Hindustan Construction Co EBITDA jumped on 46.0% in 2015 and Revenue increased on 7.1%

30 Apr 2015 • About Hindustan Construction Co ($HIN) • By InTwits

Hindustan Construction Co reported FY2015 financial results today. Overall the company's long term financial model is characterised by the following facts:

EBITDA Margin is expanding: 12.0% in FY2015 vs. 8.8% in FY2014 vs. 8.7% in FY2011
EBITDA Margin is quite volatile: 12.0% in FY2015, 8.8% in FY2014, 5.3% in FY2013, 5.3% in FY2012, 8.7% in FY2011
Hindustan Construction Co has high CAPEX intensity: 5 year average CAPEX/Revenue was 13.9%. At the same time it's a lot of higher than industry average of 8.0%.
CAPEX is quite volatile: 2,516 in 2015, 4,103 in 2014, 9,997 in 2013, 14,978 in 2012, 20,502 in 2011
The company has business model with low profitability: ROIC is at 7.4%
It operates with high leverage: Net Debt/EBITDA is 9.3x while industry average is 7.7x

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

Hindustan Construction Co ($HIN) key annual financial indicators

mln. INR	2011	2012	2013	2014	2015	2015/2014
P&L
Revenue	71,559	81,576	85,100	96,683	103,530	7.1%
EBITDA	6,230	4,343	4,533	8,524	12,444	46.0%
Net Income	-646	-5,301	-4,825	-2,774	-1,595	-42.5%
Balance Sheet
Cash	6,014	5,789	7,671	6,869	3,606	-47.5%
Short Term Debt	17,489	35,999	20,587	29,271	36,439	24.5%
Long Term Debt	50,656	51,638	79,100	82,229	82,362	0.2%
Cash flow
Capex	15,673	10,395	10,541	12,853	9,475	-26.3%
Ratios
Revenue growth	80.0%	14.0%	4.3%	13.6%	7.1%
EBITDA growth	10.2%	-30.3%	4.4%	88.0%	46.0%
EBITDA Margin	8.7%	5.3%	5.3%	8.8%	12.0%	3.2%
Net Income Margin	-0.9%	-6.5%	-5.7%	-2.9%	-1.5%	1.3%
CAPEX, % of revenue	21.9%	12.7%	12.4%	13.3%	9.2%	-4.1%
ROIC	5.2%	1.9%	1.3%	4.8%	7.4%	2.7%
ROE	-5.2%	-54.2%	-75.6%	-51.8%	-29.0%	22.7%
Net Debt/EBITDA	10.0x	18.8x	20.3x	12.3x	9.3x	-3.0x

Revenue and profitability

The company's Revenue increased on 7.1% in FY2015. Revenue growth happened at the same time with EBITDA margin expansion. EBITDA Margin increased on 3.2 pp from 8.8% to 12.0% in FY2015.

Net Income marign increased slightly on 1.3 pp from -2.9% to -1.5% in FY2015.

Capital expenditures (CAPEX) and working capital investments

Hindustan Construction Co's CAPEX/Revenue was 9.2% in FY2015. Hindustan Construction Co's CAPEX/Revenue decreased on 3.6 pp from 12.7% in FY2012 to 9.2% in FY2015. Average CAPEX/Revenue for the last three years was 11.6%.The company maintained rich investment policy and has spent a big chunk of EBITDA (76.1%) to CAPEX.

Return on investment

The company operates at low but positive ROIC (7.43%) and negative ROE (-29.03%). ROIC increased on 2.7 pp from 4.8% to 7.4% in FY2015. ROE surged on 22.7 pp from -51.8% to -29.0% in FY2015.

Leverage (Debt)

Debt level is 9.3x Net Debt / EBITDA and 9.5x Debt / EBITDA. Net Debt / EBITDA dropped on 3.0x from 12.3x to 9.3x in FY2015. Debt increased on 6.5% in FY2015 while cash dropped on 47.5% in FY2015.

Appendix 1: 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	FY2011	FY2012	FY2013	FY2014	FY2015
Larsen & Toubro ($LTOD)	18.6%	23.5%	16.1%	14.2%
Electrosteel Castings ($ECS)	18.3%	12.4%	5.3%	11.1%
Median (2 companies)	18.5%	17.9%	10.7%	12.6%
Hindustan Construction Co ($HIN)		14.0%	4.3%	13.6%	7.1%

Top companies by EBITDA margin, %


Top	FY2011	FY2012	FY2013	FY2014	FY2015
Electrosteel Castings ($ECS)	14.4%	9.9%	8.9%	14.4%
Larsen & Toubro ($LTOD)	15.2%	14.6%	13.9%	13.1%
Median (2 companies)	14.8%	12.2%	11.4%	13.8%
Hindustan Construction Co ($HIN)	8.7%	5.3%	5.3%	8.8%	12.0%

Top companies by CAPEX/Revenue, %


Top	FY2011	FY2012	FY2013	FY2014	FY2015
Larsen & Toubro ($LTOD)	14.2%	11.5%	10.6%	8.2%
Electrosteel Castings ($ECS)	6.6%	11.9%	13.7%	6.6%
Median (2 companies)	10.4%	11.7%	12.1%	7.4%
Hindustan Construction Co ($HIN)	21.9%	12.7%	12.4%	13.3%	9.2%

Top companies by ROIC, %


Top	FY2011	FY2012	FY2013	FY2014	FY2015
Larsen & Toubro ($LTOD)	12.3%	11.1%	9.6%	8.6%
Electrosteel Castings ($ECS)	6.7%	4.3%	3.4%	6.3%
Median (2 companies)	9.5%	7.7%	6.5%	7.5%
Hindustan Construction Co ($HIN)	5.2%	1.9%	1.3%	4.8%	7.4%

Top companies by Net Debt / EBITDA


Top	FY2011	FY2012	FY2013	FY2014	FY2015
Larsen & Toubro ($LTOD)	3.7x	4.8x	5.8x	6.9x
Electrosteel Castings ($ECS)	5.7x	9.0x	11.6x	6.9x
Median (2 companies)	4.7x	6.9x	8.7x	6.9x
Hindustan Construction Co ($HIN)	10.0x	18.8x	20.3x	12.3x	9.3x

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.