Cherkizovo Group OJSC reports 43.8% Net Income decline in 2019 and 6.5 pp EBITDA Margin decline from 21.6% to 15.1%
13 Feb 2020 • About Cherkizovo Group OJSC (
$CHE) • By InTwits
Cherkizovo Group OJSC reported 2019 financial results today. Here are the key drivers of the company's long term financial model:
- Cherkizovo Group OJSC is a growth stock: 2019 revenue growth was 19.6%, 5 year revenue CAGR was 11.6% at 2019 ROIC 8.0%
- Cherkizovo Group OJSC has medium CAPEX intensity: 5 year average CAPEX/Revenue was 9.9%. At the same time it's a lot of higher than industry average of 5.7%.
- CAPEX is quite volatile: £39m in FY2019, £28m in FY2018, £22m in FY2017, £28m in FY2016, £8m in FY2015
- The company has business model with low profitability: ROIC is 8.0%
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 jumped on 19.6%. During the last 5 years Revenue growth bottomed in 2016 at 7.0% and was accelerating since that time. Revenue growth was financed by EBITDA margin decline. EBITDA Margin decreased on 6.5 pp from 21.6% to 15.1% in 2019.
Gross Margin decreased slightly on 0.68 pp from 25.0% to 24.3% in 2019. SG&A as a % of Revenue showed almost no change in 2019. SG&A as a % of Revenue declined at -0.36 pp per annum in 2015-2019.
Net Income margin decreased on 6.3 pp from 12.0% to 5.6% in 2019.
Investments (CAPEX, working capital and M&A)
In 2019 Cherkizovo Group OJSC had CAPEX/Revenue of 6.7%. The company showed decline in CAPEX/Revenue of 3.7 pp from 10.4% in 2016 to 6.7% in 2019. Average CAPEX/Revenue for the last three years was 8.9%. CAPEX as a % of Revenue followed a declining trend at -1.2 pp per annum in 2015-2019.
Return on investment
The company operates at low ROIC (8.0%) and ROE (11.2%). ROIC decreased on 5.3 pp from 13.3% to 8.0% in 2019. ROE dropped on 10.3 pp from 21.5% to 11.2% in 2019.
Leverage (Debt)
Company's Net Debt / EBITDA is 3.4x and Debt / EBITDA is 3.6x. Net Debt / EBITDA jumped on 0.7x from 2.7x to 3.4x in 2019. Debt decreased on 5.3% while cash dropped on 65.6%.
Cherkizovo Group OJSC has short term refinancing risk: cash is only 15.8% of short term debt.
Management team
The company's CEO Sergey Mikhailov is a founder and has spent 4 years with the company. Cherkizovo Group OJSC's CFO Ludmila Mikhailova has spent 4 years with the company.
Financial and operational results
FY ended 31 Dec 2019
Cherkizovo Group OJSC ($CHE) key annual financial indicators| mln. RUB | 2015 | 2016 | 2017 | 2018 | 2019 | 2019/2018 |
|---|
P&L
|
|---|
| Revenue | 77,033 | 82,417 | 90,465 | 100,422 | 120,109 | 19.6% |
| Gross Profit | 19,149 | 17,855 | 23,559 | 25,104 | 29,213 | 16.4% |
| SG&A | 11,575 | 12,562 | 13,363 | 13,865 | 16,723 | 20.6% |
| EBITDA | 11,361 | 9,917 | 15,100 | 21,657 | 18,130 | -16.3% |
| EBIT | | | | 15,612 | | |
| Interest expence | | | | 3,375 | | |
| Tax | | | | -187 | | |
| Net Income | 6,007 | 1,919 | 5,800 | 12,004 | 6,751 | -43.8% |
Balance Sheet
|
|---|
| Cash | 5,561 | 1,002 | 705 | 9,613 | 3,304 | -65.6% |
| Accounts Receivable | | | | 5,733 | | |
| Inventory | | | | 27,824 | | |
| Accounts Payable | | | | 10,830 | | |
| Short Term Debt | 24,730 | 13,824 | 18,995 | 23,798 | 20,862 | -12.3% |
| Long Term Debt | 16,119 | 24,470 | 30,603 | 44,643 | 43,941 | -1.6% |
Cash flow
|
|---|
| Capex | 9,415 | 8,570 | 9,882 | 9,182 | 8,092 | -11.9% |
| Dividends | | | | 3,922 | | |
Ratios
|
|---|
| Revenue growth | 11.1% | 7.0% | 9.8% | 11.0% | 19.6% | |
| EBITDA growth | -33.0% | -12.7% | 52.3% | 43.4% | -16.3% | |
|
|---|
| Gross Margin | 24.9% | 21.7% | 26.0% | 25.0% | 24.3% | -0.7% |
| EBITDA Margin | 14.7% | 12.0% | 16.7% | 21.6% | 15.1% | -6.5% |
| EBIT Margin | | | | 15.5% | |
| SG&A, % of revenue | 15.0% | 15.2% | 14.8% | 13.8% | 13.9% | 0.1% |
| Net Income Margin | 7.8% | 2.3% | 6.4% | 12.0% | 5.6% | -6.3% |
