HEG 2020-21 Annual Report Analysis

Wed, 31 Mar

HEG has announced its results for the year ended March 2021. Let us have a look at the detailed performance review of the company during FY20-21.

HEG Income Statement Analysis

• Operating income during the year fell 41.5% on a year-on-year (YoY) basis.
• The company's operating profit increased by 915.7% YoY during the fiscal. Operating profit margins witnessed a growth and stood at 4.7% in FY21 as against 0.3% in FY20.
• Depreciation charges increased by 1.4% and finance costs decreased by 68.9% YoY, respectively.
• Other income declined by 21.5% YoY.
• Net profit for the year declined by 147.4% YoY.
• Net profit margins during the year declined from 2.5% in FY20 to 2.0% in FY21.

HEG Income Statement 2020-21

No. of Mths Year Ending		12 Mar-20*	12 Mar-21*	% Change
Net Sales	Rs m	21,490	12,562	-41.5%
Other income	Rs m	1,438	1,129	-21.5%
Total Revenues	Rs m	22,928	13,691	-40.3%
Gross profit	Rs m	-58	-592	915.7%
Depreciation	Rs m	721	731	1.4%
Interest	Rs m	365	114	-68.9%
Profit before tax	Rs m	293	-308	-205.0%
Tax	Rs m	-241	-55	-77.3%
Profit after tax	Rs m	534	-253	-147.4%
Gross profit margin	%	-0.3	-4.7
Effective tax rate	%	-82.2	17.7
Net profit margin	%	2.5	-2.0

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HEG Balance Sheet Analysis

• The company's current liabilities during FY21 down at Rs 6 billion as compared to Rs 8 billion in FY20, thereby witnessing an decrease of -21.1%.
• Current assets rose 1% and stood at Rs 21 billion, while fixed assets fell 9% and stood at Rs 22 billion in FY21.
• Overall, the total assets and liabilities for FY21 stood at Rs 42 billion as against Rs 44 billion during FY20, thereby witnessing a fall of 4%.

HEG Balance Sheet as on March 2021

No. of Mths Year Ending		12 Mar-20*	12 Mar-21*	% Change
Networth	Rs m	35,117	34,951	-0.5
Current Liabilities	Rs m	8,165	6,440	-21.1
Long-term Debt	Rs m	0	0	0.0
Total Liabilities	Rs m	44,384	42,442	-4.4
Current assets	Rs m	20,589	20,736	0.7
Fixed Assets	Rs m	23,795	21,705	-8.8
Total Assets	Rs m	44,384	42,442	-4.4

HEG Cash Flow Statement Analysis

• HEG's cash flow from operating activities (CFO) during FY21 stood at Rs 7 billion on a YoY basis.
• Cash flow from investing activities (CFI) during FY21 stood at Rs -4 billion, an improvement of 56.2% on a YoY basis.
• Cash flow from financial activities (CFF) during FY21 stood at Rs -3 billion, an improvement of 33% on a YoY basis.
• Overall, net cash flows for the company during FY21 stood at Rs -114 million from the Rs 36 million net cash flows seen during FY20.

HEG Cash Flow Statement 2020-21

Particulars	No. of months	12	12	% Change
	Year Ending	Mar-20	Mar-21
Cash Flow from Operating Activities	Rs m	7,387	7,287	-1.4%
Cash Flow from Investing Activities	Rs m	-2,754	-4,303	-
Cash Flow from Financing Activities	Rs m	-4,596	-3,098	-
Net Cash Flow	Rs m	36	-114	-

Current Valuations for HEG

• The trailing twelve-month earnings per share (EPS) of the company stands at Rs -6.6, an decline from the EPS of Rs 13.8 recorded last year.
• The price to earnings (P/E) ratio, at the current price of Rs 1,464.2, stands at -223.6 times its trailing twelve months earnings.
• The price to book value (P/BV) ratio at current price levels stands at 1.6 times, while the price to sales ratio stands at 4.5 times.
• The company's price to cash flow (P/CF) ratio stood at 87.5 times its end-of-year operating cash flow earnings.

Per Share Data/Valuations

No. of Mths Year Ending		12 Mar-20*	12 Mar-21*
Sales per share (Unadj.)	Rs	556.7	325.4
TTM Earnings per share	Rs	13.8	-6.6
Diluted earnings per share	Rs	13.8	-6.6
Price to Cash Flow	x	14.9	87.5
TTM P/E ratio	x	35.1	-223.6
Price / Book Value ratio	x	1.4	1.2
Market Cap	Rs m	49,936	41,853
Dividends per share (Unadj.)	Rs	25.0	3.0

Ratio Analysis for HEG

• Solvency Ratios

Current Ratio: The company's current ratio improved and stood at 3.2x during FY21, from 2.5x during FY20. 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 deteriorated and stood at -1.7x during FY21, from 1.8x during FY20. 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 declined and down at -0.7% during FY21, from 1.5% during FY21. 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 declined and down at -0.6% during FY21, from 1.9% during FY20. 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 declined and down at -0.3% during FY21, from 2.0% during FY20. The ROA measures how efficiently the company uses its assets to generate earnings.

Key Ratio Analysis

No. of Mths Year Ending		12 Mar-20*	12 Mar-21*
Current ratio	x	2.5	3.2
Debtors’ Days	Days	678	841
Interest coverage	x	1.8	-1.7
Debt to equity ratio	x	0.0	0.0
Return on assets	%	2.0	-0.3
Return on equity	%	1.5	-0.7
Return on capital employed	%	1.9	-0.6

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 up from Rs 484.8 to Rs 1,464.2, registering a gain of Rs 979.4 or around 202.0%.

Meanwhile, the S&P BSE CAPITAL GOODS Index is trading at Rs 21,095.8 (down 0.4%). Over the last one year it has moved up from 10,979.5 to 21,095.8, a gain of 10,116 points (up 92.1%).

Overall, the S&P BSE SENSEX is up 74.1% 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