Hms Hydraulic Mach & Sys Grp Net Income jumped on 218% in 2015 and EBITDA Margin increased on 8.5 pp from 7.5% to 16.0%

29 Apr 2016 • About Hms Hydraulic Mach & Sys Grp ($HMSG) • By InTwits

Hms Hydraulic Mach & Sys Grp reported 2015 financial results today. Overall the company's long term financial model is characterised by the following facts:

Hms Hydraulic Mach & Sys Grp is a growth stock: 2015 revenue growth was 15.3%, 5 year revenue CAGR was 10.1% at 2015 ROIC 14.7%
Hms Hydraulic Mach & Sys Grp has low CAPEX intensity: 5 year average CAPEX/Revenue was 4.1%. At the same time it's a lot of higher than industry average of 3.0%.
CAPEX is quite volatile: 1,701 in 2015, 2,727 in 2014, 5,584 in 2013, 5,671 in 2012, 6,094 in 2011
The company has highly profitable business model: ROIC is at 14.7%
It operates with high leverage: Net Debt/EBITDA is 2.1x while industry average is -32.1x

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

Hms Hydraulic Mach & Sys Grp ($HMSG) key annual financial indicators

mln. RUB	2011	2012	2013	2014	2015	2015/2014
P&L
Revenue	27,496	31,460	32,358	32,351	37,296	15.3%
Gross Profit	8,364	9,833	8,985	8,840	11,514	30.3%
SG&A	3,442	4,836	4,993	5,367	5,781	7.7%
EBITDA	5,233	5,197	5,487	2,414	5,958	146.8%
Net Income	3,225	2,098	1,042	-1,596	1,885	-218.1%
Balance Sheet
Cash	1,598	1,346	1,584	4,535	3,496	-22.9%
Short Term Debt	1,974	2,198	1,174	3,735	4,628	23.9%
Long Term Debt	4,434	11,230	11,524	13,235	11,218	-15.2%
Cash flow
Capex	1,139	1,374	1,466	1,157	1,381	19.4%
Ratios
Revenue growth	19.2%	14.4%	2.9%	-0.0%	15.3%
EBITDA growth	55.5%	-0.7%	5.6%	-56.0%	146.8%
Gross Margin	30.4%	31.3%	27.8%	27.3%	30.9%	3.5%
EBITDA Margin	19.0%	16.5%	17.0%	7.5%	16.0%	8.5%
Net Income Margin	11.7%	6.7%	3.2%	-4.9%	5.1%	10.0%
SG&A, % of revenue	12.5%	15.4%	15.4%	16.6%	15.5%	-1.1%
CAPEX, % of revenue	4.1%	4.4%	4.5%	3.6%	3.7%	0.1%
ROIC	31.6%	17.5%	14.7%	3.2%	14.7%	11.5%
ROE	51.4%	21.8%	10.8%	-17.6%	20.7%	38.3%
Net Debt/EBITDA	0.9x	2.3x	2.0x	5.2x	2.1x	-3.1x

Revenue and profitability

The company's Revenue surged on 15.3% in 2015. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin increased on 3.2 pp from 16.8% to 20.0% in 2015.

Gross Margin increased on 3.5 pp from 27.3% to 30.9% in 2015. SG&A as a % of Revenue decreased slightly on 1.1 pp from 16.6% to 15.5% in 2015.

Net Income marign increased on 10.0 pp from -4.9% to 5.1% in 2015.

Capital expenditures (CAPEX) and working capital investments

In 2015 the company had CAPEX/Revenue of 3.7%. The company showed small CAPEX/Revenue decline of 0.66 pp from 4.4% in 2012 to 3.7% in 2015. Average CAPEX/Revenue for the last three years was 3.9%.

Return on investment

The company operates at high and attractive ROE (20.69%) while ROIC is a bit lower (14.66%). ROIC surged on 11.5 pp from 3.2% to 14.7% in 2015. ROE surged on 38.3 pp from -17.6% to 20.7% in 2015.

Leverage (Debt)

Debt level is 2.1x Net Debt / EBITDA and 2.7x Debt / EBITDA. Net Debt / EBITDA dropped on 3.1x from 5.2x to 2.1x in 2015. Debt decreased on 6.6% in 2015 while cash dropped on 22.9% in 2015.

Appendix 1: Peers in Industrial Engineering

Below we provide Hms Hydraulic Mach & Sys Grp benchmarking against other companies in Industrial 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	FY2011	FY2012	FY2013	FY2014	FY2015
Mincon Group ($MCON)		53.5%	-17.1%	4.2%	28.8%
Ab Dynamics ($ABDP)		36.9%	36.8%	13.8%	19.3%
Flowtech Fluidpower ($FLO)		-5.8%	-5.1%	17.7%	18.7%
Somero Enterprise Inc ($SOMA)		47.1%	40.1%	31.5%	18.5%
Hydro International ($HYD)		11.7%	-7.2%	-0.1%	17.7%
Median (22 companies)	-8.6%	11.6%	6.1%	2.8%	0.2%
Hms Hydraulic Mach & Sys Grp ($HMSG)		14.4%	2.9%	-0.0%	15.3%

