Lg Chem reports 87.3% CAPEX growth in 2018 and 9.7% Revenue growth
30 Jan 2019 • About Lg Chem (
$LGCD) • By InTwits
Lg Chem reported 2018 financial results today. Overall the company's long term financial model is characterised by the following facts:
- Lg Chem has medium CAPEX intensity: 5 year average CAPEX/Revenue was 9.0%. At the same time it's in pair with industry average of 9.4%
- CAPEX is quite volatile: 4,219,355 KRWm in 2018, 2,252,616 KRWm in 2017, 1,398,503 KRWm in 2016, 1,633,410 KRWm in 2015, 1,411,268 KRWm in 2014
- The company has business model with average profitability: ROIC is 10.7%
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
Lg Chem's Revenue increased on 9.7%. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin increased slightly on 0.77 pp from 6.9% to 7.7% in 2018. During 2014-2018 EBITDA Margin topped in 2017 at 16.9%.
Gross Margin decreased on 2.7 pp from 21.6% to 19.0% in 2018. During the last 5 years Gross Margin topped in 2017 at 21.6%. SG&A as a % of Revenue increased slightly on 0.61 pp from 9.0% to 9.6% in 2018. SG&A as a % of Revenue followed a growing trend at 0.59 pp per annum in 2014-2018.
Net Income margin decreased on 2.3 pp from 7.6% to 5.2% in 2018. During the last 5 years Net Income margin topped in 2017 at 7.6%. The efficient tax rate was 22.2% in 2018.
Investments (CAPEX, working capital and M&A)
The company's CAPEX/Revenue was 15.0% in 2018. CAPEX/Revenue increased on 6.9 pp from 8.1% in 2015 to 15.0% in 2018. It's average level of CAPEX/Revenue for the last three years was 10.2%. The company maintained rich investment policy and has spent a lot to CAPEX (113% of EBITDA).
Return on investment
The company operates at low ROIC (10.7%) and ROE (8.0%). ROIC decreased on 5.3 pp from 16.0% to 10.7% in 2018. ROE decreased on 3.7 pp from 11.6% to 8.0% in 2018. During 2014-2018 ROIC topped in 2017 at 16.0%. During the last 5 years ROE topped in 2017 at 11.6%.
Leverage (Debt)
Company's Net Debt / EBITDA is 0.8x and Debt / EBITDA is 1.4x. Net Debt / EBITDA surged on 0.6x from 0.2x to 0.8x in 2018. Debt surged on 74.8% while cash surged on 11.8%.
Lg Chem has good short term financial stability: Interest coverage ratio (ICR) is 16.6x. Lg Chem has no short term refinancing risk: cash is higher than short term debt (155.8%).
Average interest expence paid by the company was 2.5% in 2018.
The company paid 33.5% of Net Income as dividends in 2018.
Management team
CEO total compensation was 2,147,483,647 KRW in 2018 which included 1,486,000,000 KRW salary and 1,080,000,000 KRW annual bonus.
Financial and operational results
FY ended 31 Dec 2018
Lg Chem ($LGCD) key annual financial indicators| mln. KRW | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 22,577,830 | 20,206,583 | 20,659,296 | 25,698,014 | 28,183,013 | 9.7% |
| Gross Profit | 3,003,890 | 3,666,042 | 4,064,236 | 5,563,526 | 5,346,197 | -3.9% |
| SG&A | 1,602,607 | 1,652,643 | 1,817,758 | 2,316,987 | 2,712,068 | 17.1% |
| EBITDA | 2,460,985 | 3,079,650 | 3,328,613 | 4,330,499 | 3,733,339 | -13.8% |
| EBIT | | | | | 2,246,070 | |
| Interest expence | | | | | 135,513 | |
| Tax | | | | | 420,735 | |
| Net Income | 867,924 | 1,152,990 | 1,281,120 | 1,945,280 | 1,472,610 | -24.3% |
Balance Sheet
|
|---|
| Cash | 988,016 | 1,704,918 | 1,474,367 | 2,249,341 | 2,513,702 | 11.8% |
| Inventory | | | | | 4,289,463 | |
| Accounts Payable | | | | | 2,165,969 | |
| Short Term Debt | 2,205,720 | 2,150,778 | 2,212,641 | 1,451,324 | 1,613,146 | 11.1% |
| Long Term Debt | 727,830 | 507,928 | 678,000 | 1,593,625 | 3,708,001 | 132.7% |
Cash flow
|
|---|
| Capex | 1,411,268 | 1,633,410 | 1,398,503 | 2,252,616 | 4,219,355 | 87.3% |
| Dividends | | | | | 493,880 | |
Ratios
|
|---|
| Revenue growth | -2.4% | -10.5% | 2.2% | 24.4% | 9.7% | |
