Hindustan Construction Co Debt dropped on 30.4% and EBITDA showed almost no change

03 May 2018 • About Hindustan Construction Co ($HIN) • By InTwits

Hindustan Construction Co reported FY2018 financial results today. Overall the company's long term financial model is characterised by the following facts:

Hindustan Construction Co has medium CAPEX intensity: 5 year average CAPEX/Revenue was 5.2%. At the same time it's a lot of higher than industry average of 1.8%.
CAPEX is quite volatile: ₹0m in FY2018, ₹2,440m in FY2017, ₹953m in FY2016, ₹9,475m in FY2015, ₹12,853m in FY2014
The company has business model with average profitability: ROIC is 11.7%
It operates with high leverage: Net Debt/EBITDA is 4.9x while industry average is 4.1x

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

Revenue and profitability

The company's Revenue increased on 2.7%. Revenue decline was accompanies by EBITDA margin decline. EBITDA Margin decreased on 7.6 pp from 19.7% to 12.1% in FY2018. During FY2014-FY2018 EBITDA Margin topped in FY2016 at 13.5% and was declining since that time.

Net Income margin decreased slightly on 0.80 pp from -10.0% to -10.8% in FY2018. Net Income margin stuck to a declining trend at -2.4 pp per annum in FY2014-FY2018.

Leverage (Debt)

Company's Net Debt / EBITDA is 4.9x and Debt / EBITDA is 6.2x. Net Debt / EBITDA dropped on 3.5x from 8.5x to 4.9x in FY2018. Debt dropped on 30.4% while cash jumped on 246%. Net Debt/EBITDA declined at -1.5x per annum in the last 5 years.

Hindustan Construction Co has short term refinancing risk: cash is only 84.8% of short term debt.

Financial and operational results

FY ended 31 Mar 2018

Hindustan Construction Co ($HIN) key annual financial indicators

mln. INR	2014	2015	2016	2017	2018	2018/2017
P&L
Revenue	95,927	103,530	85,402	98,668	101,325	2.7%
SG&A			487
EBITDA	8,524	12,444	11,546	7,793	7,761	-0.4%
Net Income	-2,774	-1,595	-5,373	-9,826	-10,900
Balance Sheet
Cash	6,869	3,606	2,230	2,752	9,521	245.9%
Short Term Debt	29,271	36,439	21,497	12,404	11,232	-9.4%
Long Term Debt	82,229	82,362	55,139	56,328	36,617	-35.0%
Cash flow
Capex	12,853	9,475	953	2,440	0	-100.0%
Ratios
Revenue growth	13.6%	7.9%	-17.5%	15.5%	2.7%
EBITDA growth	88.0%	46.0%	-7.2%	-32.5%	-0.4%

EBITDA Margin	8.9%	12.0%	13.5%	7.9%	7.7%	-0.2%
SG&A, % of revenue			0.6%
Net Income Margin	-2.9%	-1.5%	-6.3%	-10.0%	-10.8%	-0.8%
CAPEX, % of revenue	13.4%	9.2%	1.1%	2.5%	0.0%

ROIC	4.8%	7.4%	8.9%	8.2%	11.7%	3.6%
ROE	-51.8%	-29.0%	-35.6%
Net Debt/EBITDA	12.3x	9.3x	6.4x	8.5x	4.9x	-3.5x

Peers in Construction & Engineering

Below we provide Hindustan Construction Co benchmarking against other companies in Construction & 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	FY2014	FY2015	FY2016	FY2017	FY2018
Larsen & Toubro ($LTOD)	14.2%	6.0%	11.7%	7.6%
Nexus Infrastructure Plc ($NEXS)	31.1%	20.8%	3.7%	-0.5%
Electrosteel Castings ($ECS)	9.9%	1.5%	-8.2%	-5.7%
Median (3 companies)	14.2%	6.0%	3.7%	-0.5%
Hindustan Construction Co ($HIN)		7.9%	-17.5%	15.5%	2.7%

