Nahar Spinning Mills Debt dropped on 15.0% while EBITDA increased on 3.0%

30-05-2016 • About Nahar Spinning Mills ($NAHARSPING) • By InTwits

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

EBITDA Margin is quite volatile: 11.1% in FY2016, 10.2% in FY2015, 16.3% in FY2014, 16.5% in FY2013, 1.0% in FY2012
Nahar Spinning Mills has medium CAPEX intensity: 5 year average CAPEX/Revenue was 6.3%. At the same time it's in pair with industry average of 5.5%
CAPEX is quite volatile: ₹572m in FY2016, ₹1,279m in FY2015, ₹2,099m in FY2014, ₹547m in FY2013, ₹1,742m in FY2012
The company has potentially unprofitable business model: ROIC is 6.8%
It operates with medium-size leverage: Net Debt/EBITDA is 4.0x while industry average is 4.6x

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

Revenue and profitability

Nahar Spinning Mills's Revenue decreased on 5.2%. Revenue decline was accelerating on average at -7.3 pp per annum in the last 5 years. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin increased slightly on 0.88 pp from 10.2% to 11.1% in FY2016.

Net Income margin increased slightly on 1.6 pp from 0.95% to 2.5% in FY2016.

Investments (CAPEX, working capital and M&A)

Nahar Spinning Mills's CAPEX/Revenue was 2.8% in FY2016. CAPEX/Revenue showed almost no change from FY2013 to FY2016. Average CAPEX/Revenue for the last three years was 6.1%.

Return on investment

The company operates at low ROIC (6.8%) and ROE (6.6%). ROIC increased on 2.2 pp from 4.6% to 6.8% in FY2016. ROE increased on 3.9 pp from 2.7% to 6.6% in FY2016.

Leverage (Debt)

Company's Net Debt / EBITDA is 4.0x and Debt / EBITDA is 4.0x. Net Debt / EBITDA dropped on 0.9x from 4.9x to 4.0x in FY2016. Debt dropped on 15.0% while cash surged on 76.9%.

Nahar Spinning Mills has short term refinancing risk: cash is only 1.9% of short term debt.

Valuation and dividends

The company's trades at EV/EBITDA 5.9x and P/E 8.3x while industy averages are 17.8x and 21.9x. The company's EV/(EBITDA-CAPEX) is 7.9x with the industry average at 22.8x.

Financial and operational results

Nahar Spinning Mills ($NAHARSPING) key annual financial indicators

mln. INR	2012	2013	2014	2015	2016	2016/2015
P&L
Revenue	16,962	19,613	22,042	21,496	20,382	-5.2%
EBITDA	169	3,229	3,583	2,198	2,264	3.0%
Net Income	-1,174	784	1,458	204	514	152.2%
Balance Sheet
Cash	88	102	53	69	121	76.9%
Short Term Debt	8,046	8,883	7,930	7,312	6,431	-12.0%
Long Term Debt	4,038	3,386	3,661	3,463	2,731	-21.1%
Cash flow
Capex	1,742	547	2,099	1,279	572	-55.3%
Ratios
Revenue growth	22.1%	15.6%	12.4%	-2.5%	-5.2%
EBITDA growth	-94.1%	1,806.0%	11.0%	-38.6%	3.0%

EBITDA Margin	1.0%	16.5%	16.3%	10.2%	11.1%	0.9%
Net Income Margin	-6.9%	4.0%	6.6%	0.9%	2.5%	1.6%
CAPEX, % of revenue	10.3%	2.8%	9.5%	5.9%	2.8%	-3.1%

ROIC	-3.5%	12.8%	13.7%	4.6%	6.8%	2.2%
ROE	-19.3%	13.4%	21.0%	2.7%	6.6%	3.9%
Net Debt/EBITDA	70.8x	3.8x	3.2x	4.9x	4.0x	-0.9x

Peers in Textiles

Below we provide Nahar Spinning Mills benchmarking against other companies in Textiles 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
Raj Rayon Industries ($RAJRAYON)	-	3.8%	-33.7%	-61.0%	146.1%
Olympia Industries ($OLYMPTX)	-	-96.6%	74,809.1%	1,749.9%	50.5%
Prag Bosimi Synthetics ($PRAGBOS)	-	-	-	-	34.5%
Nitin Spinners ($NITINSPIN)	-	4.1%	9.5%	26.2%	24.4%
Blue Chip Tex Industries ($BLUECHIPT)	-	12.9%	29.9%	56.1%	23.7%
Median (65 companies)	3.0%	9.3%	14.6%	-0.1%	-4.3%
Nahar Spinning Mills ($NAHARSPING)	-	15.6%	12.4%	-2.5%	-5.2%