| CAPEX, % of revenue | 12.2% | 10.4% | 10.9% | 9.1% | 6.7% | -2.4% |
|
|---|
| ROIC | 8.9% | 5.6% | 10.2% | 13.3% | 8.0% | -5.3% |
| ROE | 12.4% | 3.7% | 11.1% | 21.5% | 11.2% | -10.3% |
| Net Debt/EBITDA | 3.1x | 3.8x | 3.2x | 2.7x | 3.4x | 0.7x |
| Interest coverage ratio (ICR) | | | | 4.6x | |
| Interest expence / Average debt | | | | 5.7% | | |
People
|
|---|
| Employees | | | | 23,496 | | |
| Revenue/Employee, th. RUB | | | | 4,274 | | |
Peers in Food Producers
Below we provide Cherkizovo Group OJSC benchmarking against other companies in Food Producers 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 | FY2015 | FY2016 | FY2017 | FY2018 | FY2019 |
|---|
| Real Good Food ($RGD) | -5.1% | -4.0% | 7.3% | 20.5% | |
| Wynnstay Group ($WYN) | | -2.4% | 6.1% | 18.4% | 6.0% |
| Carr'S Milling Industries ($CRM) | -22.8% | -4.9% | 9.9% | 16.5% | |
| Zambeef Products ($ZAM) | | 52.8% | 2.5% | 14.2% | 12.7% |
| Origin Enterprises ($OGN) | 3.0% | 4.3% | 0.5% | 6.5% | |
| |
|---|
| Median (10 companies) | -5.1% | 0.5% | 7.0% | 4.8% | 4.0% |
|---|
| Cherkizovo Group OJSC ($CHE) | | 7.0% | 9.8% | 11.0% | 19.6% |
Top companies by Gross margin, %
| Top 5 | FY2015 | FY2016 | FY2017 | FY2018 | FY2019 |
|---|
| Unilever ($ULVR) | 42.2% | 42.7% | 43.1% | 43.6% | |
| Produce Investments ($PIL) | 36.4% | 37.9% | 35.7% | 37.8% | |
| Zambeef Products ($ZAM) | 43.2% | 36.3% | 32.9% | 35.0% | 34.2% |
| Tongaat Hulett Ltd ($THL) | 22.4% | 19.9% | 22.9% | 20.6% | 27.1% |
| Real Good Food ($RGD) | 24.4% | 26.6% | 24.4% | 19.2% | |
| |
|---|
| Median (9 companies) | 24.4% | 26.8% | 24.4% | 19.2% | 27.1% |
|---|
| Cherkizovo Group OJSC ($CHE) | 24.9% | 21.7% | 26.0% | 25.0% | 24.3% |
Top companies by EBITDA margin, %
| Top 5 | FY2015 | FY2016 | FY2017 | FY2018 | FY2019 |
|---|
| Unilever ($ULVR) | 16.8% | 18.0% | 19.8% | 28.1% | 20.6% |
| Tongaat Hulett Ltd ($THL) | 16.5% | 17.5% | 19.3% | 17.5% | 10.9% |
| Tate & Lyle ($BD15) | 6.1% | 10.3% | 13.9% | 16.4% | |
| Kerry Group ($KYGA) | 13.8% | 13.0% | 12.3% | 13.3% | |
| Zambeef Products ($ZAM) | 14.7% | 9.7% | 5.3% | 8.1% | 9.0% |
| |
|---|
| Median (11 companies) | 10.4% | 10.0% | 12.3% | 5.1% | 10.0% |
|---|
| Cherkizovo Group OJSC ($CHE) | 14.7% | 12.0% | 16.7% | 21.6% | 15.1% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2015 | FY2016 | FY2017 | FY2018 | FY2019 |
|---|
| Tongaat Hulett Ltd ($THL) | 5.0% | 10.9% | 6.0% | 12.1% | 6.4% |
| Real Good Food ($RGD) | 1.4% | 6.4% | 10.0% | 8.4% | |
| Zambeef Products ($ZAM) | 15.9% | 2.1% | 6.4% | 5.4% | 3.6% |
| Kerry Group ($KYGA) | 4.1% | 3.7% | 4.7% | 4.5% | |
| Tate & Lyle ($BD15) | 5.2% | 7.6% | 4.6% | 4.1% | |
| |
|---|
| Median (11 companies) | 4.1% | 3.5% | 4.6% | 2.8% | 3.2% |
|---|
| Cherkizovo Group OJSC ($CHE) | 12.2% | 10.4% | 10.9% | 9.1% | 6.7% |
Top companies by ROIC, %
| Top 5 | FY2015 | FY2016 | FY2017 | FY2018 | FY2019 |
|---|
| Unilever ($ULVR) | 26.0% | 24.3% | 24.6% | 31.6% | 20.7% |
| Tate & Lyle ($BD15) | 1.8% | 7.2% | 12.1% | 14.4% | |
| Origin Enterprises ($OGN) | 20.1% | 15.3% | 11.1% | 13.0% | |
| Kerry Group ($KYGA) | 15.8% | 12.8% | 11.9% | 11.3% | |
| Wynnstay Group ($WYN) | 9.7% | 8.0% | 8.3% | 9.9% | 7.3% |
| |
|---|
| Median (13 companies) | 9.7% | 8.1% | 7.3% | 8.4% | 9.4% |
|---|
| Cherkizovo Group OJSC ($CHE) | 8.9% | 5.6% | 10.2% | 13.3% | 8.0% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2015 | FY2016 | FY2017 | FY2018 | FY2019 |
|---|
| Tongaat Hulett Ltd ($THL) | 1.8x | 2.1x | 1.5x | 2.3x | 5.6x |
| Zambeef Products ($ZAM) | 3.0x | 2.1x | 4.0x | 2.0x | 2.7x |
| Kerry Group ($KYGA) | 2.2x | 1.9x | 1.8x | 2.0x | |
| Unilever ($ULVR) | 1.4x | 1.4x | 2.0x | 1.5x | 2.3x |
| Tate & Lyle ($BD15) | 4.0x | 1.8x | 1.1x | 0.9x | |
| |
|---|
| Median (8 companies) | 1.6x | 1.4x | 1.8x | 1.2x | 2.5x |
|---|
| Cherkizovo Group OJSC ($CHE) | 3.1x | 3.8x | 3.2x | 2.7x | 3.4x |
