Phosagro OJSC demonstrates fast growth in fundamentals

30 Mar 2016 • About Phosagro OJSC ($PHOR) • By InTwits

Phosagro OJSC is an attractive growth stock in Chemicals industry. Its revenue performance, profitability and healthy financial model stands it out vs. other public companies on the market.

Growth story

Phosagro OJSC showed growth in the last financial year. Phosagro OJSC's revenue surged on 54.1% in FY2015. EBITDA also increased considerably: 119% for the same period.

In the last 3 years Phosagro OJSC showed fast revenue growth of 21.7% from 2012 to 2015 annually. EBITDA surged on 33.5% from 2012 to 2015 annually.

Phosagro OJSC ($PHOR) financials for the last 5 years

mln. RUB	2011	2012	2013	2014	2015
Revenue	100,518	105,303	104,566	123,124	189,732
Revenue growth, %		4.8%	-0.7%	17.7%	54.1%
Gross margin, %	44.1%	42.9%	34.8%	45.2%	56.2%
SG&A, %	11.7%	13.1%	15.4%	17.4%	15.2%
EBITDA	35,370	34,695	23,934	37,609	82,464
EBITDA growth, %		-1.9%	-31.0%	57.1%	119.3%
EBITDA margin, %	35.2%	32.9%	22.9%	30.5%	43.5%
Net Income	19,935	20,654	7,660	-13,641	36,442
Net Income margin, %	19.8%	19.6%	7.33%	-11.1%	19.2%
CAPEX	12,905	13,370	17,795	20,549	42,550
CAPEX/Revenue, %	12.8%	12.7%	17.0%	16.7%	22.4%
Debt	32,153	36,469	52,756	123,824	134,512
Cash	16,888	9,664	8,938	30,687	29,347
Net Debt/EBITDA	0.4x	0.8x	1.8x	2.5x	1.3x
ROIC, %	32.4%	28.5%	15.0%	21.6%	41.2%
ROE, %	39.2%	44.3%	14.5%	-29.6%	76.1%

Profitability and return on investment

EBITDA growth was supported by margin expansion. Phosagro OJSC's EBITDA margin surged on 13 pp from 30.5% to 43.5% in 2015. In the longer period Phosagro OJSC showed fast EBITDA margin growth of 10.6 pp from 32.9% in 2012 to 43.5% in 2015.

We call Phosagro OJSC an attractive growth stock as together with the growth it delivers high ROIC at 41.2%. Three years ago it was considerably lower at 28.5%. For the last three years the average ROIC was 25.9%.

Net Income margin surged on 30.3 pp from -11.1% to 19.2% in 2015. In the longer period Phosagro OJSC's Net Income margin decreased slightly on 0.400 pp from 19.6% in 2012 to 19.2% in 2015.

Phosagro OJSC operates at ROE of 76.1%. For the last three years the average ROE was 20.3%.

Capital expenditures (CAPEX)

To fuel this fast growth Phosagro OJSC had to invest in CAPEX.In FY2015 the company had CAPEX/Revenue of 22.4%. Phosagro OJSC's CAPEX/Revenue surged on 9.73 pp from 12.7% in 2012 to 22.4% in 2015. It's average CAPEX/Revenue for the last three years was 18.7%.

Leverage (Debt)

Having such a fast growth profile the company keeps medium debt level at 1.3x Net Debt/EBITDA. In the last 3 years leverage surged on 0.50x from 0.77x in 2012 to 1.28x in 2015.

