India Glycols Ltd. :500201-IN: Earnings Analysis: 2017 By the Numbers : August 18, 2017

India Glycols Ltd. reports financial results for the year ended March 31, 2017.

We analyze the earnings along side the following peers of India Glycols Ltd. – Savita Oil Technologies Limited and PRAJ Industries Limited (524667-IN and 522205-IN) that have also reported for this period.

Highlights

  • Gross margins widened from 13.39% to 14.10% compared to the same period last year, operating (EBITDA) margins now 9.58% from 7.17%.
  • Year-on-year change in operating cash flow of -84.01% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • Earnings growth from operating margin improvements as well as one-time items.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income growth:

2017 2016 2015 2014 2013
Relevant Numbers (Annual)
Revenues 24963.23 23174.39 25421.62 29480.94 33293.58
Revenue Growth (YOY) N/A N/A N/A N/A N/A
Earnings 350.44 -568.07 -886.45 -1613.58 955.29
Earnings Growth (YOY) 161.69 35.92 45.06 -268.91 41.72
Net Margin 1.4 -2.45 -3.49 -5.47 2.87
EPS 11.32 -18.35 -28.63 -52.12 32.46
Return on Equity 4.77 -11.19 -26.48 -35.53 20.12
Return on Assets 0.92 -1.58 -2.65 -4.92 3.02

Access our Ratings and Scores for India Glycols Ltd.

Earnings Growth Analysis

The company’s earnings growth was influenced by year-on-year improvement in gross margins from 13.39% to 14.10% as well as better cost controls. As a result, operating margins (EBITDA margins) rose from 7.17% to 9.58% compared to the same period last year. For comparison, gross margins were 13.39% and EBITDA margins were 7.17% in the last reporting period.

Gross Margin Versus EBITDA Margin

Quadrant label definitions. Hover to know more

Differentiated; Low Cost, Commodity; Low Cost, Commodity; High Cost, Differentiated; High Cost

Gross Margin Trend

Companies sometimes sacrifice improvements in revenues and margins in order to extend friendlier terms to customers and vendors. Capital Cube probes for such activity by comparing the changes in gross margins with any changes in working capital. If the gross margins improved without a worsening of working capital, it is possible that the company’s performance is a result of truly delivering in the marketplace and not simply an accounting prop-up using the balance sheet.

Gross Margin History
Working Capital Days History

500201-IN‘s improvement in gross margin has been accompanied by an improvement in its balance sheet as well. This suggests that gross margin improvements are likely from operating decisions and not accounting gimmicks. Its working capital days have declined to -97.36 days from -92.75 days for the same period last year.

Gross Margin Versus Working Capital Days

Quadrant label definitions. Hover to know more

Customer Financed, Cash Starved, Supplier Financed, Cash Rich

Cash Versus Earnings – Sustainable Performance?

It is important to examine a company�s cash versus earnings numbers to gauge whether its performance is sustainable.

500201-IN‘s change in operating cash flow of -84.01% compared to the same period last year is about the same as its change in earnings this period. Additionally, this change in operating cash flow is about average among its peer group. This suggests that the company did not use accruals or reserves to manage earnings this period, and that, all else being equal, the earnings number is sustainable.

Operating Cash Flow Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Cash Flow based Earnings, Likely Non-cash Earnings, Low Cash Flow Base, Likely Undeclared Earnings

Margins

The company’s earnings growth has also been influenced by the following factors: (1) Improvements in operating (EBIT) margins from 4.69% to 6.70% and (2) one-time items. The company’s pretax margins are now 1.80% compared to -3.50% for the same period last year.

EBIT Margin Versus PreTax Margin

Quadrant label definitions. Hover to know more

Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables
EBIT Margin History
PreTax Margin History

Access our Ratings and Scores for India Glycols Ltd.

Company Profile

India Glycols Ltd. manufactures green technology based bulk, specialty and performance chemicals and natural gums, spirits, industrial gases, sugar and nutraceuticals. The company operates its business through the following segments: Chemical, Ethyl Alcohol & Extra Neutral Alcohol and Others. The Chemicals segment comprises Glycols, Ethylene Oxide Derivatives and Natural Gum & Derivatives. The Others segment includes Nutraceuticals & Herbal Extracts, Industrial Gases etc. India Glycols was founded on November 19, 1983 and is headquartered in Noida, India.

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