| EBITDA growth | -11.7% | 25.1% | 8.1% | 30.1% | -13.8% | |
|
|---|
| Gross Margin | 13.3% | 18.1% | 19.7% | 21.6% | 19.0% | -2.7% |
| EBITDA Margin | 10.9% | 15.2% | 16.1% | 16.9% | 13.2% | -3.6% |
| EBIT Margin | | | | | 8.0% |
| SG&A, % of revenue | 7.1% | 8.2% | 8.8% | 9.0% | 9.6% | 0.6% |
| Net Income Margin | 3.8% | 5.7% | 6.2% | 7.6% | 5.2% | -2.3% |
| CAPEX, % of revenue | 6.3% | 8.1% | 6.8% | 8.8% | 15.0% | 6.2% |
|
|---|
| ROIC | 8.6% | 11.6% | 12.0% | 16.0% | 10.7% | -5.3% |
| ROE | 6.6% | 8.2% | 8.6% | 11.6% | 8.0% | -3.7% |
| Net Debt/EBITDA | 0.8x | 0.3x | 0.4x | 0.2x | 0.8x | 0.6x |
| Interest expence / Average debt | | | | | 2.5% | |
Peers in Chemicals
Below you can find Lg Chem benchmarking vs. other companies in Chemicals 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 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Hardide ($HDD) | | -0.9% | -28.7% | 51.3% | 42.3% |
| Plastics Capital ($PLA) | | 21.9% | 28.4% | 29.5% | 16.6% |
| Uralkali PJSC ($URKA) | | -12.2% | -27.1% | 21.2% | |
| Frutarom Industries ($FRUT) | 21.6% | 6.5% | 31.4% | 18.8% | |
| Victrex ($VCT) | | 4.3% | -4.3% | 15.0% | 12.3% |
| |
|---|
| Median (10 companies) | 15.8% | 3.4% | -15.7% | 14.8% | 16.6% |
|---|
| Lg Chem ($LGCD) | | -10.5% | 2.2% | 24.4% | 9.7% |
Top companies by Gross margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Uralkali PJSC ($URKA) | 74.3% | 81.8% | 75.9% | 73.2% | |
| Victrex ($VCT) | 64.6% | 63.8% | 62.9% | 63.3% | 63.8% |
| Hardide ($HDD) | 68.8% | | 32.0% | 49.1% | 52.3% |
| Acron JSC ($AKRN) | 42.8% | 52.7% | 49.3% | 45.0% | |
| Phosagro OJSC ($PHOR) | 45.2% | 56.2% | 54.0% | 44.1% | |
| |
|---|
| Median (10 companies) | 42.8% | 40.3% | 35.8% | 41.3% | 52.3% |
|---|
| Lg Chem ($LGCD) | 13.3% | 18.1% | 19.7% | 21.6% | 19.0% |
Top companies by EBITDA margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Uralkali PJSC ($URKA) | 48.6% | 62.3% | 51.9% | 48.6% | |
| Victrex ($VCT) | 44.4% | 45.2% | 45.9% | 44.3% | 44.4% |
| Acron JSC ($AKRN) | 27.2% | 36.2% | 33.2% | 31.5% | |
| Arab Potash Co ($APOD) | 27.7% | 39.6% | 19.0% | 29.9% | |
| Phosagro OJSC ($PHOR) | 30.5% | 43.5% | 38.5% | 28.3% | |
| |
|---|
| Median (10 companies) | 26.7% | 31.9% | 19.0% | 27.9% | 8.6% |
|---|
| Lg Chem ($LGCD) | 10.9% | 15.2% | 16.1% | 16.9% | 13.2% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Phosagro OJSC ($PHOR) | 16.7% | 22.4% | 21.4% | 19.8% | |
| Acron JSC ($AKRN) | 15.4% | 14.2% | 13.6% | 12.0% | |
| Croda International ($50GP) | 6.0% | 8.6% | 8.3% | 11.3% | |
| Uralkali PJSC ($URKA) | 9.8% | 10.9% | 13.9% | 9.8% | |
| Basf Se ($BFA) | 7.1% | 8.2% | 7.2% | 6.2% | |
| |
|---|
| Median (10 companies) | 6.2% | 8.4% | 8.3% | 6.0% | 4.8% |
|---|
| Lg Chem ($LGCD) | 6.3% | 8.1% | 6.8% | 8.8% | 15.0% |
Top companies by ROIC, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Victrex ($VCT) | 29.7% | 28.9% | 26.0% | 24.9% | 25.3% |
| Plastics Capital ($PLA) | 8.6% | 6.8% | 4.3% | 7.2% | 6.7% |
| Hardide ($HDD) | 0.0% | | -35.4% | -32.1% | -21.6% |
| Halosource Inc ($HALO) | -26.3% | -37.2% | -104.9% | | |
| Croda International ($50GP) | 35.3% | 30.5% | 27.7% | 27.5% | |
| |
|---|
| Median (9 companies) | 13.2% | 17.3% | 12.8% | 14.3% | 6.7% |
|---|
| Lg Chem ($LGCD) | 8.6% | 11.6% | 12.0% | 16.0% | 10.7% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Uralkali PJSC ($URKA) | 1.8x | 2.8x | 4.7x | 4.0x | |
| Plastics Capital ($PLA) | 1.4x | 2.2x | 2.3x | 2.8x | 2.3x |
| Phosagro OJSC ($PHOR) | 2.5x | 1.3x | 1.5x | 2.3x | |
| Acron JSC ($AKRN) | 2.8x | 1.4x | 1.8x | 2.0x | |
| Frutarom Industries ($FRUT) | 1.1x | 2.6x | 2.2x | 2.0x | |
| |
|---|
| Median (9 companies) | 1.2x | 1.3x | 1.5x | 2.0x | 0.9x |
|---|
| Lg Chem ($LGCD) | 0.8x | 0.3x | 0.4x | 0.2x | 0.8x |
