Crompton Greaves reports 27.9% EBITDA decline and 2.2 pp EBITDA Margin decline from 8.8% to 6.5%

27 May 2016 • About Crompton Greaves ($CGVD) • By InTwits

Crompton Greaves reported FY2016 financial results today. Overall the company's long term financial model is characterised by the following facts:

Crompton Greaves is a company in decline: FY2016 revenue growth was -3.4%, 5 years revenue CAGR was -10.9%
Crompton Greaves has low CAPEX intensity: 5 year average CAPEX/Revenue was 2.8%. At the same time it's in pair with industry average of 3.4%.
CAPEX is quite volatile: 16,643 in 2016, 11,423 in 2015, 5,206 in 2014, 4,233 in 2013, 7,433 in 2012
The company has potentially unprofitable business model: ROIC is at 1.7%

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

Crompton Greaves ($CGVD) key annual financial indicators

mln. INR	2012	2013	2014	2015	2016	2016/2015
P&L
Revenue	112,486	120,944	136,315	58,002	56,052	-3.4%
SG&A				385	401	4.3%
EBITDA	8,036	3,832	8,487	5,092	3,671	-27.9%
Net Income	3,736	-361	2,443	235	-3,955	-1,786.7%
Balance Sheet
Cash	4,701	5,233	7,677	6,777	7,952	17.3%
Short Term Debt	3,686	4,720	7,614	8,150	8,741	7.3%
Long Term Debt	6,142	15,550	16,323	12,772	5,990	-53.1%
Cash flow
Capex	3,724	2,204	2,963	2,086	1,750	-16.1%
Ratios
Revenue growth	12.4%	7.5%	12.7%	-57.5%	-3.4%
EBITDA growth	-38.5%	-52.3%	121.5%	-40.0%	-27.9%
EBITDA Margin	7.1%	3.2%	6.2%	8.8%	6.5%	-2.2%
Net Income Margin	3.3%	-0.3%	1.8%	0.4%	-7.1%	-7.5%
SG&A, % of revenue				0.7%	0.7%	0.1%
CAPEX, % of revenue	3.3%	1.8%	2.2%	3.6%	3.1%	-0.5%
ROIC	12.9%	3.5%	10.1%	4.1%	1.7%	-2.4%
ROE	10.9%	-1.0%	6.8%	0.6%	-8.9%	-9.5%
Net Debt/EBITDA	0.6x	3.9x	1.9x	2.8x	1.8x	-0.9x

Revenue and profitability

The company's Revenue decreased on 3.4% in FY2016. Revenue decline was worsened by EBITDA margin decline. EBITDA Margin decreased on 2.2 pp from 8.8% to 6.5% in FY2016.

SG&A as a % of Revenue showed almost no change in FY2016.

Net Income marign decreased on 7.5 pp from 0.40% to -7.1% in FY2016.

Capital expenditures (CAPEX) and working capital investments

The company's CAPEX/Revenue was 3.1% in FY2016. The company showed small growth in CAPEX/Revenue of 1.3 pp from 1.8% in FY2013 to 3.1% in FY2016. It's average CAPEX/Revenue for the last three years was 3.0%.

Return on investment

The company operates at low but positive ROIC (1.65%) and negative ROE (-8.90%). ROIC decreased on 2.4 pp from 4.1% to 1.7% in FY2016. ROE decreased on 9.5 pp from 0.59% to -8.9% in FY2016.

Leverage (Debt)

Debt level is 1.8x Net Debt / EBITDA and 4.0x Debt / EBITDA. Net Debt / EBITDA dropped on 0.9x from 2.8x to 1.8x in FY2016. Debt dropped on 29.6% in FY2016 while cash jumped on 17.3% in FY2016.

Appendix 1: Peers in Heavy Electrical Equipment

Below we provide Crompton Greaves benchmarking against other companies in Heavy Electrical Equipment 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	FY2012	FY2013	FY2014	FY2015	FY2016
Suzlon Energy ($SUEL)	17.9%	-11.1%	7.8%	-1.9%
Median (1 company)	17.9%	-11.1%	7.8%	-1.9%
Crompton Greaves ($CGVD)		7.5%	12.7%	-57.5%	-3.4%

Top companies by Gross margin, %


Top	FY2012	FY2013	FY2014	FY2015	FY2016
Suzlon Energy ($SUEL)	33.2%	27.2%	28.6%	31.3%
Median (1 company)	33.2%	27.2%	28.6%	31.3%

Top companies by EBITDA margin, %


Top	FY2012	FY2013	FY2014	FY2015	FY2016
Suzlon Energy ($SUEL)	8.9%	-5.3%	0.8%	4.0%
Median (1 company)	8.9%	-5.3%	0.8%	4.0%
Crompton Greaves ($CGVD)	7.1%	3.2%	6.2%	8.8%	6.5%

Top companies by CAPEX/Revenue, %


Top	FY2012	FY2013	FY2014	FY2015	FY2016
Suzlon Energy ($SUEL)	4.2%	3.7%	3.4%	3.7%
Median (1 company)	4.2%	3.7%	3.4%	3.7%
Crompton Greaves ($CGVD)	3.3%	1.8%	2.2%	3.6%	3.1%

Top companies by ROIC, %


Top	FY2012	FY2013	FY2014	FY2015	FY2016
Suzlon Energy ($SUEL)	6.2%	-9.4%	-3.5%	-0.1%
Median (1 company)	6.2%	-9.4%	-3.5%	-0.1%
Crompton Greaves ($CGVD)	12.9%	3.5%	10.1%	4.1%	1.7%

Top companies by Net Debt / EBITDA


Top	FY2012	FY2013	FY2014	FY2015	FY2016
Suzlon Energy ($SUEL)	6.1x		87.6x	19.1x
Median (1 company)	6.1x		87.6x	19.1x
Crompton Greaves ($CGVD)	0.6x	3.9x	1.9x	2.8x	1.8x

Crompton Greaves stock price chart

Crompton Greaves financials

mln.	FY2010	FY2011	FY2012

Revenue	91,409	100,051	112,486
EBITDA	12,455	13,067	8,036
Net income	8,599	8,887	3,736
CAPEX	2,904	7,461	3,724
Debt	4,879	3,932	9,828
Cash	6,688	2,582	4,701

About Crompton Greaves

Crompton Greaves Limited provides various electrical products and services for utilities, industries, and consumers primarily in India. It operates in four segments: Power Systems, Consumer Products, Industrial Systems, and Other. The Power Systems segment offers power and distribution transformers, switchgears, circuit breakers, vacuum interrupters, network protection and control gears, and reactors, as well as power supervisory control and data acquisition systems (SCADA). This segment also undertakes design, execution, and servicing of turnkey transmission and distribution, as well as sub-station projects and solutions, including end to end renewable projects. The Consumer Products segment manufactures and markets a range of products, including fans, light sources and luminaires, pumps, as well as household appliances, such as geysers, mixer grinders, toasters, irons, and electric lanterns. The Industrial Systems segment provides power conversion equipment of a spectrum of high and low tension rotating machines, such as motors and alternators; inverters and converters; and stampings, as well as railway transportation and signaling equipment. It also offers generators, drives, drives solutions, traction electronics, and SCADA. The Other segment distributes electricity; and provides self adhesive tapes and specialty lables. Crompton Greaves Limited serves utilities and industries in generation, transmission, distribution, renewables, oil and gas, cement, metals and mining, and transportation sectors. The company also sells its products in Asia, Africa, North America, South America, Europe, and Australia. Crompton Greaves Limited was founded in 1937 and is based in Mumbai, India.