Mahindra & Mahindra Net Debt / EBITDA jumped on 5.8x from 6.1x to 11.9x in 2015 while Revenue decreased on 5.3%

29 May 2015 • About Mahindra & Mahindra ($MHID) • By InTwits

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

Mahindra & Mahindra doesn't have a profitable business model yet: FY2015 ROIC is 1.2%
EBITDA Margin is declining: 4.7% in FY2015 vs. 7.5% in FY2014 vs. 12.2% in FY2011
Mahindra & Mahindra has medium CAPEX intensity: 5 year average CAPEX/Revenue was 6.5%. At the same time it's in pair with industry average of 7.5%.
CAPEX is quite volatile: 48,807 in 2015, 97,081 in 2014, 175,675 in 2013, 46,845 in 2012, 18,464 in 2011
The company has potentially unprofitable business model: ROIC is at 1.2%
It operates with medium-size leverage: Net Debt/EBITDA is 11.9x while industry average is 11.9x

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

Mahindra & Mahindra ($MHID) key annual financial indicators

mln. INR	2011	2012	2013	2014	2015	2015/2014
P&L
Revenue	334,463	547,059	626,435	669,310	633,620	-5.3%
EBITDA	40,815	45,539	51,440	50,112	29,567	-41.0%
Net Income	30,797	31,267	40,992	46,669	31,375	-32.8%
Balance Sheet
Cash	18,084	31,648	38,398	46,438	30,046	-35.3%
Short Term Debt	49,951	70,807	89,536	99,167	159,486	60.8%
Long Term Debt	120,524	160,399	198,603	254,918	223,270	-12.4%
Cash flow
Capex	26,526	33,370	32,914	36,653	47,589	29.8%
Ratios
Revenue growth	44.2%	63.6%	14.5%	6.8%	-5.3%
EBITDA growth	-265.8%	11.6%	13.0%	-2.6%	-41.0%
EBITDA Margin	12.2%	8.3%	8.2%	7.5%	4.7%	-2.8%
Net Income Margin	9.2%	5.7%	6.5%	7.0%	5.0%	-2.0%
CAPEX, % of revenue	7.9%	6.1%	5.3%	5.5%	7.5%	2.0%
ROIC	10.0%	6.8%	6.1%	4.7%	1.2%	-3.5%
ROE	25.2%	20.2%	22.4%	21.6%	12.8%	-8.8%
Net Debt/EBITDA	3.7x	4.4x	4.9x	6.1x	11.9x	5.8x

Revenue and profitability

Mahindra & Mahindra's Revenue decreased on 5.3% in FY2015. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin increased on 2.7 pp from 5.9% to 8.6% in 2015.

Net Income marign decreased on 2.0 pp from 7.0% to 5.0% in FY2015.

Capital expenditures (CAPEX) and working capital investments

Mahindra & Mahindra's CAPEX/Revenue was 7.5% in FY2015. Mahindra & Mahindra showed small growth in CAPEX/Revenue of 1.4 pp from 6.1% in FY2012 to 7.5% in FY2015. Average CAPEX/Revenue for the last three years was 6.1%.Battling declining revenue Mahindra & Mahindra made large investments to CAPEX (161% of EBITDA) but that didn't help at least in this year.

Return on investment

The company operates at good ROE (12.76%) while ROIC is low (1.21%). ROIC decreased on 3.5 pp from 4.7% to 1.2% in FY2015. ROE decreased on 8.8 pp from 21.6% to 12.8% in FY2015.

Leverage (Debt)

Company's Net Debt / EBITDA is 11.9x and Debt / EBITDA is 12.9x. Net Debt / EBITDA jumped on 5.8x from 6.1x to 11.9x in FY2015. Debt increased on 8.1% in FY2015 while cash dropped on 35.3% in FY2015.

Appendix 1: Peers in Cars & Utility Vehicles

Below we provide Mahindra & Mahindra benchmarking against other companies in Cars & Utility Vehicles 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.

Mahindra & Mahindra stock price chart

Mahindra & Mahindra financials

mln.	FY2010	FY2011	FY2012

Revenue	231,987	334,463	547,059
EBITDA	-24,612.700	40,815	45,539
Net income	24,786	30,797	31,267
CAPEX	27,029	26,526	33,370
Debt	134,859	170,475	231,205
Cash	26,943	18,084	31,648

About Mahindra & Mahindra

Mahindra & Mahindra Limited primarily engages in the automotive and farm equipment businesses in India and internationally. The company offers aerospace components, assemblies, and aircrafts; automotive services and pre-owned cars; and crop care, fresh produce services, seed distribution, and seed potato inputs. It also provides commercial vehicles, such as Alfa, Gio, trucks and buses, Bolero Pick-Up, Genio, Loadking, Maxximo Plus, and Tourister buses; personal vehicles, including Bolero, e2o, Scorpio, Thar, Verito, Xylo, Actyon, Actyon Sports, Chairman W, Korando, Kyron, Rexton, Rodius, XUV 500, and Quanto; contract sourcing and engineering services; and components, such as alloy steel, blankings, castings, composites, ferrites and magnetic products, forgings, gears, ring rolling, and stampings. In addition, the company offers backhoe loaders; engineering consulting, information security consulting, project management, and strategic risk management services; defense vehicles, including Land, Axe, Marksman, Mine Protected Vehicle, and Rakshak; diesel generators, inverters, and off-grid solar energy solutions; on-grid, power-leasing, telecom infrastructure management, and turnkey EPC services; tractors, crop harvesting, and rice and sugarcane farming solutions; and general and life insurance broking, as well as vehicle, asset, and rural housing finance services. Further, it provides bulk handling systems; business process outsourcing, IT consulting, R&D engineering and manufacturing, supply chain consulting, infrastructure management, security, and network technology solutions and services; leisure boats, resorts, homestays, and terra camps; logistics and people transport solutions; business cities and special economic zones, and living spaces; baby and maternity products through its Mom & Me retail chain; and two wheelers, such as Centuro, Pantero, Duro-DZ, Flyte, genZe, Kine, and Rodeo-RZ. The company was founded in 1945 and is headquartered in Mumbai, India.