HEG 2018-19 Annual Report Analysis

Sun, 31 Mar

HEG has announced its results for the year ended March 2019. Let us have a look at the detailed performance review of the company during FY18-19.

HEG Income Statement Analysis

• Operating income during the year rose 140.5% on a year-on-year (YoY) basis.
• The company's operating profit increased by 174.2% YoY during the fiscal. Operating profit margins witnessed a fall and down at 70.7% in FY19 as against 62.0% in FY18.
• Depreciation charges decreased by 0.2% and finance costs decreased by 68.2% YoY, respectively.
• Other income grew by 212.6% YoY.
• Net profit for the year grew by 182.1% YoY.
• Net profit margins during the year grew from 39.4% in FY18 to 46.3% in FY19.

HEG Income Statement 2018-19

No. of Mths Year Ending		12 Mar-18*	12 Mar-19*	% Change
Net Sales	Rs m	27,417	65,928	140.5%
Other income	Rs m	349	1,092	212.6%
Total Revenues	Rs m	27,767	67,020	141.4%
Gross profit	Rs m	16,988	46,582	174.2%
Depreciation	Rs m	726	724	-0.2%
Interest	Rs m	564	180	-68.2%
Profit before tax	Rs m	16,047	46,771	191.5%
Tax	Rs m	5,234	16,266	210.8%
Profit after tax	Rs m	10,813	30,504	182.1%
Gross profit margin	%	62.0	70.7
Effective tax rate	%	32.6	34.8
Net profit margin	%	39.4	46.3

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HEG Balance Sheet Analysis

• The company's current liabilities during FY19 stood at Rs 12 billion as compared to Rs 7 billion in FY18, thereby witnessing an increase of 72.4%.
• Current assets rose 113% and stood at Rs 34 billion, while fixed assets rose 52% and stood at Rs 17 billion in FY19.
• Overall, the total assets and liabilities for FY19 stood at Rs 51 billion as against Rs 27 billion during FY18, thereby witnessing a growth of 88%.

HEG Balance Sheet as on March 2019

No. of Mths Year Ending		12 Mar-18*	12 Mar-19*	% Change
Networth	Rs m	19,075	37,937	98.9
Current Liabilities	Rs m	7,065	12,179	72.4
Long-term Debt	Rs m	0	0	0.0
Total Liabilities	Rs m	27,391	51,444	87.8
Current assets	Rs m	16,147	34,355	112.8
Fixed Assets	Rs m	11,244	17,088	52.0
Total Assets	Rs m	27,391	51,444	87.8

HEG Cash Flow Statement Analysis

• HEG's cash flow from operating activities (CFO) during FY19 stood at Rs 15 billion, an improvement of 150.5% on a YoY basis.
• Cash flow from investing activities (CFI) during FY19 stood at Rs -7 billion, an improvement of 7,265.4% on a YoY basis.
• Cash flow from financial activities (CFF) during FY19 stood at Rs -8 billion on a YoY basis.
• Overall, net cash flows for the company during FY19 stood at Rs 240 million from the Rs -31 million net cash flows seen during FY18.

HEG Cash Flow Statement 2018-19

Particulars	No. of months	12	12	% Change
	Year Ending	Mar-18	Mar-19
Cash Flow from Operating Activities	Rs m	5,941	14,882	150.5%
Cash Flow from Investing Activities	Rs m	-92	-6,758	-
Cash Flow from Financing Activities	Rs m	-5,880	-7,885	-
Net Cash Flow	Rs m	-31	240	-

Current Valuations for HEG

• The trailing twelve-month earnings per share (EPS) of the company stands at Rs 790.3, an improvement from the EPS of Rs 270.6 recorded last year.
• The price to earnings (P/E) ratio, at the current price of Rs 2,094.2, stands at 2.6 times its trailing twelve months earnings.
• The price to book value (P/BV) ratio at current price levels stands at 2.1 times, while the price to sales ratio stands at 1.2 times.
• The company's price to cash flow (P/CF) ratio stood at 4.3 times its end-of-year operating cash flow earnings.

Per Share Data/Valuations

No. of Mths Year Ending		12 Mar-18*	12 Mar-19*
Sales per share (Unadj.)	Rs	686.1	1,708.0
TTM Earnings per share	Rs	270.6	790.3
Diluted earnings per share	Rs	280.2	790.4
Price to Cash Flow	x	10.6	4.3
TTM P/E ratio	x	11.4	2.6
Price / Book Value ratio	x	3.9	3.5
Market Cap	Rs m	74,567	133,540
Dividends per share (Unadj.)	Rs	80.0	80.0

Ratio Analysis for HEG

• Solvency Ratios

Current Ratio: The company's current ratio improved and stood at 2.8x during FY19, from 2.3x during FY18. The current ratio measures the company's ability to pay short-term and long-term obligations.

Interest Coverage Ratio: The company's interest coverage ratio improved and stood at 261.3x during FY19, from 29.4x during FY18. The interest coverage ratio of a company states how easily a company can pay its interest expense on outstanding debt. A higher ratio is preferable.

• Profitability Ratios

Return on Equity (ROE): The ROE for the company improved and stood at 80.4% during FY19, from 56.7% during FY19. The ROE measures the ability of a firm to generate profits from its shareholders capital in the company.

Return on Capital Employed (ROCE): The ROCE for the company improved and stood at 123.8% during FY19, from 87.1% during FY18. The ROCE measures the ability of a firm to generate profits from its total capital (shareholder capital plus debt capital) employed in the company.

Return on Assets (ROA): The ROA of the company improved and stood at 59.6% during FY19, from 41.5% during FY18. The ROA measures how efficiently the company uses its assets to generate earnings.

Key Ratio Analysis

No. of Mths Year Ending		12 Mar-18*	12 Mar-19*
Current ratio	x	2.3	2.8
Debtors’ Days	Days	1,295	657
Interest coverage	x	29.4	261.3
Debt to equity ratio	x	0.0	0.0
Return on assets	%	41.5	59.6
Return on equity	%	56.7	80.4
Return on capital employed	%	87.1	123.8

To see how HEG has performed over the last 5 years, please visit here.

HEG Share Price Performance

Over the last one year, HEG share price has moved down from Rs 3,181.5 to Rs 2,094.2, registering a loss of Rs 1,087.4 or around 34.2%.

Meanwhile, the S&P BSE CAPITAL GOODS Index is trading at Rs 18,472.0 (up 0.5%). Over the last one year it has moved down from 18,476.7 to 18,472.0, a loss of 5 points (down 0.0%).

Overall, the S&P BSE SENSEX is up 16.3% over the year.

(To know more, check out historical annual results for HEG and quarterly results for HEG)

Read: Latest Annual Report Analysis of HEG