Blue Star reports 18.5% EBITDA growth in 2016 and almost no change in EBITDA Margin of 5.7%

30-05-2016 • About Blue Star ($BLUESTARCO) • By InTwits

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

EBITDA Margin is quite volatile: 5.7% in FY2016, 5.5% in FY2015, 5.4% in FY2014, 3.1% in FY2013, -0.8% in FY2012
Blue Star has low CAPEX intensity: 5 year average CAPEX/Revenue was 1.5%. At the same time it's in pair with industry average of 1.8%
CAPEX is quite volatile: ₹1,929m in FY2016, ₹1,737m in FY2015, ₹3,947m in FY2014, ₹2,592m in FY2013, ₹7,167m in FY2012
The company has highly profitable business model: ROIC is 14.3%
It operates with high leverage: Net Debt/EBITDA is 1.5x while industry average is 0.1x

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

Revenue and profitability

Blue Star's Revenue surged on 14.8%. Revenue decline was slowing down on average by 4.5 pp per annum in the last 5 years. EBITDA Margin showed almost no change in FY2016. EBITDA Margin followed a growing trend at 1.5 pp per annum in FY2012-FY2016.

Net Income margin increased slightly on 1.3 pp from 1.7% to 3.0% in FY2016.

Investments (CAPEX, working capital and M&A)

In FY2016 the company had CAPEX/Revenue of 1.5%. Blue Star's CAPEX/Revenue increased slightly on 0.55 pp from 0.95% in FY2013 to 1.5% in FY2016. It's average CAPEX/Revenue for the last three years was 1.6%.

Return on investment

The company operates at good ROIC (14.3%) and ROE (19.4%). ROIC increased slightly on 0.93 pp from 13.4% to 14.3% in FY2016. ROE increased on 7.6 pp from 11.8% to 19.4% in FY2016. ROIC grew at 4.7 pp per annum in the last 5 years.

Leverage (Debt)

Company's Net Debt / EBITDA is 1.5x and Debt / EBITDA is 1.7x. Net Debt / EBITDA dropped on 0.5x from 2.0x to 1.5x in FY2016. Debt decreased on 8.3% while cash increased on 9.6%.

Blue Star has short term refinancing risk: cash is only 13.2% of short term debt.

Management team

Blue Star's CFO Neeraj Basur has spent 6 years with the company.

Financial and operational results

Blue Star ($BLUESTARCO) key annual financial indicators

mln. INR	2012	2013	2014	2015	2016	2016/2015
P&L
Revenue	27,888	28,970	29,343	31,819	36,530	14.8%
SG&A					1,145
EBITDA	-220	905	1,579	1,760	2,086	18.5%
Net Income	-1,051	391	775	542	1,084	100.0%
Balance Sheet
Cash	489	143	661	419	459	9.6%
Short Term Debt	3,670	4,216	4,944	3,739	3,468	-7.2%
Long Term Debt	0	0	0	239	180	-24.4%
Cash flow
Capex	536	276	399	602	550	-8.6%
Ratios
Revenue growth	-5.5%	3.9%	1.3%	8.4%	14.8%
EBITDA growth	-108.6%	-512.4%	74.4%	11.5%	18.5%

EBITDA Margin	-0.8%	3.1%	5.4%	5.5%	5.7%	0.2%
SG&A, % of revenue					3.1%
Net Income Margin	-3.8%	1.3%	2.6%	1.7%	3.0%	1.3%
CAPEX, % of revenue	1.9%	1.0%	1.4%	1.9%	1.5%	-0.4%

ROIC	-6.1%	6.9%	12.6%	13.4%	14.3%	0.9%
ROE	-23.2%	9.8%	18.0%	11.8%	19.4%	7.6%
Net Debt/EBITDA		4.5x	2.7x	2.0x	1.5x	-0.5x

Peers in Consumer Electronics

Below we provide Blue Star benchmarking against other companies in Consumer Electronics 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
Whirlpool Of India ($WHIRLPOOL)	-	4.3%	2.2%	16.2%	5.9%
Hitachi Home And Life Solutions (India) ($HITACHIHOM)	-	16.5%	18.3%	43.0%	5.5%
Mirc Electronics ($MIRCELECTR)	-	-21.4%	-0.9%	-17.7%	-28.1%
Sharp India ($SHARP)	-	-7.4%	98.9%	22.2%	-84.1%
Median (4 companies)	-	-1.5%	10.2%	19.2%	-11.3%
Blue Star ($BLUESTARCO)	-	3.9%	1.3%	8.4%	14.8%