Top companies by EBITDA margin, %


Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
Sil Investments ($SILINV)	-	-	-	93.8%	-
Swadeshi Polytex ($SWADPOL)	-	-	-	64.4%	-
Binny ($BINNY)	-	-	-	60.9%	-
Ruby Mills ($RUBYMILLS)	28.3%	25.1%	28.6%	29.3%	-
Premier Synthetics ($PREMSYN)	-	-	-	25.9%	-
Median (86 companies)	6.5%	9.5%	9.5%	6.9%	8.5%
Nahar Spinning Mills ($NAHARSPING)	1.0%	16.5%	16.3%	10.2%	11.1%

Top companies by CAPEX/Revenue, %


Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
Nitin Spinners ($NITINSPIN)	1.9%	2.6%	8.0%	42.3%	4.7%
Maharaja Shree Umaid Mills ($MAHASHR)	18.6%	24.1%	6.8%	16.8%	-
Jindal Worldwide ($JINDWORLD)	3.0%	10.5%	20.7%	11.6%	2.2%
SRF ($SRF)	0.0%	18.7%	20.0%	11.4%	13.0%
Welspun India ($WELSPUNIND)	5.6%	7.8%	16.4%	10.9%	17.7%
Median (20 companies)	3.2%	5.9%	6.7%	6.7%	4.7%
Nahar Spinning Mills ($NAHARSPING)	10.3%	2.8%	9.5%	5.9%	2.8%

Top companies by ROIC, %


Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
Welspun India ($WELSPUNIND)	9.3%	15.6%	8.5%	21.9%	25.2%
Jindal Worldwide ($JINDWORLD)	14.5%	15.2%	13.7%	11.0%	18.0%
Nitin Spinners ($NITINSPIN)	6.0%	19.5%	21.5%	17.5%	17.8%
Sangam (India) ($SANGAMIND)	9.8%	14.7%	12.2%	12.8%	15.0%
Sutlej Textiles & Industries ($SUTLEJTEX)	9.5%	13.6%	19.8%	14.6%	14.4%
Median (106 companies)	3.6%	8.9%	8.6%	9.6%	12.3%
Nahar Spinning Mills ($NAHARSPING)	-3.5%	12.8%	13.7%	4.6%	6.8%

Top companies by Net Debt / EBITDA


Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
Jaybharat Textiles & Real Estate ($JAYTEX)	10.9x	53.6x	23.8x	-	247.8x
Bombay Rayon Fashions ($BRFL)	4.9x	4.9x	11.6x	10.0x	7.3x
Filatex India ($FILATEX)	8.0x	6.5x	0.0x	0.0x	4.9x
Raymond ($RAYMOND)	3.7x	4.6x	3.7x	4.1x	4.5x
Mandhana Industries ($MANDHANA)	3.7x	4.3x	3.9x	3.8x	3.9x
Median (59 companies)	3.8x	3.2x	0.0x	0.0x	0.0x
Nahar Spinning Mills ($NAHARSPING)	70.8x	3.8x	3.2x	4.9x	4.0x

Nahar Spinning Mills stock price chart

Nahar Spinning Mills financials

mln.	FY2010	FY2011	FY2012

Revenue	26,564	13,888	16,962
EBITDA	1,875	2,891	169.4
Net income	534.9	1,215	-1,173.610
CAPEX	902.3	2,182	1,742
Debt	8,559	13,355	12,084
Cash	61.679	80.820	88.199

About Nahar Spinning Mills

Nahar Spinning Mills Limited manufactures and sells yarn and garments in India. It offers woollen products, such as pullovers, cardigans, shirts, coats, baby suites, mufflers, shawls, blankets, knitting wool, etc.; and cotton/blended knitted products, including hosiery pullovers, T shirts, baby suites, ladies tops, winter thermals, tracksuits, jackets, hoodies, etc. The company also provides various yarns comprising woollen, woollen blended, cotton, polyester cotton, other blended, compact, mercerized gassed, organic cotton, etc.; and woven fabric for shirts, trousers, denims, etc. In addition, it is involved in various activities, such as sugar manufacturing, BOPP film, investment, lending, financial advisory, solar power generation, wind mill, and non-conventional co-generation power plant, etc. Further, the company exports its products. Nahar Spinning Mills Limited was founded in 1949 and is based in Ludhiana, India.