Yash Papers Ltd. :516030-IN: Earnings Analysis: 2017 By the Numbers : August 15, 2017

Yash Papers Ltd. reports financial results for the year ended March 31, 2017.

We analyze the earnings along side the following peers of Yash Papers Ltd. – Rama Pulp & Papers Ltd. and Mohit Paper Mills Limited (502587-IN and 530169-IN) that have also reported for this period.

Highlights

  • Gross margins widened from 17.67% to 18.54% compared to the same period last year, operating (EBITDA) margins now 16.86% from 13.93%.
  • Year-on-year change in operating cash flow of -15.73% 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 1728.43 1726.82 1716.21 1469.07 1133.5
Revenue Growth (YOY) N/A N/A N/A N/A N/A
Earnings 63.89 28.53 -66.63 19.45 16.9
Earnings Growth (YOY) 123.99 142.81 -442.62 15.08 249.16
Net Margin 3.7 1.65 -3.88 1.32 1.49
EPS 1.94 1.03 -2.41 0.7 0.61
Return on Equity 12.12 6.46 -15.74 4.33 3.92
Return on Assets 3.09 1.51 -3.42 1.03 0.98

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Earnings Growth Analysis

The company’s earnings growth was influenced by year-on-year improvement in gross margins from 17.67% to 18.54% as well as better cost controls. As a result, operating margins (EBITDA margins) rose from 13.93% to 16.86% compared to the same period last year. For comparison, gross margins were 17.67% and EBITDA margins were 13.93% 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

516030-IN‘s gross margin improvement has not produced any big difference in its working capital. Working capital days are currently 6.68, compared to last year’s level of 2.18 days. This leads Capital Cube to conclude that the improvements in gross margins are likely from operating decisions and not trade-offs with the balance sheet.

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.

516030-IN‘s change in operating cash flow of -15.73% 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 10.10% to 12.99% and (2) one-time items. The company’s pretax margins are now 5.56% compared to 2.52% 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

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Company Profile

Yash Papers Ltd. engages in the business of manufacturing of paper in India. It operates through Paper segment. The company products include wrapping, bags, specialty and pulp. Yash Papers was founded by K. K. Jhunjhunwala on May 5, 1981 and is headquartered in Faizabad, India.

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