Top companies by EBITDA margin, %


Top	FY2012	FY2013	FY2014	FY2015	FY2016
Whirlpool Of India ($WHIRLPOOL)	8.9%	8.4%	7.9%	10.1%	10.9%
Hitachi Home And Life Solutions (India) ($HITACHIHOM)	4.3%	5.4%	5.6%	9.0%	7.5%
Mirc Electronics ($MIRCELECTR)	1.4%	-0.0%	0.5%	4.1%	-0.0%
Sharp India ($SHARP)	7.2%	4.8%	6.3%	5.7%	-20.6%
Median (4 companies)	5.8%	5.1%	5.9%	5.7%	3.7%
Blue Star ($BLUESTARCO)	-0.8%	3.1%	5.4%	5.5%	5.7%

Top companies by CAPEX/Revenue, %


Top	FY2012	FY2013	FY2014	FY2015	FY2016
Hitachi Home And Life Solutions (India) ($HITACHIHOM)	2.1%	12.0%	3.8%	4.2%	3.6%
Whirlpool Of India ($WHIRLPOOL)	4.5%	3.0%	3.0%	2.6%	2.1%
Mirc Electronics ($MIRCELECTR)	0.7%	1.3%	0.6%	0.0%	0.1%
Median (3 companies)	3.3%	3.0%	3.0%	2.6%	2.1%
Blue Star ($BLUESTARCO)	1.9%	1.0%	1.4%	1.9%	1.5%

Top companies by ROIC, %


Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
Whirlpool Of India ($WHIRLPOOL)	34.9%	27.0%	21.1%	29.3%	28.2%
Hitachi Home And Life Solutions (India) ($HITACHIHOM)	6.5%	9.6%	8.4%	25.6%	16.6%
Mirc Electronics ($MIRCELECTR)	-0.0%	-4.0%	-2.2%	7.3%	-3.5%
Calcom Vision ($CALCOM)	-	-14.3%	-	-	-
Vxl Instruments ($VXLINSTR)	13.7%	4.5%	-	-	-
Median (6 companies)	7.9%	0.2%	8.4%	25.6%	16.6%
Blue Star ($BLUESTARCO)	-6.1%	6.9%	12.6%	13.4%	14.3%

Top companies by Net Debt / EBITDA


Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
Mirc Electronics ($MIRCELECTR)	5.8x	-	45.1x	4.9x	-
Hitachi Home And Life Solutions (India) ($HITACHIHOM)	2.0x	1.4x	2.0x	1.0x	1.0x
Sharp India ($SHARP)	1.2x	0.4x	0.0x	0.6x	-
Vxl Instruments ($VXLINSTR)	1.2x	3.9x	-	0.0x	-
Whirlpool Of India ($WHIRLPOOL)	-0.2x	-0.7x	-1.3x	-1.6x	-2.2x
Median (5 companies)	1.6x	1.4x	1.0x	0.6x	-0.6x
Blue Star ($BLUESTARCO)	-	4.5x	2.7x	2.0x	1.5x

Blue Star stock price chart

Blue Star financials

mln.	FY2010	FY2011	FY2012

Revenue	38,195	29,510	27,888
EBITDA	0.000	2,561	-219.555
Net income	0.000	1,610	-1,051.030
CAPEX	0.000	541.5	535.8
Debt	0.000	4,445	3,670
Cash	0.000	464.3	488.9

About Blue Star

Blue Star Limited operates as an air conditioning and commercial refrigeration company in India. The company operates through Electro Mechanical Projects and Packaged Air-Conditioning Systems, Cooling Products, and Professional Electronics and Industrial Systems segments. The Electro Mechanical Projects and Packaged Air-Conditioning Systems segment designs, manufactures, installs, commissions, and maintains central air conditioning plants, packaged/ducted systems, and variable refrigerant flow systems; and provides contracting services in electrification, plumbing, and fire-fighting, as well as after-sales services in the areas of upgrades and enhancements, air management, water management, and energy management. It also offers electrical design and engineering services; and consultancy services for green building, as well as liasioning, approvals, commissioning, and asset management services. In addition, this segment supplies and installs entire power systems. The Cooling Products segment provides room air conditioners for residential and commercial applications; and manufactures and markets a range of commercial refrigeration products comprising water coolers, bottled water dispensers, deep freezers, cold storages, bottle coolers, ice cube machines, and supermarket refrigeration products for industrial, commercial, and hospitality sectors, as well as cold chain equipment. The Professional Electronics and Industrial Systems segment distributes professional electronic equipment and services, such as testing machines, medical, analytical, test and measuring, data communications, and industrial products and systems. This segment is also involved in the business of specialized industrial projects. The company also offers IT services. It serves institutional, industrial, and government organizations; and showrooms, restaurants, banks, hospitals, theatres, shopping malls, and boutiques. Blue Star Limited was founded in 1943 and is headquartered in Mumbai, India.