Hindustan Construction Co reports 32.5% EBITDA decline in 2017 and 5.6 pp EBITDA Margin decline from 13.5% to 7.9%

04-05-2017 • About Hindustan Construction Co ($HCC) • By InTwits

Hindustan Construction Co reported FY2017 financial results today. Here are the key drivers of the company's long term financial model:

EBITDA Margin is quite volatile: 7.9% in FY2017, 13.5% in FY2016, 12.0% in FY2015, 8.9% in FY2014, 5.4% in FY2013
Hindustan Construction Co has medium CAPEX intensity: 5 year average CAPEX/Revenue was 7.7%. At the same time it's a lot of higher than industry average of 6.0%.
CAPEX is quite volatile: ₹2,440m in FY2017, ₹953m in FY2016, ₹9,475m in FY2015, ₹12,853m in FY2014, ₹10,541m in FY2013
The company has business model with low profitability: ROIC is 8.2%
It operates with high leverage: Net Debt/EBITDA is 8.5x while industry average is 96.1x

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

Revenue and profitability

Hindustan Construction Co's Revenue surged on 15.5%. Revenue decline was accompanies by EBITDA margin decline. EBITDA Margin decreased slightly on 0.67 pp from 20.2% to 19.5% in FY2017. During FY2013-FY2017 EBITDA Margin topped in FY2016 at 13.5%.

Net Income margin decreased on 3.7 pp from -6.3% to -10.0% in FY2017. During the last 5 years Net Income margin topped in FY2015 at -1.5% and was declining since that time.

Investments (CAPEX, working capital and M&A)

Hindustan Construction Co's CAPEX/Revenue was 2.5% in FY2017. CAPEX/Revenue dropped on 10.9 pp from 13.4% in FY2014 to 2.5% in FY2017. It's average level of CAPEX/Revenue for the last three years was 4.2%. CAPEX as a % of Revenue declined at -3.2 pp per annum in FY2013-FY2017.

Leverage (Debt)

Debt level is 8.5x Net Debt / EBITDA and 8.8x Debt / EBITDA. Net Debt / EBITDA jumped on 2.0x from 6.4x to 8.5x in FY2017. Debt dropped on 10.3% while cash surged on 23.4%. During the last 5 years Net Debt/EBITDA bottomed in FY2016 at 6.4x.

Hindustan Construction Co has short term refinancing risk: cash is only 22.2% of short term debt.

Financial and operational results

FY ended 31-03-2017

Hindustan Construction Co ($HCC) key annual financial indicators

mln. INR	2013	2014	2015	2016	2017	2017/2016
P&L
Revenue	84,476	95,927	103,530	85,402	98,668	15.5%
SG&A				487
EBITDA	4,533	8,524	12,444	11,546	7,793	-32.5%
Net Income	-4,825	-2,774	-1,595	-5,373	-9,826
Balance Sheet
Cash	7,671	6,869	3,606	2,230	2,752	23.4%
Short Term Debt	20,587	29,271	36,439	21,497	12,404	-42.3%
Long Term Debt	79,100	82,229	82,362	55,139	56,328	2.2%
Cash flow
Capex	10,541	12,853	9,475	953	2,440	155.9%
Ratios
Revenue growth	3.7%	13.6%	7.9%	-17.5%	15.5%
EBITDA growth	4.4%	88.0%	46.0%	-7.2%	-32.5%

EBITDA Margin	5.4%	8.9%	12.0%	13.5%	7.9%	-5.6%
SG&A, % of revenue				0.6%
Net Income Margin	-5.7%	-2.9%	-1.5%	-6.3%	-10.0%	-3.7%
CAPEX, % of revenue	12.5%	13.4%	9.2%	1.1%	2.5%	1.4%

ROIC	1.3%	4.8%	7.4%	8.9%	8.2%	-0.8%
ROE	-75.6%	-51.8%	-29.0%	-35.6%
Net Debt/EBITDA	20.3x	12.3x	9.3x	6.4x	8.5x	2.0x

Peers in Construction & Engineering

Below you can find Hindustan Construction Co benchmarking vs. other companies in Construction & Engineering 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	FY2013	FY2014	FY2015	FY2016	FY2017
Ramky Infrastructure ($RAMKY)	-5.0%	-37.9%	-33.6%	44.2%	-
Shristi Infrastructure Development Corporation ($SHRISTI)	-2.1%	-2.3%	1.0%	28.2%	-
Prakash Constrowell ($PRAKASHCON)	19.4%	-3.4%	-26.4%	23.8%	-
Mbl Infrastructures ($MBLINFRA)	7.1%	30.3%	11.1%	19.4%	-
Skipper ($SKIPPER)	21.5%	15.7%	26.0%	14.7%	-
Median (29 companies)	6.9%	6.6%	-0.0%	-4.9%	-
Hindustan Construction Co ($HCC)	-	13.6%	7.9%	-17.5%	15.5%

