R Systems International reports 45.1% Net Income decline in 2016 and 2.8% Revenue decline

10-02-2017 • About R Systems International ($RSYSTEMS) • By InTwits

R Systems International reported FY2016 financial results today. Here are the key drivers of the company's long term financial model: The company has highly profitable business model: ROIC is 24.9%.

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 decreased on 2.8%. Despite revenue decline the EBITDA margin expanded. EBITDA Margin increased slightly on 0.80 pp from 12.3% to 13.1% in FY2016.

Net Income margin decreased on 7.0 pp from 16.2% to 9.1% in FY2016. During FY2012-FY2016 Net Income margin topped in FY2015 at 16.2%.

Return on investment

The company operates at high and attractive ROIC (24.9%) and ROE (20.6%). ROIC decreased slightly on 0.73 pp from 25.7% to 24.9% in FY2016. ROE dropped on 22.3 pp from 42.9% to 20.6% in FY2016. During the last 5 years ROIC topped in FY2014 at 34.2% and was declining since that time. During the last 5 years ROE topped in FY2015 at 42.9%.

Leverage (Debt)

Company's Net Debt / EBITDA is -1.5x and Debt / EBITDA is 0.0x. Debt jumped on 52.4% while cash jumped on 34.3%.

The company has no short term refinancing risk: short term debt is zero.

Valuation and dividends

The company's trades at EV/EBITDA 8.1x and P/E 13.7x while industy averages are 17.8x and 21.9x.

Financial and operational results

R Systems International ($RSYSTEMS) key annual financial indicators

mln. INR	2012	2013	2014	2015	2016	2016/2015
P&L
Revenue	4,650	5,961	6,485	6,050	5,882	-2.8%
EBITDA	326	795	938	744	770	3.6%
Net Income	184	527	781	978	537	-45.1%
Balance Sheet
Cash	324	794	1,022	851	1,143	34.3%
Short Term Debt	3	6	3	5	0	-100.0%
Long Term Debt	3	9	6	8	19	146.4%
Cash flow
Capex	86	169	98	163
Ratios
Revenue growth	13.6%	28.2%	8.8%	-6.7%	-2.8%
EBITDA growth	-3.4%	143.8%	17.9%	-20.7%	3.6%

EBITDA Margin	7.0%	13.3%	14.5%	12.3%	13.1%	0.8%
Net Income Margin	3.9%	8.8%	12.0%	16.2%	9.1%	-7.0%
CAPEX, % of revenue	1.8%	2.8%	1.5%	2.7%

ROIC	10.3%	29.1%	34.2%	25.7%	24.9%	-0.7%
ROE	9.3%	24.7%	35.1%	42.9%	20.6%	-22.3%
Net Debt/EBITDA	-1.0x	-1.0x	-1.1x	-1.1x	-1.5x	-0.3x

Peers in IT Consulting & Software

Below you can find R Systems International benchmarking vs. other companies in IT Consulting & Software 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 5	FY2012	FY2013	FY2014	FY2015	FY2016
Mindtree ($MINDTREE)	-	23.2%	28.8%	17.0%	31.8%
Ramco Systems ($RAMCOSYS)	-	7.3%	9.9%	37.0%	24.2%
Sqs India Bfsi ($SQSBFSI)	-	32.9%	20.4%	10.1%	23.4%
Infinite Computer Solutions (India) ($INFINITE)	-	31.7%	24.6%	0.3%	21.3%
Tech Mahindra ($TECHM)	-	25.2%	174.0%	20.1%	17.1%
Median (23 companies)	34.9%	20.0%	14.0%	10.1%	10.4%
R Systems International ($RSYSTEMS)	-	28.2%	8.8%	-6.7%	-2.8%

Top companies by Gross margin, %


Top	FY2012	FY2013	FY2014	FY2015	FY2016
Tata Consultancy Services ($TCS)	-	-	47.4%	42.4%	43.9%
Infosys ($INFY)	41.3%	98.1%	35.9%	38.3%	37.4%
Mindtree ($MINDTREE)	31.5%	36.2%	-	34.8%	32.4%
Wipro ($WIPRO)	29.2%	30.4%	32.0%	31.6%	30.4%
Median (4 companies)	32.7%	36.2%	35.9%	36.6%	34.9%