Peers in Chemicals

Below we provide Phosagro OJSC benchmarking against other companies in Chemicals 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, %

	FY2011	FY2012	FY2013	FY2014	FY2015
Top 5
Frutarom Industries ($FRUT)		19.2%	9.0%	21.6%	6.5%
Halosource Inc ($HALO)		10.3%	21.0%	11.6%	-22.3%
Acron JSC ($AKRN)	40.0%	8.7%	-4.5%	9.9%
Uralkali PJSC ($URKA)	105.7%	13.0%	-15.9%	7.1%
Plastics Capital ($PLA)		-4.2%	-2.1%	3.3%	21.9%
Median (9 companies)	40.0%	5.6%	-0.5%	3.3%	-0.9%
Phosagro OJSC ($PHOR)		4.8%	-0.7%	17.7%	54.1%

Top companies by Gross margin, %

	FY2011	FY2012	FY2013	FY2014	FY2015
Top 5
Uralkali PJSC ($URKA)	74.6%		71.6%	74.3%
Halosource Inc ($HALO)	34.8%	32.9%	40.7%	44.8%	40.2%
Acron JSC ($AKRN)	45.8%	43.1%	38.1%	42.8%
Frutarom Industries ($FRUT)	36.4%	36.6%	38.1%	39.1%	38.7%
Plastics Capital ($PLA)	40.6%	36.2%	36.6%	36.0%	35.3%
Median (9 companies)	38.5%	35.1%	36.6%	36.0%	35.1%
Phosagro OJSC ($PHOR)	44.1%	42.9%	34.8%	45.2%	56.2%

Top companies by EBITDA margin, %

	FY2011	FY2012	FY2013	FY2014	FY2015
Top 5
Uralkali PJSC ($URKA)	59.2%		44.5%	48.6%
Arab Potash Co ($APOD)	51.0%	47.2%	36.3%	27.7%
Acron JSC ($AKRN)	44.8%	28.4%	22.7%	27.2%
Croda International ($50GP)		27.2%	27.6%	26.7%	27.7%
Frutarom Industries ($FRUT)	15.3%	16.0%	17.0%	18.2%	18.5%
Median (9 companies)	16.4%	15.4%	17.0%	18.2%	15.3%
Phosagro OJSC ($PHOR)	35.2%	32.9%	22.9%	30.5%	43.5%

Top companies by CAPEX/Revenue, %

	FY2011	FY2012	FY2013	FY2014	FY2015
Top 5
Acron JSC ($AKRN)	16.6%	22.7%	21.3%	15.4%
Uralkali PJSC ($URKA)	10.4%		12.5%	9.8%
Basf Se ($BFA)	4.6%	5.6%	6.6%	7.1%	8.2%
Lg Chem ($LGCD)	9.7%	8.2%	5.9%	6.3%	8.1%
Croda International ($50GP)		4.8%	4.1%	6.0%	8.6%
Median (9 companies)	7.2%	5.2%	5.9%	6.0%	5.6%
Phosagro OJSC ($PHOR)	12.8%	12.7%	17.0%	16.7%	22.4%

Top companies by ROIC, %

	FY2011	FY2012	FY2013	FY2014	FY2015
Top 5
Croda International ($50GP)		46.5%	42.3%	35.3%	30.5%
Basf Se ($BFA)	20.8%	15.4%	16.6%	16.6%	13.5%
Frutarom Industries ($FRUT)	11.7%	12.0%	11.9%	15.1%	14.1%
Uralkali PJSC ($URKA)	23.7%			13.2%
Acron JSC ($AKRN)	27.7%	14.4%	9.2%	10.6%
Median (9 companies)	22.2%	14.4%	12.0%	10.6%	12.5%
Phosagro OJSC ($PHOR)	32.4%	28.5%	15.0%	21.6%	41.2%

Top companies by Net Debt / EBITDA

	FY2011	FY2012	FY2013	FY2014	FY2015
Top 5
Acron JSC ($AKRN)	1.2x	1.6x	2.4x	2.8x
Uralkali PJSC ($URKA)	1.1x		2.8x	1.8x
Plastics Capital ($PLA)	2.3x	2.1x	1.9x	1.4x	2.2x
Basf Se ($BFA)	0.9x	1.2x	1.2x	1.3x	1.2x
Frutarom Industries ($FRUT)	1.3x	1.4x	1.7x	1.1x	2.6x
Median (8 companies)	1.1x	1.2x	1.4x	1.2x	1.2x
Phosagro OJSC ($PHOR)	0.4x	0.8x	1.8x	2.5x	1.3x

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