Meghmani Organics Net Income jumped on 88.1% and EBITDA Margin increased on 5.9 pp from 15.9% to 21.8%

28-05-2016 • About Meghmani Organics ($MEGH) • By InTwits

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

Meghmani Organics has medium CAPEX intensity: 5 year average CAPEX/Revenue was 8.0%. At the same time it's in pair with industry average of 7.5%
CAPEX is quite volatile: ₹489m in FY2016, ₹0m in FY2015, ₹402m in FY2014, ₹865m in FY2013, ₹26m in FY2012
The company has highly profitable business model: ROIC is 15.9%
It operates with high leverage: Net Debt/EBITDA is 1.9x while industry average is 1.0x

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

Revenue and profitability

Meghmani Organics's Revenue increased on 4.8%. Revenue decline was accompanies by EBITDA margin decline. EBITDA Margin decreased slightly on 1.1 pp from 12.8% to 11.7% in FY2016.

Net Income margin increased on 2.7 pp from 3.4% to 6.1% in FY2016. Net Income margin stuck to a growing trend at 1.3 pp per annum in the last 5 years.

Investments (CAPEX, working capital and M&A)

Meghmani Organics's CAPEX/Revenue was 7.0% in FY2016. Meghmani Organics showed decline in CAPEX/Revenue of 3.3 pp from 10.3% in FY2013 to 7.0% in FY2016. Average CAPEX/Revenue for the last three years was 6.5%.

Return on investment

The company operates at good ROIC (15.9%) and ROE (13.8%). ROIC increased on 6.4 pp from 9.5% to 15.9% in FY2016. ROE increased on 5.6 pp from 8.2% to 13.8% in FY2016. ROE stuck to a growing trend at 3.1 pp per annum in the last 5 years.

Leverage (Debt)

Debt level is 1.9x Net Debt / EBITDA and 2.0x Debt / EBITDA. Net Debt / EBITDA dropped on 1.1x from 3.1x to 1.9x in FY2016. Debt decreased on 9.8% while cash dropped on 29.6%.

Meghmani Organics has short term refinancing risk: cash is only 3.0% of short term debt.

Financial and operational results

Meghmani Organics ($MEGH) key annual financial indicators

mln. INR	2012	2013	2014	2015	2016	2016/2015
P&L
Revenue	10,622	10,585	11,783	12,942	13,559	4.8%
EBITDA	1,692	1,931	1,684	2,054	2,954	43.8%
Net Income	35	172	228	439	826	88.1%
Balance Sheet
Cash	440	99	371	156	110	-29.6%
Short Term Debt	2,634	2,955	3,771	3,307	3,623	9.6%
Long Term Debt	4,993	4,217	3,773	3,129	2,181	-30.3%
Cash flow
Capex	1,088	1,086	927	600	946	57.8%
Ratios
Revenue growth	1.6%	-0.4%	11.3%	9.8%	4.8%
EBITDA growth	15.6%	14.1%	-12.8%	22.0%	43.8%

EBITDA Margin	15.9%	18.2%	14.3%	15.9%	21.8%	5.9%
Net Income Margin	0.3%	1.6%	1.9%	3.4%	6.1%	2.7%
CAPEX, % of revenue	10.2%	10.3%	7.9%	4.6%	7.0%	2.3%

ROIC	7.3%	8.9%	6.5%	9.5%	15.9%	6.4%
ROE	0.7%	3.5%	4.5%	8.2%	13.8%	5.6%
Net Debt/EBITDA	4.2x	3.7x	4.3x	3.1x	1.9x	-1.1x

Peers in Specialty Chemicals

Below we provide Meghmani Organics benchmarking against other companies in Specialty 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
Vikas Globalone ($VIKASGLOB)	-	53.0%	-0.9%	-10.0%	36.6%
Cochin Minerals & Rutile ($COCHINM)	-	-15.9%	-33.8%	-11.0%	35.6%
Ultramarine & Pigments ($ULTRAMAR)	-	3.0%	7.2%	14.2%	27.7%
Anil ($ANILLTD)	-	9.5%	16.8%	17.5%	26.6%
Sudarshan Chemical Industries ($SUDARSCHEM)	-	9.1%	28.2%	8.3%	15.3%
Median (23 companies)	17.4%	14.1%	13.7%	11.7%	-0.5%
Meghmani Organics ($MEGH)	-	-0.4%	11.3%	9.8%	4.8%