Top companies by Gross margin, %


Top	FY2014	FY2015	FY2016	FY2017	FY2018
Nexus Infrastructure Plc ($NEXS)	15.9%	15.8%	19.4%	20.2%
Median (1 company)	15.9%	15.8%	19.4%	20.2%

Top companies by EBITDA margin, %


Top	FY2014	FY2015	FY2016	FY2017	FY2018
Electrosteel Castings ($ECS)	15.0%	12.8%	12.3%	13.9%
Larsen & Toubro ($LTOD)	13.1%	12.8%	10.5%	10.3%
Nexus Infrastructure Plc ($NEXS)	6.8%	7.1%	8.6%	7.9%
Median (3 companies)	13.1%	12.8%	10.5%	10.3%
Hindustan Construction Co ($HIN)	8.9%	12.0%	13.5%	7.9%	7.7%

Top companies by CAPEX/Revenue, %


Top	FY2014	FY2015	FY2016	FY2017	FY2018
Nexus Infrastructure Plc ($NEXS)	2.1%	0.4%	0.8%	3.0%
Larsen & Toubro ($LTOD)	8.2%	7.0%	4.3%	2.8%
Electrosteel Castings ($ECS)	6.9%	5.8%	1.7%	1.5%
Median (3 companies)	6.9%	5.8%	1.7%	2.8%
Hindustan Construction Co ($HIN)	13.4%	9.2%	1.1%	2.5%	0.0%

Top companies by ROIC, %


Top	FY2014	FY2015	FY2016	FY2017	FY2018
Nexus Infrastructure Plc ($NEXS)		49.5%	45.3%	32.5%
Larsen & Toubro ($LTOD)	8.6%	6.8%	6.3%	6.1%
Electrosteel Castings ($ECS)	6.3%	5.0%	4.6%	4.6%
Median (3 companies)	7.5%	6.8%	6.3%	6.1%
Hindustan Construction Co ($HIN)	4.8%	7.4%	8.9%	8.2%	11.7%

Top companies by Net Debt / EBITDA


Top	FY2014	FY2015	FY2016	FY2017	FY2018
Larsen & Toubro ($LTOD)	6.9x	7.4x	7.9x	8.0x
Electrosteel Castings ($ECS)	6.9x	8.0x	6.9x	5.2x
Nexus Infrastructure Plc ($NEXS)	-2.4x	-2.9x	-1.9x	-1.6x
Median (3 companies)	6.9x	7.4x	6.9x	5.2x
Hindustan Construction Co ($HIN)	12.3x	9.3x	6.4x	8.5x	4.9x

Hindustan Construction Co stock price chart

Hindustan Construction Co financials

mln.	FY2010	FY2011	FY2012

Revenue	39,752	70,965	81,444
EBITDA	5,654	6,230	4,343
Net income	58.000	-646.200	-5,300.900
CAPEX	13,097	15,673	10,395
Debt	53,657	68,146	87,636
Cash	2,470	6,014	5,789

About Hindustan Construction Co

Hindustan Construction Company Limited, together with its subsidiaries, primarily provides engineering and construction services in India. It constructs dams, barrages, tunnels, underground power stations, and surface power stations, as well as water conductor systems, such as surge shafts, pressure shafts, and penstocks; and undertakes hydro power projects on engineering, procurement, and construction basis. The company also constructs nuclear reactor buildings, underground crude oil storage cavern, and pot shell structure and civil works; and develops specialized systems to offer solutions for projects, such as urban water supply systems, pumping stations, water treatment plants, and lift irrigation for the rural sector. In addition, it is involved in building transportation projects comprising rapid transport systems, bridges, highways, road, and rail bridges, as well as residential and office complexes in real estate sector. Further, the company specializes in the turnkey development of new buildings and refurbishments, as well as offers real estate development and construction services. Additionally, it provides information technology (IT) solutions for the infrastructure industry; enterprise resource planning solutions; and business IT solutions and process consulting for organizations. Hindustan Construction Company Limited was founded in 1926 and is headquartered in Mumbai, India.