Larsen & Toubro reports 76.9% EBITDA growth in 2018 and 6.3 pp EBITDA Margin growth from 10.3% to 16.6%
28 May 2018 • About Larsen & Toubro (
$LTOD) • By InTwits
Larsen & Toubro reported FY2018 financial results today. Here are the key drivers of the company's long term financial model:
- Larsen & Toubro has low CAPEX intensity: 5 year average CAPEX/Revenue was 5.0%. At the same time it's a lot of higher than industry average of 1.7%.
- CAPEX is quite volatile: ₹28,772m in FY2018, ₹29,771m in FY2017, ₹43,216m in FY2016, ₹62,525m in FY2015, ₹69,673m in FY2014
- The company has business model with average profitability: ROIC is 11.0%
- It operates with high leverage: Net Debt/EBITDA is 5.1x while industry average is 3.2x
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 9.5%. Revenue growth happened at the same time with EBITDA margin expansion. EBITDA Margin increased on 6.3 pp from 10.3% to 16.6% in FY2018. During FY2014-FY2018 EBITDA Margin bottomed in FY2017 at 10.3%.
Net Income margin increased slightly on 0.64 pp from 5.6% to 6.3% in FY2018. During the last 5 years Net Income margin bottomed in FY2016 at 4.2% and was growing since that time.
Investments (CAPEX, working capital and M&A)
The company's CAPEX/Revenue was 2.4% in FY2018. The company showed decline in CAPEX/Revenue of 4.5 pp from 7.0% in FY2015 to 2.4% in FY2018. For the last three years the average CAPEX/Revenue was 3.2%. CAPEX as a % of Revenue followed a declining trend at -1.6 pp per annum in FY2014-FY2018.
Return on investment
The company operates at good ROE (13.9%) while ROIC is low (11.0%). ROIC increased on 4.9 pp from 6.1% to 11.0% in FY2018. ROE increased slightly on 1.1 pp from 12.8% to 13.9% in FY2018. During the last 5 years ROIC bottomed in FY2017 at 6.1%. During the last 5 years ROE bottomed in FY2016 at 9.9% and was growing since that time.
Leverage (Debt)
Debt level is 5.1x Net Debt / EBITDA and 5.5x Debt / EBITDA. Net Debt / EBITDA dropped on 2.9x from 8.0x to 5.1x in FY2018. Debt jumped on 14.4% while cash surged on 51.4%. During the last 5 years Net Debt/EBITDA topped in FY2017 at 8.0x.
Larsen & Toubro has short term refinancing risk: cash is only 23.0% of short term debt.
Financial and operational results
FY ended 31 Mar 2018
Larsen & Toubro ($LTOD) key annual financial indicators| mln. INR | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 844,936 | 895,897 | 1,000,328 | 1,076,365 | 1,179,081 | 9.5% |
| EBITDA | 110,951 | 114,464 | 104,571 | 110,732 | 195,911 | 76.9% |
| Net Income | 49,020 | 47,648 | 42,329 | 60,412 | 73,699 | 22.0% |
Balance Sheet
|
|---|
| Cash | 40,597 | 57,120 | 53,331 | 52,590 | 79,605 | 51.4% |
| Short Term Debt | 254,006 | 251,608 | 269,117 | 266,134 | 346,093 | 30.0% |
| Long Term Debt | 554,449 | 655,372 | 612,238 | 673,406 | 729,148 | 8.3% |
Cash flow
|
|---|
| Capex | 69,673 | 62,525 | 43,216 | 29,771 | 28,772 | -3.4% |
Ratios
|
|---|
| Revenue growth | 14.2% | 6.0% | 11.7% | 7.6% | 9.5% | |
| EBITDA growth | 7.8% | 3.2% | -8.6% | 5.9% | 76.9% | |
|
|---|
| EBITDA Margin | 13.1% | 12.8% | 10.5% | 10.3% | 16.6% | 6.3% |
| Net Income Margin | 5.8% | 5.3% | 4.2% | 5.6% | 6.3% | 0.6% |
| CAPEX, % of revenue | 8.2% | 7.0% | 4.3% | 2.8% | 2.4% | -0.3% |
|
|---|
| ROIC | 8.6% | 6.8% | 6.3% | 6.1% | 11.0% | 4.9% |
| ROE | 13.7% | 12.1% | 9.9% | 12.8% | 13.9% | 1.1% |
| Net Debt/EBITDA | 6.9x | 7.4x | 7.9x | 8.0x | 5.1x | -2.9x |
Peers in Construction & Engineering
Below you can find Larsen & Toubro benchmarking vs. other companies in Construction & Engineering 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.
