless panamaxes, and kamsarmaxes. The company has 6 own tankers and a gas carrier of 626,791 DWT; and 14 own bulk carriers with an aggregate capacity of 1,061,488 DWT, as well as 1 chartered-in bulk carrier of 91,800 DWT with an aggregate capacity of 1,532,288 DWT. Further, it owns five trailer suction hopper dredgers having an aggregate capacity of 26,100 cubic meters and one cutter suction dredger for carrying out capital and maintenance dredging projects. Mercator Limited was incorporated in 1983 and is based in Mumbai, India.