HEG 2022-23 Annual Report Analysis

Wed, 2 Aug

HEG has announced its results for the year ended March 2023. Let us have a look at the detailed performance review of the company during FY22-23.

HEG Income Statement Analysis

• Operating income during the year rose 12.1% on a year-on-year (YoY) basis.
• The company's operating profit increased by 22.7% YoY during the fiscal. Operating profit margins witnessed a fall and down at 28.2% in FY23 as against 25.8% in FY22.
• Depreciation charges increased by 29.0% and finance costs increased by 247.3% YoY, respectively.
• Other income grew by 37.2% YoY.
• Net profit for the year grew by 23.5% YoY.
• Net profit margins during the year grew from 19.6% in FY22 to 21.6% in FY23.

HEG Income Statement 2022-23

No. of Mths Year Ending		12 Mar-22*	12 Mar-23*	% Change
Net Sales	Rs m	22,016	24,672	12.1%
Other income	Rs m	795	1,091	37.2%
Total Revenues	Rs m	22,812	25,764	12.9%
Gross profit	Rs m	5,677	6,965	22.7%
Depreciation	Rs m	793	1,023	29.0%
Interest	Rs m	75	260	247.3%
Profit before tax	Rs m	5,605	6,774	20.9%
Tax	Rs m	1,294	1,450	12.0%
Profit after tax	Rs m	4,310	5,324	23.5%
Gross profit margin	%	25.8	28.2
Effective tax rate	%	23.1	21.4
Net profit margin	%	19.6	21.6

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HEG Balance Sheet Analysis

• The company's current liabilities during FY23 stood at Rs 15 billion as compared to Rs 14 billion in FY22, thereby witnessing an increase of 3.4%.
• Current assets fell 4% and stood at Rs 30 billion, while fixed assets rose 23% and stood at Rs 28 billion in FY23.
• Overall, the total assets and liabilities for FY23 stood at Rs 58 billion as against Rs 54 billion during FY22, thereby witnessing a growth of 7%.

HEG Balance Sheet as on March 2023

No. of Mths Year Ending		12 Mar-22*	12 Mar-23*	% Change
Networth	Rs m	39,136	42,809	9.4
Current Liabilities	Rs m	14,150	14,628	3.4
Long-term Debt	Rs m	0	0	0.0
Total Liabilities	Rs m	54,358	58,387	7.4
Current assets	Rs m	31,349	29,992	-4.3
Fixed Assets	Rs m	23,009	28,395	23.4
Total Assets	Rs m	54,358	58,387	7.4

HEG Cash Flow Statement Analysis

• HEG's cash flow from operating activities (CFO) during FY23 stood at Rs 1 billion on a YoY basis.
• Cash flow from investing activities (CFI) during FY23 stood at Rs -211 million on a YoY basis.
• Cash flow from financial activities (CFF) during FY23 stood at Rs -1,000 million on a YoY basis.
• Overall, net cash flows for the company during FY23 stood at Rs -77 million from the Rs 197 million net cash flows seen during FY22.

HEG Cash Flow Statement 2022-23

Particulars	No. of months	12	12	% Change
	Year Ending	Mar-22	Mar-23
Cash Flow from Operating Activities	Rs m	-1,406	1,133	-
Cash Flow from Investing Activities	Rs m	-1,834	-211	-
Cash Flow from Financing Activities	Rs m	3,436	-1,000	-
Net Cash Flow	Rs m	197	-77	-

Current Valuations for HEG

• The trailing twelve-month earnings per share (EPS) of the company stands at Rs 137.9, an improvement from the EPS of Rs 111.7 recorded last year.
• The price to earnings (P/E) ratio, at the current price of Rs 1,743.0, stands at 14.8 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 2.7 times.
• The company's price to cash flow (P/CF) ratio stood at 7.2 times its end-of-year operating cash flow earnings.

Per Share Data/Valuations

No. of Mths Year Ending		12 Mar-22*	12 Mar-23*
Sales per share (Unadj.)	Rs	570.4	639.2
TTM Earnings per share	Rs	111.7	137.9
Diluted earnings per share	Rs	111.7	137.9
Price to Cash Flow	x	10.4	7.2
TTM P/E ratio	x	13.6	14.8
Price / Book Value ratio	x	1.8	1.1
Market Cap	Rs m	70,570	45,645
Dividends per share (Unadj.)	Rs	40.0	42.5

Ratio Analysis for HEG

• Solvency Ratios

Current Ratio: The company's current ratio deteriorated and stood at 2.1x during FY23, from 2.2x during FY22. 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 27.0x during FY23, from 75.8x during FY22. 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 12.4% during FY23, from 11.0% during FY23. 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 16.4% during FY23, from 14.5% during FY22. 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 9.6% during FY23, from 8.1% during FY22. The ROA measures how efficiently the company uses its assets to generate earnings.

Key Ratio Analysis

No. of Mths Year Ending		12 Mar-22*	12 Mar-23*
Current ratio	x	2.2	2.1
Debtors’ Days	Days	977	724
Interest coverage	x	75.8	27.0
Debt to equity ratio	x	0.0	0.0
Return on assets	%	8.1	9.6
Return on equity	%	11.0	12.4
Return on capital employed	%	14.5	16.4

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 1,289.6 to Rs 1,743.0, registering a gain of Rs 453.4 or around 35.2%.

Meanwhile, the S&P BSE CAPITAL GOODS Index is trading at Rs 43,066.5 (down 1.8%). Over the last one year it has moved up from 30,053.1 to 43,066.5, a gain of 13,013 points (up 43.3%).

Overall, the S&P BSE SENSEX is up 13.2% over the year.

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