Mahindra & Mahindra Debt surged on 16.3% in 2016 and EBITDA jumped on 13.4%

30 May 2016 • About Mahindra & Mahindra ($MHID) • By InTwits

Mahindra & Mahindra reported FY2016 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: FY2016 ROIC is 1.0%
Mahindra & Mahindra has medium CAPEX intensity: 5 year average CAPEX/Revenue was 6.1%. At the same time it's in pair with industry average of 6.2%.
CAPEX is quite volatile: 101,307 in 2016, 48,807 in 2015, 97,081 in 2014, 175,675 in 2013, 46,845 in 2012
The company has potentially unprofitable business model: ROIC is at 1.0%
It operates with medium-size leverage: Net Debt/EBITDA is 12.5x while industry average is 12.5x

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	2012	2013	2014	2015	2016	2016/2015
P&L
Revenue	547,059	626,435	669,310	633,620	697,860	10.1%
EBITDA	45,539	51,440	50,112	29,567	33,515	13.4%
Net Income	31,267	40,992	46,669	31,375	32,113	2.4%
Balance Sheet
Cash	31,648	38,398	46,438	30,046	27,953	-7.0%
Short Term Debt	70,807	89,536	99,167	159,486	194,339	21.9%
Long Term Debt	160,399	198,603	254,918	223,270	250,963	12.4%
Cash flow
Capex	33,370	32,914	36,653	47,589	43,343	-8.9%
Ratios
Revenue growth	63.6%	14.5%	6.8%	-5.3%	10.1%
EBITDA growth	11.6%	13.0%	-2.6%	-41.0%	13.4%
EBITDA Margin	8.3%	8.2%	7.5%	4.7%	4.8%	0.1%
Net Income Margin	5.7%	6.5%	7.0%	5.0%	4.6%	-0.4%
CAPEX, % of revenue	6.1%	5.3%	5.5%	7.5%	6.2%	-1.3%
ROIC	6.8%	6.1%	4.7%	1.2%	1.0%	-0.2%
ROE	20.2%	22.4%	21.6%	12.8%	11.8%	-1.0%
Net Debt/EBITDA	4.4x	4.9x	6.1x	11.9x	12.5x	0.5x

Revenue and profitability

Mahindra & Mahindra's Revenue surged on 10.1% in FY2016. EBITDA Margin showed almost no change in FY2016.

Net Income marign showed almost no change in FY2016.

Capital expenditures (CAPEX) and working capital investments

Mahindra & Mahindra's CAPEX/Revenue was 6.2% in FY2016. Mahindra & Mahindra showed small growth in CAPEX/Revenue of 0.96 pp from 5.3% in FY2013 to 6.2% in FY2016. It's average CAPEX/Revenue for the last three years was 6.4%.Mahindra & Mahindra has spent a lot to CAPEX (129% of EBITDA) to secure its growth.

Return on investment

The company operates at low ROIC (0.97%) and ROE (11.79%). ROIC showed almost no change in FY2016. ROE decreased slightly on 0.97 pp from 12.8% to 11.8% in FY2016.

Leverage (Debt)

Debt level is 12.5x Net Debt / EBITDA and 13.3x Debt / EBITDA. Net Debt / EBITDA jumped on 0.5x from 11.9x to 12.5x in FY2016. Debt jumped on 16.3% in FY2016 while cash decreased on 7.0% in FY2016.

Appendix 1: Peers in Cars & Utility Vehicles

Below you can find Mahindra & Mahindra benchmarking vs. other companies in Cars & Utility Vehicles 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.

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.