Essar Oil reports 37.0% revenue decline in FY2016 and 5.5 pp EBITDA Margin growth from 5.7% to 11.2%
21-12-2016 • About Essar Oil (
$ESSAROIL) • By InTwits
Essar Oil reported FY2016 financial results today. Overall the company's long term financial model is characterised by the following facts:
- EBITDA Margin is expanding: 11.2% in FY2016 vs. 5.7% in FY2015 vs. 4.0% in FY2012
- EBITDA Margin is quite volatile: 11.2% in FY2016, 5.7% in FY2015, 5.1% in FY2014, 4.2% in FY2013, 4.0% in FY2012
- Essar Oil has low CAPEX intensity: 5 year average CAPEX/Revenue was 2.2%. At the same time it's a lot of higher than industry average of 7.1%.
- CAPEX is quite volatile: ₹8,063m in FY2016, ₹7,697m in FY2015, ₹13,680m in FY2014, ₹22,167m in FY2013, ₹27,920m in FY2012
- The company has highly profitable business model: ROIC is 12.1%
- It operates with high leverage: Net Debt/EBITDA is 5.1x while industry average is 3.9x
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 37.0%. Revenue decline was accelerating on average at -19.0 pp per annum in the last 5 years. Revenue decline happened at the same time with EBITDA margin expansion. EBITDA Margin increased on 5.5 pp from 5.7% to 11.2% in FY2016. EBITDA Margin pursued a growing trend in the last 5 years.
Net Income margin increased on 2.3 pp from 1.8% to 4.1% in FY2016. Net Income margin stuck to a growing trend at 1.6 pp per annum in FY2012-FY2016.
Investments (CAPEX, working capital and M&A)
In FY2016 Essar Oil had CAPEX/Revenue of 1.5%. CAPEX/Revenue decreased slightly on 0.96 pp from 2.5% in FY2013 to 1.5% in FY2016. It's average level of CAPEX/Revenue for the last three years was 1.3%. During the last 5 years CAPEX as a % of Revenue bottomed in FY2015 at 0.93%.
Return on investment
The company operates at high and attractive ROE (34.3%) while ROIC is a bit lower (12.1%). ROIC decreased on 2.1 pp from 14.2% to 12.1% in FY2016. ROE decreased on 4.5 pp from 38.7% to 34.3% in FY2016. During FY2012-FY2016 ROIC topped in FY2014 at 14.6% and was declining since that time. ROE stuck to a growing trend at 22.0 pp per annum in the last 5 years.
Leverage (Debt)
Debt level is 5.1x Net Debt / EBITDA and 5.1x Debt / EBITDA. Net Debt / EBITDA dropped on 0.6x from 5.7x to 5.1x in FY2016. Debt increased on 9.7% while cash dropped on 62.6%.
Essar Oil has short term refinancing risk: cash is only 1.0% of short term debt.
Management team
The company's CEO is Lalit Kumar Gupta. Lalit Kumar Gupta has 8 years tenure with the company.