Top companies by EBITDA margin, %


Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
Oracle Financial Services Software ($OFSS)	35.3%	35.2%	37.4%	39.7%	41.1%
Tata Consultancy Services ($TCS)	29.5%	28.6%	30.7%	26.1%	28.2%
Infosys ($INFY)	31.6%	27.9%	26.3%	27.1%	27.1%
Wipro ($WIPRO)	19.1%	20.9%	22.4%	22.3%	21.1%
Ramco Systems ($RAMCOSYS)	9.6%	-2.8%	4.9%	18.8%	20.3%
Median (22 companies)	15.1%	17.2%	18.5%	13.2%	14.0%
R Systems International ($RSYSTEMS)	7.0%	13.3%	14.5%	12.3%	13.1%

Top companies by CAPEX/Revenue, %


Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
Ramco Systems ($RAMCOSYS)	-	22.1%	15.3%	12.4%	10.3%
Niit Technologies ($NIITTECH)	5.9%	4.6%	6.1%	7.9%	6.0%
Financial Technologies (India) ($FINANTECH)	8.9%	11.4%	-	6.5%	5.4%
Infosys ($INFY)	4.9%	5.2%	5.5%	4.2%	4.4%
Cyient ($CYIENT)	5.2%	3.9%	3.5%	3.0%	4.2%
Median (19 companies)	3.8%	3.2%	3.2%	3.1%	2.7%

Top companies by ROIC, %


Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
Oracle Financial Services Software ($OFSS)	18.0%	16.8%	16.3%	24.2%	45.7%
Tata Consultancy Services ($TCS)	48.6%	48.4%	50.2%	40.5%	44.4%
Sqs India Bfsi ($SQSBFSI)	12.1%	27.0%	29.4%	30.6%	39.9%
Mindtree ($MINDTREE)	24.9%	34.6%	36.2%	32.0%	28.9%
Infosys ($INFY)	32.4%	28.3%	27.2%	25.1%	25.3%
Median (30 companies)	19.6%	20.1%	22.3%	19.4%	17.2%
R Systems International ($RSYSTEMS)	10.3%	29.1%	34.2%	25.7%	24.9%

Top companies by Net Debt / EBITDA


Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
Agc Networks ($AGCNET)	0.9x	10.1x	-	4.6x	22.8x
3I Infotech ($3IINFOTECH)	8.5x	20.3x	27.7x	14.7x	6.8x
Onward Technologies ($ONWARDTEC)	2.4x	2.2x	4.1x	1.9x	1.2x
Wipro ($WIPRO)	-0.3x	-0.3x	-0.6x	-0.8x	0.2x
Asm Technologies ($ASMTEC)	1.7x	2.1x	-	0.0x	0.0x
Median (24 companies)	-0.0x	-0.1x	-0.2x	-0.2x	-0.1x
R Systems International ($RSYSTEMS)	-1.0x	-1.0x	-1.1x	-1.1x	-1.5x

R Systems International stock price chart

R Systems International financials

mln.	FY2010	FY2011	FY2012

Revenue	7,350	4,095	4,650
EBITDA	214.4	337.8	326.2
Net income	167.8	165.1	183.6
CAPEX	79.543	79.860	85.873
Debt	8.349	7.943	6.946
Cash	0.932	348.3	324.2

About R Systems International

R Systems International Ltd. offers IT consulting services and solutions to banking and finance, technology, independent software vendors, telecom and digital media, government, healthcare, manufacturing, and logistic industries in India and internationally. It operates through Information technology Services and Products, and Business Process Outsourcing Services segments. The company offers Indus Loan Origination system that handles loan processing applications; Indus Loan Servicing module for repayment transactions; Indus Collections module to track and recover non-performing loans; Indus Dealer/Inventory Funding module; Indus Collateral management module to capture demographic, valuation, and insurance related information about collaterals; and microfinance solutions. It also provides Indus Credit Management and Revenue Collections module to automate and streamline revenue collections, and delinquency management process; Indus Dealer Management solution to induct, monitor, promote, reward, and discipline network of dealers/agents; Indus Commissions and Incentive module that facilitates the calculation of commissions and incentives; Flodox, a Web-based workflow management system; R Space Portal, an enterprise portal; and iPerSyst, a renewals and retention system to retain customers and collect premiums. In addition, the company offers ECnet Pro, a supply chain management and business-to-business platform to collaborate and complete purchase related processes and transactions; Computaris Facebook Integration platform to enable operators to interact with customers; Computaris Convergent Charging solution to converge real-time rating, charging, and billing; mobile broadband management solutions; Computaris MVNO for MVNOs business exigencies; and value added services. Further, it provides integrated product lifecycle management, application, testing, and packaged services. R Systems International Ltd. was founded in 1993 and is headquartered in Noida, India.