Top companies by Gross margin, %


Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Somero Enterprise Inc ($SOMA)	46.7%	48.7%	52.2%	54.0%	55.8%
Hydro International ($HYD)	40.0%	37.3%	39.4%	45.3%	46.4%
Rotork ($76ID)		46.8%	47.4%	48.0%	45.7%
Northbridge Industrial Services ($NBI)	59.0%	57.0%	54.0%	48.4%	43.4%
Amiad Water Systems Ltd ($AFS)	43.6%	42.8%	40.8%	38.9%	40.5%
Median (20 companies)	30.9%	31.0%	30.0%	33.2%	33.6%
Hms Hydraulic Mach & Sys Grp ($HMSG)	30.4%	31.3%	27.8%	27.3%	30.9%

Top companies by EBITDA margin, %


Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Northbridge Industrial Services ($NBI)	30.9%	30.3%	29.2%	32.4%	32.5%
Somero Enterprise Inc ($SOMA)	3.8%	12.6%	23.9%	27.4%	28.2%
Rotork ($76ID)		27.0%	27.6%	28.0%	25.0%
Ab Dynamics ($ABDP)	12.3%	21.3%	18.9%	20.1%	24.0%
Mincon Group ($MCON)	34.0%	22.9%	30.0%	22.7%	17.6%
Median (22 companies)	8.3%	8.6%	8.0%	7.4%	8.1%
Hms Hydraulic Mach & Sys Grp ($HMSG)	19.0%	16.5%	17.0%	7.5%	16.0%

Top companies by CAPEX/Revenue, %


Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Pressure Technologies ($PRES)	5.0%	2.4%	2.3%	3.3%	11.6%
Somero Enterprise Inc ($SOMA)	0.6%	1.7%	1.8%	2.1%	5.9%
Mitsubishi Electric Corp ($MEL)		4.4%	4.2%	3.7%	4.6%
Ab Dynamics ($ABDP)	1.5%	2.2%	5.6%	2.5%	4.2%
Braime(T.F.& J.H.)(Hldgs) ($BMTO)	1.6%	2.3%	9.6%	5.6%	3.8%
Median (22 companies)	2.0%	2.4%	2.0%	2.4%	2.2%
Hms Hydraulic Mach & Sys Grp ($HMSG)	4.1%	4.4%	4.5%	3.6%	3.7%

Top companies by ROIC, %


Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Somero Enterprise Inc ($SOMA)	-7.0%	6.0%	34.1%	51.7%	54.3%
Energy Technique ($ETQ)	-14.3%	18.9%	19.3%	47.5%	41.6%
Renold ($RNO)		18.8%	-12.7%	-2.5%	41.3%
Ab Dynamics ($ABDP)		44.4%	34.3%	28.4%	31.4%
Rotork ($76ID)		50.0%	45.4%	38.1%	21.9%
Median (22 companies)	12.3%	13.5%	11.4%	11.0%	9.0%
Hms Hydraulic Mach & Sys Grp ($HMSG)	31.6%	17.5%	14.7%	3.2%	14.7%

Top companies by Net Debt / EBITDA


Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Tricorn Group ($TCN)	0.0x	-0.3x	0.9x	5.8x	4.0x
Avingtrans ($AVG)	2.0x	3.1x	0.7x	1.2x	3.6x
600 Group ($SIXH)	2.7x		3.2x	2.2x	3.1x
Chamberlin ($CMH)	1.6x	0.5x	0.4x		2.2x
Braime(T.F.& J.H.)(Hldgs) ($BMTO)	0.6x	0.6x	1.2x	1.4x	1.5x
Median (22 companies)	0.3x	0.1x	0.1x	0.1x	0.6x
Hms Hydraulic Mach & Sys Grp ($HMSG)	0.9x	2.3x	2.0x	5.2x	2.1x

Hms Hydraulic Mach & Sys Grp stock price chart

Hms Hydraulic Mach & Sys Grp financials

mln.	FY2010	FY2011	FY2012

Revenue	23,070	27,496	31,460
EBITDA	3,365	5,233	5,197
Net income	1,469	3,225	2,098
CAPEX	950.3	1,139	1,374
Debt	4,648	6,408	13,428
Cash	351.1	1,598	1,346

About Hms Hydraulic Mach & Sys Grp

HMS Hydraulic Machines & Systems Group plc, together with its subsidiaries, manufactures and repairs various pumps and pumping units in the Russian Federation and internationally. It operates through Industrial Pumps; Oil and Gas Equipment; Compressors; and Engineering, Procurement and Construction segments. The Industrial Pumps segment designs, engineers, manufactures, and supplies a range of pumps and pump-based integrated solutions to customers in various sectors, including oil and gas, power generation, water utilities, chemical processing, steel & mining, pulp and paper, food, etc. This segment also provides aftermarket maintenance, repair, and other support services its products. The Oil and Gas Equipment segment manufactures and installs modular pumping stations; automated metering equipment; oil, gas, and water processing and preparation units; and other equipment and systems for oil extraction and transportation. The Compressors segment designs, manufactures and supplies a range of compressors and compressor-based solutions, including compressor units and compressor stations to customers in the oil and gas, petrochemical, metals and mining, and other basic industries. The Engineering, Procurement and Construction segment provides design and engineering services, project management, and construction works for projects in the oil and gas upstream and midstream, and water utilities sectors. The company was founded in 1993 and is headquartered in Moscow, the Russian Federation. HMS Hydraulic Machines & Systems Group plc is a subsidiary of HMS Technologies Limited.