Lg Electronics Inc CAPEX jumped on 22.9% and Revenue showed almost no change
08 Jan 2019 • About Lg Electronics Inc (
$39IB) • By InTwits
Lg Electronics Inc reported 2018 financial results today. Overall the company's long term financial model is characterised by the following facts:
- Lg Electronics Inc has low CAPEX intensity: 5 year average CAPEX/Revenue was 4.0%. At the same time it's in pair with industry average of 3.4%
- CAPEX is quite volatile: 3,226,486 KRWm in 2018, 3,055,023 KRWm in 2017, 2,971,161 KRWm in 2016, 8,141,729 KRWm in 2015, 3,353,809 KRWm in 2014
- The company has business model with average profitability: ROIC is 11.0%
- It operates with medium-size leverage: Net Debt/EBITDA is 1.4x while industry average is -0.7x
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 showed almost no change in 2018. Despite revenue decline the EBITDA margin expanded. EBITDA Margin increased slightly on 0.77 pp from 6.9% to 7.7% in 2018. During the last 5 years EBITDA Margin bottomed in 2015 at 5.5% and was growing since that time.
Gross Margin increased slightly on 0.71 pp from 23.9% to 24.6% in 2018. SG&A as a % of Revenue showed almost no change in 2018.
Net Income margin decreased slightly on 0.79 pp from 2.8% to 2.0% in 2018. The efficient tax rate was 30.2% in 2018.
Investments (CAPEX, working capital and M&A)
In 2018 Lg Electronics Inc had CAPEX/Revenue of 5.2%. CAPEX/Revenue increased on 2.1 pp from 3.1% in 2015 to 5.2% in 2018. It's average level of CAPEX/Revenue for the last three years was 4.3%. Lg Electronics Inc invested a big chunk of EBITDA (67.3%) to CAPEX which didn't stop revenue from falling. During the last 5 years CAPEX as a % of Revenue bottomed in 2015 at 3.1% and was growing since that time.
Return on investment
The company operates at low ROIC (11.0%) and ROE (8.2%). ROIC showed almost no change in 2018. ROE decreased on 4.3 pp from 12.5% to 8.2% in 2018.
Leverage (Debt)
Company's Net Debt / EBITDA is 1.4x and Debt / EBITDA is 2.3x. Net Debt / EBITDA decreased on 0.030x from 1.4x to 1.4x in 2018. Debt jumped on 15.4% while cash surged on 27.5%. During 2014-2018 Net Debt/EBITDA topped in 2015 at 2.0x and was declining since that time.
Lg Electronics Inc has good short term financial stability: Interest coverage ratio (ICR) is 6.5x. Lg Electronics Inc has no short term refinancing risk: cash is higher than short term debt (303.9%).
Average interest expence paid by the company was 3.8% in 2018.
The company paid 9.9% of Net Income as dividends in 2018.
Management team
CEO total compensation was 2,147,483,647 KRW in 2018 which included 1,654,000,000 KRW salary and 1,467,000,000 KRW annual bonus.
Financial and operational results
FY ended 31 Dec 2018
Lg Electronics Inc ($39IB) key annual financial indicators| mln. KRW | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 59,040,767 | 56,509,008 | 55,367,033 | 61,396,284 | 61,341,664 | -0.1% |
| Gross Profit | 13,741,645 | 12,873,945 | 13,736,740 | 14,658,721 | 15,081,044 | 2.9% |
| SG&A | 11,086,238 | 10,787,544 | 11,656,588 | 11,489,236 | 11,577,602 | 0.8% |
| EBITDA | 3,806,759 | 3,125,012 | 3,080,745 | 4,236,118 | 4,703,403 | 11.0% |
| EBIT | | | | | 2,703,291 | |
| Interest expence | | | | | 414,524 | |
| Tax | | | | | 535,761 | |
| Net Income | 399,350 | 124,394 | 76,879 | 1,725,770 | 1,240,140 | -28.1% |
Balance Sheet
|
|---|
| Cash | 2,244,406 | 2,710,156 | 3,015,137 | 3,350,597 | 4,270,388 | 27.5% |
| Inventory | | | | | 6,021,356 | |
| Accounts Payable | | | | | 7,216,739 | |
| Short Term Debt | 2,575,550 | 2,326,128 | 1,650,511 | 1,360,756 | 1,405,116 | 3.3% |
| Long Term Debt | 6,426,881 | 6,501,122 | 7,008,500 | 8,089,724 | 9,496,070 | 17.4% |
Cash flow
|
|---|
| Capex | 2,165,948 | 1,747,253 | 2,019,014 | 2,575,542 | 3,166,489 | 22.9% |
| Dividends | | | | | 122,567 | |
Ratios
|
|---|
