Larsen & Toubro Net Income surged on 42.7% and EBITDA Margin showed almost no change
29-05-2017 • About Larsen & Toubro (
$LT) • By InTwits
Larsen & Toubro reported FY2017 financial results today. Here are the key drivers of the company's long term financial model:
- Larsen & Toubro is a growth stock: FY2017 revenue growth was 7.6%, 5 year revenue CAGR was 11.1% at FY2017 ROIC 6.1%
- Larsen & Toubro has medium CAPEX intensity: 5 year average CAPEX/Revenue was 6.6%. At the same time it's in pair with industry average of 6.0%
- CAPEX is quite volatile: ₹29,771m in FY2017, ₹43,216m in FY2016, ₹62,525m in FY2015, ₹69,673m in FY2014, ₹78,323m in FY2013
- The company has potentially unprofitable business model: ROIC is 6.1%
- It operates with high leverage: Net Debt/EBITDA is 8.0x 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
Larsen & Toubro's Revenue increased on 7.6%. EBITDA Margin showed almost no change in FY2017. EBITDA Margin stuck to a declining trend at -0.99 pp per annum in the last 5 years.
Net Income margin increased slightly on 1.4 pp from 4.2% to 5.6% in FY2017. During the last 5 years Net Income margin bottomed in FY2016 at 4.2%.
Investments (CAPEX, working capital and M&A)
In FY2017 the company had CAPEX/Revenue of 2.8%. Larsen & Toubro showed decline in CAPEX/Revenue of 5.5 pp from 8.2% in FY2014 to 2.8% in FY2017. For the last three years the average CAPEX/Revenue was 4.7%. CAPEX as a % of Revenue declined at -2.0 pp per annum in FY2013-FY2017.
Return on investment
The company operates at good ROE (12.8%) while ROIC is low (6.1%). ROIC showed almost no change in FY2017. ROE increased on 2.9 pp from 9.9% to 12.8% in FY2017. ROIC stuck to a declining trend at -0.94 pp per annum in the last 5 years. During the last 5 years ROE bottomed in FY2016 at 9.9%.
Leverage (Debt)
Debt level is 8.0x Net Debt / EBITDA and 8.5x Debt / EBITDA. Net Debt / EBITDA increased on 0.1x from 7.9x to 8.0x in FY2017. Debt increased on 6.6% while cash decreased slightly on 1.4%. Net Debt/EBITDA followed a growing trend at 0.5x per annum in the last 5 years.
Larsen & Toubro has short term refinancing risk: cash is only 19.8% of short term debt.
Financial and operational results
FY ended 31-03-2017
Larsen & Toubro ($LT) key annual financial indicators| mln. INR | 2013 | 2014 | 2015 | 2016 | 2017 | 2017/2016 |
|---|
P&L
|
|---|
| Revenue | 739,979 | 844,936 | 895,897 | 1,000,328 | 1,076,365 | 7.6% |
| EBITDA | 102,967 | 110,951 | 114,464 | 104,571 | 110,732 | 5.9% |
| Net Income | 52,057 | 49,020 | 47,648 | 42,329 | 60,412 | 42.7% |
Balance Sheet
|
|---|
| Cash | 35,275 | 40,597 | 57,120 | 53,331 | 52,590 | -1.4% |
| Short Term Debt | 157,520 | 254,006 | 251,608 | 269,117 | 266,134 | -1.1% |
| Long Term Debt | 473,921 | 554,449 | 655,372 | 612,238 | 673,406 | 10.0% |
Cash flow
|
|---|
| Capex | 78,323 | 69,673 | 62,525 | 43,216 | 29,771 | -31.1% |
Ratios
|
|---|
| Revenue growth | 16.1% | 14.2% | 6.0% | 11.7% | 7.6% | |
| EBITDA growth | 10.6% | 7.8% | 3.2% | -8.6% | 5.9% | |
|
|---|
| EBITDA Margin | 13.9% | 13.1% | 12.8% | 10.5% | 10.3% | -0.2% |
| Net Income Margin | 7.0% | 5.8% | 5.3% | 4.2% | 5.6% | 1.4% |
| CAPEX, % of revenue | 10.6% | 8.2% | 7.0% | 4.3% | 2.8% | -1.6% |
|
|---|
| ROIC | 9.6% | 8.6% | 6.8% | 6.3% | 6.1% | -0.2% |
| ROE | 16.5% | 13.7% | 12.1% | 9.9% | 12.8% | 2.9% |
| Net Debt/EBITDA | 5.8x | 6.9x | 7.4x | 7.9x | 8.0x | 0.1x |
Peers in Construction & Engineering
Below we provide Larsen & Toubro benchmarking against other companies in Construction & Engineering 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 | 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 ($SKIPPER) | 21.5% | 15.7% | 26.0% | 14.7% | - |
| |
|---|
| Median (29 companies) | 6.9% | 6.6% | -0.0% | -5.3% | 4.9% |
|---|
| Larsen & Toubro ($LT) | - | 14.2% | 6.0% | 11.7% | 7.6% |
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 ($SUPREMEINF) | 15.6% | 17.5% | 20.0% | 19.7% | - |
| |
|---|
| Median (25 companies) | 11.2% | 10.2% | 9.9% | 10.8% | 10.9% |
|---|
| Larsen & Toubro ($LT) | 13.9% | 13.1% | 12.8% | 10.5% | 10.3% |
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 ($RAMKY) | 11.9% | 8.6% | 1.4% | 6.8% | - |
| |
|---|
| Median (19 companies) | 6.6% | 4.0% | 3.1% | 3.5% | 2.0% |
|---|
| Larsen & Toubro ($LT) | 10.6% | 8.2% | 7.0% | 4.3% | 2.8% |
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 ($MBLINFRA) | 13.4% | 14.0% | 13.6% | 11.2% | - |
| |
|---|
| Median (38 companies) | 7.1% | 5.6% | 6.6% | 7.2% | 6.4% |
|---|
| Larsen & Toubro ($LT) | 9.6% | 8.6% | 6.8% | 6.3% | 6.1% |
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 ($JPASSOCIAT) | 8.9x | 11.0x | 11.9x | 14.1x | - |
| |
|---|
| Median (26 companies) | 5.2x | 5.4x | 2.7x | 4.7x | 6.8x |
|---|
| Larsen & Toubro ($LT) | 5.8x | 6.9x | 7.4x | 7.9x | 8.0x |