Top companies by Revenue growth, %
| Top | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Hindustan Construction Co ($HIN) | | 7.9% | -17.5% | 15.5% | 2.7% |
| Nexus Infrastructure Plc ($NEXS) | 31.1% | 20.8% | 3.7% | -0.5% | |
| Electrosteel Castings ($ECS) | | 1.5% | -8.2% | -5.7% | 3.6% |
| |
|---|
| Median (3 companies) | 31.1% | 7.9% | -8.2% | -0.5% | 3.1% |
|---|
| Larsen & Toubro ($LTOD) | | 6.0% | 11.7% | 7.6% | 9.5% |
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% | 11.9% |
| Nexus Infrastructure Plc ($NEXS) | 6.8% | 7.1% | 8.6% | 7.9% | |
| Hindustan Construction Co ($HIN) | 8.9% | 12.0% | 13.5% | 7.9% | 7.7% |
| |
|---|
| Median (3 companies) | 8.9% | 12.0% | 12.3% | 7.9% | 9.8% |
|---|
| Larsen & Toubro ($LTOD) | 13.1% | 12.8% | 10.5% | 10.3% | 16.6% |
Top companies by CAPEX/Revenue, %
| Top | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Nexus Infrastructure Plc ($NEXS) | 2.1% | 0.4% | 0.8% | 3.0% | |
| Hindustan Construction Co ($HIN) | 13.4% | 9.2% | 1.1% | 2.5% | 0.0% |
| Electrosteel Castings ($ECS) | 6.9% | 5.8% | 1.7% | 1.5% | 1.4% |
| |
|---|
| Median (3 companies) | 6.9% | 5.8% | 1.1% | 2.5% | 0.7% |
|---|
| Larsen & Toubro ($LTOD) | 8.2% | 7.0% | 4.3% | 2.8% | 2.4% |
Top companies by ROIC, %
| Top | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Nexus Infrastructure Plc ($NEXS) | | 49.5% | 45.3% | 32.5% | |
| Hindustan Construction Co ($HIN) | 4.8% | 7.4% | 8.9% | 8.2% | 11.7% |
| Electrosteel Castings ($ECS) | 6.3% | 5.0% | 4.6% | 4.6% | 4.5% |
| |
|---|
| Median (3 companies) | 5.5% | 7.4% | 8.9% | 8.2% | 8.1% |
|---|
| Larsen & Toubro ($LTOD) | 8.6% | 6.8% | 6.3% | 6.1% | 11.0% |
Top companies by Net Debt / EBITDA
| Top | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Hindustan Construction Co ($HIN) | 12.3x | 9.3x | 6.4x | 8.5x | 4.9x |
| Electrosteel Castings ($ECS) | 6.9x | 8.0x | 6.9x | 5.2x | 4.6x |
| Nexus Infrastructure Plc ($NEXS) | -2.4x | -2.9x | -1.9x | -1.6x | |
| |
|---|
| Median (3 companies) | 6.9x | 8.0x | 6.4x | 5.2x | 4.7x |
|---|
| Larsen & Toubro ($LTOD) | 6.9x | 7.4x | 7.9x | 8.0x | 5.1x |