| Revenue growth | 1.5% | -4.3% | -2.0% | 10.9% | -0.1% | |
| EBITDA growth | 18.5% | -17.9% | -1.4% | 37.5% | 11.0% | |
|
|---|
| Gross Margin | 23.3% | 22.8% | 24.8% | 23.9% | 24.6% | 0.7% |
| EBITDA Margin | 6.4% | 5.5% | 5.6% | 6.9% | 7.7% | 0.8% |
| EBIT Margin | | | | | 4.4% |
| SG&A, % of revenue | 18.8% | 19.1% | 21.1% | 18.7% | 18.9% | 0.2% |
| Net Income Margin | 0.7% | 0.2% | 0.1% | 2.8% | 2.0% | -0.8% |
| CAPEX, % of revenue | 3.7% | 3.1% | 3.6% | 4.2% | 5.2% | 1.0% |
|
|---|
| ROIC | 8.9% | 5.8% | 6.5% | 11.3% | 11.0% | -0.3% |
| ROE | 3.1% | 1.0% | 0.6% | 12.5% | 8.2% | -4.3% |
| Net Debt/EBITDA | 1.8x | 2.0x | 1.8x | 1.4x | 1.4x | -0.0x |
| Interest coverage ratio (ICR) | | | | | 6.5x |
| Interest expence / Average debt | | | | | 3.8% | |
Peers in Leisure Goods
Below we provide Lg Electronics Inc benchmarking against other companies in Leisure Goods 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 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Lightwaverf ($LWRF) | | -30.9% | -31.3% | 110.1% | -7.2% |
| Tandem Group ($TND) | 10.5% | 9.8% | 11.7% | -4.1% | |
| Character Group ($CCT) | | 1.2% | 22.1% | -4.7% | -7.9% |
| Konami Corp ($KNM) | | 0.3% | 14.6% | -8.0% | 4.2% |
| Vmoto Ltd ($VMT) | 70.6% | 10.9% | -63.7% | -12.7% | |
| |
|---|
| Median (6 companies) | 40.5% | 5.5% | 3.8% | -6.3% | -7.5% |
|---|
| Lg Electronics Inc ($39IB) | | -4.3% | -2.0% | 10.9% | -0.1% |
Top companies by Gross margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Konami Corp ($KNM) | 31.3% | 32.8% | 35.0% | 38.6% | 40.6% |
| Hornby ($HRN) | 45.2% | 46.7% | 39.0% | 38.3% | 38.6% |
| Lightwaverf ($LWRF) | 33.9% | | 32.5% | 35.5% | 29.3% |
| Character Group ($CCT) | 29.8% | 37.0% | 31.6% | 32.6% | 34.2% |
| Tandem Group ($TND) | 30.5% | 29.4% | 26.0% | 29.6% | |
| |
|---|
| Median (6 companies) | 30.9% | 32.8% | 32.1% | 34.0% | 36.4% |
|---|
| Lg Electronics Inc ($39IB) | 23.3% | 22.8% | 24.8% | 23.9% | 24.6% |
Top companies by EBITDA margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Konami Corp ($KNM) | 13.3% | 16.5% | 21.5% | 22.9% | 24.1% |
| Character Group ($CCT) | 10.0% | 14.1% | 13.1% | 13.9% | 12.8% |
| Tandem Group ($TND) | 5.3% | 4.7% | 4.2% | 7.0% | |
| Hornby ($HRN) | 1.8% | 7.4% | -17.3% | -11.9% | -16.4% |
| Lightwaverf ($LWRF) | -7.5% | | -43.8% | -15.2% | -65.8% |
| |
|---|
| Median (6 companies) | 3.6% | 14.1% | -6.6% | -2.4% | -1.8% |
|---|
| Lg Electronics Inc ($39IB) | 6.4% | 5.5% | 5.6% | 6.9% | 7.7% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Konami Corp ($KNM) | 21.7% | 11.8% | 7.6% | 6.5% | 7.4% |
| Vmoto Ltd ($VMT) | 2.6% | 1.8% | 3.0% | 3.9% | |
| Hornby ($HRN) | 7.9% | 7.0% | 5.8% | 3.7% | 4.6% |
| Lightwaverf ($LWRF) | 2.0% | | 0.3% | 0.9% | 2.1% |
| Character Group ($CCT) | 0.4% | 0.4% | 0.2% | 0.2% | 0.3% |
| |
|---|
| Median (6 companies) | 2.3% | 1.8% | 1.7% | 2.3% | 3.4% |
|---|
| Lg Electronics Inc ($39IB) | 3.7% | 3.1% | 3.6% | 4.2% | 5.2% |
Top companies by ROIC, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Character Group ($CCT) | 26.8% | 37.3% | 33.7% | 29.9% | 23.5% |
| Tandem Group ($TND) | 37.6% | 16.6% | 13.2% | 24.9% | |
| Konami Corp ($KNM) | 3.2% | 6.6% | 10.4% | 15.0% | 17.5% |
| Hornby ($HRN) | -7.7% | 0.5% | -36.6% | -28.0% | -32.5% |
| Vmoto Ltd ($VMT) | 1.4% | 24.2% | -34.5% | -33.0% | |
| |
|---|
| Median (6 companies) | 2.3% | 16.6% | -12.1% | -6.5% | -7.5% |
|---|
| Lg Electronics Inc ($39IB) | 8.9% | 5.8% | 6.5% | 11.3% | 11.0% |
Top companies by Net Debt / EBITDA
| Top | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Character Group ($CCT) | 0.5x | -0.3x | -0.4x | -0.7x | -1.1x |
| Tandem Group ($TND) | -1.1x | 3.5x | 0.6x | -0.9x | |
| Konami Corp ($KNM) | -0.2x | -0.6x | -1.4x | -2.0x | -2.2x |
| |
|---|
| Median (3 companies) | 0.5x | -0.3x | -0.4x | -0.9x | -1.7x |
|---|
| Lg Electronics Inc ($39IB) | 1.8x | 2.0x | 1.8x | 1.4x | 1.4x |