Top companies by EBITDA margin, %


Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
Vinati Organics ($VINATIORGA)	21.7%	21.8%	22.7%	24.9%	32.8%
Indian Toners & Developers ($INDTONER)	-	-	-	22.6%	-
Solar Industries India ($SOLARINDS)	18.5%	17.5%	17.9%	19.3%	19.3%
Anil ($ANILLTD)	18.1%	16.9%	17.1%	17.4%	16.2%
Ultramarine & Pigments ($ULTRAMAR)	18.0%	15.5%	17.4%	17.2%	17.2%
Median (34 companies)	9.4%	10.5%	10.6%	10.5%	12.0%
Meghmani Organics ($MEGH)	15.9%	18.2%	14.3%	15.9%	21.8%

Top companies by CAPEX/Revenue, %


Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
Plastiblends India ($PLASTIBLEN)	2.1%	1.9%	0.9%	4.0%	15.6%
Camlin Fine Sciences ($CAMLINFIN)	4.3%	5.7%	7.1%	5.1%	13.7%
Vinati Organics ($VINATIORGA)	13.6%	28.2%	4.2%	7.4%	12.1%
Dai-Ichi Karkaria ($DAICHI)	3.2%	-	-	1.6%	10.3%
Solar Industries India ($SOLARINDS)	13.0%	9.9%	12.3%	10.3%	9.6%
Median (16 companies)	4.9%	4.5%	4.3%	5.2%	8.1%
Meghmani Organics ($MEGH)	10.2%	10.3%	7.9%	4.6%	7.0%

Top companies by ROIC, %


Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
Vinati Organics ($VINATIORGA)	29.6%	26.2%	30.6%	34.8%	32.2%
Camlin Fine Sciences ($CAMLINFIN)	11.1%	17.8%	24.2%	29.5%	23.3%
Pidilite Industries ($PIDILITIND)	27.4%	29.3%	29.8%	29.0%	38.3%
Adi Finechem ($ADIFINCHM)	30.6%	29.8%	46.4%	26.3%	20.6%
Ultramarine & Pigments ($ULTRAMAR)	20.0%	16.3%	20.8%	25.7%	30.2%
Median (37 companies)	15.3%	14.9%	11.4%	17.8%	21.2%
Meghmani Organics ($MEGH)	7.3%	8.9%	6.5%	9.5%	15.9%

Top companies by Net Debt / EBITDA


Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
Anil ($ANILLTD)	2.2x	3.4x	3.8x	4.0x	4.2x
Jayant Agro-Organics ($JAYAGROGN)	2.8x	3.1x	4.6x	6.5x	3.4x
Sudarshan Chemical Industries ($SUDARSCHEM)	2.4x	5.1x	3.2x	3.2x	2.4x
Vikas Globalone ($VIKASGLOB)	2.5x	4.4x	4.9x	0.0x	1.8x
Camlin Fine Sciences ($CAMLINFIN)	4.0x	2.3x	2.1x	1.5x	1.7x
Median (26 companies)	1.5x	1.7x	1.7x	0.0x	0.0x
Meghmani Organics ($MEGH)	4.2x	3.7x	4.3x	3.1x	1.9x

Meghmani Organics stock price chart

Meghmani Organics financials

mln.	FY2010	FY2011	FY2012

Revenue	15,053	10,451	10,622
EBITDA	1,243	1,464	1,692
Net income	516.8	380.1	34.839
CAPEX	1,418	1,034	1,088
Debt	6,394	7,146	7,627
Cash	220.0	164.4	440.2

About Meghmani Organics

Meghmani Organics Limited engages in manufacturing, selling, and distributing pigments, pesticides, and basic chemicals products. The company operates in three divisions: Pigments, Agrochemicals, and Basic Chemicals. The Pigments division offers phthalocynine green 7, copper phthalocynine blue, alpha blue, and beta blue pigments that are used in various applications, including printing inks, paints, textiles, leather, papers, and rubbers. The Agrochemicals division engages in the manufacture and distribution of technical, intermediates, and formulations of insecticides, which are used in crop protection, public health, termite and insect control, food grain storage, and veterinary applications. The Basic Chemicals division manufactures caustic chlorine for use by the agriculture sector, industry, and directly by the consumers. It also engages in trading activity. Meghmani Organics Limited offers its products to customers through direct sales teams and distributors/agents in the Asia-Pacific, North America, Europe, Central and Latin America, South Africa, and Brazil. The company was formerly known as Gujarat Industries. Meghmani Organics Limited was founded in 1986 and is based in Ahmedabad, India.