Top companies by EBITDA margin, %


Top 5	FY2013	FY2014	FY2015	FY2016	FY2017
Madhucon Projects ($MADHUCON)	31.9%	22.1%	32.1%	40.2%	-
Shristi Infrastructure Development Corporation ($SHRISTI)	30.0%	30.0%	29.8%	29.6%	-
Jaiprakash Associates ($JPASSOCIAT)	35.9%	32.4%	31.5%	27.6%	-
Pba Infrastructure ($PBAINFRA)	15.8%	-	-	21.2%	-
Supreme Infrastructure India ($SUPREMEINF)	15.6%	17.5%	20.0%	19.7%	-
Median (25 companies)	11.3%	10.7%	9.9%	10.5%	-
Hindustan Construction Co ($HCC)	5.4%	8.9%	12.0%	13.5%	7.9%

Top companies by CAPEX/Revenue, %


Top 5	FY2013	FY2014	FY2015	FY2016	FY2017
Shristi Infrastructure Development Corporation ($SHRISTI)	11.2%	14.1%	40.8%	25.2%	-
Jaiprakash Associates ($JPASSOCIAT)	65.5%	45.0%	31.6%	18.9%	-
Supreme Infrastructure India ($SUPREMEINF)	31.1%	43.1%	45.8%	14.8%	-
Mbl Infrastructures ($MBLINFRA)	12.7%	11.7%	9.6%	14.8%	-
Ramky Infrastructure ($RAMKY)	11.9%	8.6%	1.4%	6.8%	-
Median (19 companies)	6.6%	4.0%	3.1%	3.5%	-
Hindustan Construction Co ($HCC)	12.5%	13.4%	9.2%	1.1%	2.5%

Top companies by ROIC, %


Top 5	FY2013	FY2014	FY2015	FY2016	FY2017
Skipper ($SKIPPER)	13.5%	14.7%	27.4%	24.4%	-
Voltas ($VOLTAS)	11.7%	11.8%	19.3%	18.2%	-
Itd Cementation India ($ITDCEM)	11.3%	3.8%	12.6%	15.8%	-
Spml Infra ($SPMLINFRA)	9.7%	7.1%	10.6%	13.1%	-
Mbl Infrastructures ($MBLINFRA)	13.4%	14.0%	13.6%	11.2%	-
Median (38 companies)	7.5%	6.3%	6.6%	6.3%	-
Hindustan Construction Co ($HCC)	1.3%	4.8%	7.4%	8.9%	8.2%

Top companies by Net Debt / EBITDA


Top 5	FY2013	FY2014	FY2015	FY2016	FY2017
Mcnally Bharat Engineering Company ($MBECL)	7.0x	7.6x	28.3x	2,779.7x	-
Atlanta ($ATLANTA)	4.8x	6.4x	7.6x	71.7x	-
Ramky Infrastructure ($RAMKY)	4.6x	-	-	20.6x	-
Supreme Infrastructure India ($SUPREMEINF)	6.1x	6.8x	11.3x	16.2x	-
Jaiprakash Associates ($JPASSOCIAT)	8.9x	11.0x	11.9x	14.1x	-
Median (26 companies)	5.2x	5.4x	2.7x	4.7x	-
Hindustan Construction Co ($HCC)	20.3x	12.3x	9.3x	6.4x	8.5x

Hindustan Construction Co stock price chart

Hindustan Construction Co financials

mln.	FY2010	FY2011	FY2012

Revenue	39,752	70,965	81,444
EBITDA	5,654	6,230	4,343
Net income	58.000	-646.200	-5,300.900
CAPEX	13,097	15,673	10,395
Debt	53,657	68,146	87,636
Cash	2,470	6,014	5,789

About Hindustan Construction Co

Hindustan Construction Company Limited, together with its subsidiaries, primarily provides engineering and construction services in India. It constructs dams, barrages, tunnels, underground power stations, and surface power stations, as well as water conductor systems, such as surge shafts, pressure shafts, and penstocks; and undertakes hydro power projects on engineering, procurement, and construction basis. The company also constructs nuclear reactor buildings, underground crude oil storage cavern, and pot shell structure and civil works; and develops specialized systems to offer solutions for projects, such as urban water supply systems, pumping stations, water treatment plants, and lift irrigation for the rural sector. In addition, it is involved in building transportation projects comprising rapid transport systems, bridges, highways, road, and rail bridges, as well as residential and office complexes in real estate sector. Further, the company specializes in the turnkey development of new buildings and refurbishments, as well as offers real estate development and construction services. Additionally, it provides information technology (IT) solutions for the infrastructure industry; enterprise resource planning solutions; and business IT solutions and process consulting for organizations. Hindustan Construction Company Limited was founded in 1926 and is headquartered in Mumbai, India.