Financial and operational results
Essar Oil ($ESSAROIL) key annual financial indicators| mln. INR | 2012 | 2013 | 2014 | 2015 | 2016 | 2016/2015 |
|---|
P&L
|
|---|
| Revenue | 583,366 | 885,781 | 986,019 | 829,825 | 522,943 | -37.0% |
| EBITDA | 23,275 | 36,937 | 50,580 | 47,373 | 58,444 | 23.4% |
| Net Income | -12,855 | -11,804 | 1,270 | 15,266 | 21,563 | 41.3% |
Balance Sheet
|
|---|
| Cash | 5,056 | 3,410 | 12,786 | 3,287 | 1,228 | -62.6% |
| Short Term Debt | 55,081 | 101,957 | 67,570 | 118,858 | 128,439 | 8.1% |
| Long Term Debt | 122,028 | 145,387 | 142,846 | 152,408 | 169,237 | 11.0% |
Cash flow
|
|---|
| Capex | 27,920 | 22,167 | 13,680 | 7,697 | 8,063 | 4.7% |
Ratios
|
|---|
| Revenue growth | 24.0% | 51.8% | 11.3% | -15.8% | -37.0% | |
| EBITDA growth | -7.4% | 58.7% | 36.9% | -6.3% | 23.4% | |
|
|---|
| EBITDA Margin | 4.0% | 4.2% | 5.1% | 5.7% | 11.2% | 5.5% |
| Net Income Margin | -2.2% | -1.3% | 0.1% | 1.8% | 4.1% | 2.3% |
| CAPEX, % of revenue | 4.8% | 2.5% | 1.4% | 0.9% | 1.5% | 0.6% |
|
|---|
| ROIC | 7.8% | 9.9% | 14.6% | 14.2% | 12.1% | -2.1% |
| ROE | -36.5% | -39.6% | 5.2% | 38.7% | 34.3% | -4.5% |
| Net Debt/EBITDA | 7.4x | 6.6x | 3.9x | 5.7x | 5.1x | -0.6x |
Peers in Integrated Oil & Gas
Below you can find Essar Oil benchmarking vs. other companies in Integrated Oil & Gas industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.
Top companies by Revenue growth, %
| Top | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Deep Industries ($DEEPIND) | - | 8.0% | 39.1% | 11.5% | 67.0% |
| Reliance Industries ($RELIANCE) | - | 10.8% | 9.4% | -13.6% | -27.0% |
| |
|---|
| Median (2 companies) | - | 9.4% | 24.2% | -1.0% | 20.0% |
|---|
| Essar Oil ($ESSAROIL) | - | 51.8% | 11.3% | -15.8% | -37.0% |
Top companies by EBITDA margin, %
| Top | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Deep Industries ($DEEPIND) | 47.6% | 55.5% | 57.8% | 54.5% | 57.7% |
| Reliance Industries ($RELIANCE) | 9.7% | 8.3% | 8.1% | 10.0% | 15.2% |
| |
|---|
| Median (2 companies) | 28.7% | 31.9% | 32.9% | 32.2% | 36.5% |
|---|
| Essar Oil ($ESSAROIL) | 4.0% | 4.2% | 5.1% | 5.7% | 11.2% |
Top companies by CAPEX/Revenue, %
| Top | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Deep Industries ($DEEPIND) | 164.0% | 27.8% | 66.1% | 36.1% | 119.3% |
| Reliance Industries ($RELIANCE) | 4.6% | 7.7% | 13.8% | 16.9% | 17.1% |
| |
|---|
| Median (2 companies) | 84.3% | 17.8% | 40.0% | 26.5% | 68.2% |
|---|
| Essar Oil ($ESSAROIL) | 4.8% | 2.5% | 1.4% | 0.9% | 1.5% |
Top companies by ROIC, %
| Top | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Deep Industries ($DEEPIND) | 9.6% | 9.5% | 13.1% | 12.3% | 16.5% |
| Reliance Industries ($RELIANCE) | 8.5% | 7.6% | 7.3% | 7.0% | 7.2% |
| |
|---|
| Median (2 companies) | 9.1% | 8.5% | 10.2% | 9.7% | 11.9% |
|---|
| Essar Oil ($ESSAROIL) | 7.8% | 9.9% | 14.6% | 14.2% | 12.1% |
Top companies by Net Debt / EBITDA
| Top | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Reliance Industries ($RELIANCE) | 1.7x | 2.1x | 2.9x | 3.9x | 4.1x |
| Deep Industries ($DEEPIND) | 3.5x | 2.4x | 2.1x | 2.1x | 2.7x |
| |
|---|
| Median (2 companies) | 2.6x | 2.3x | 2.5x | 3.0x | 3.4x |
|---|
| Essar Oil ($ESSAROIL) | 7.4x | 6.6x | 3.9x | 5.7x | 5.1x |
