AMS Industries Limited is a diversified company with a fairly strong position in
ID: 1171114 • Letter: A
Question
AMS Industries Limited is a diversified company with a fairly strong position in certain segments. The financials of the company for the last five years are given below. Rs. In crore Income statement summary 2012 2013 2014 2015 2016 Net sales 660 710 730 785 844 EBIT 80 91 92 118 124 Interest 20 22 23 25 27 Profit before Tax 60 69 69 93 97 Tax 20 24 22 30 31 Profit after Tax 40 45 47 63 66 Dividends 10 12 9 16 16 Balance sheet Summary Equity capital (Rs.5 par) 50 50 50 50 50 Reserves and surplus 200 233 271 318 368 Loan funds( Interest bearing) 120 130 135 140 143 Capital Employed 370 413 456 508 561 Net fixed assets 250 270 306 343 373 Investments 20 21 25 30 28 Net current assets 100 122 125 135 160 Total assets 370 413 456 508 561 Market price per share (year end) 35 40 51 57 65 The year 2016 has just ended. The current market price per share is Rs. 65 Analyze the performance of the company and highlight the significant observations. Compute the ROE based on Five factor models. Compute the CAGR of important profit and loss as well as the balance sheet items for the last five years. Compute the FCFF of the company for the last two years. The average tax rate can be assumed as 30%
Explanation / Answer
Income Statement Yrs 2012 2013 2014 2015 2016 Sales 660.00 710.00 730.00 785.00 844.00 Variable and fixed cost 580.00 619.00 638.00 667.00 720.00 EBIT 80.00 91.00 92.00 118.00 124.00 less:interest 20.00 22.00 23.00 25.00 27.00 EBT 60.00 69.00 69.00 93.00 97.00 Less:Tax 20.00 24.00 22.00 30.00 31.00 EAT 40.00 45.00 47.00 63.00 66.00 Avaiable to ESH Less: dividend 10.00 12.00 9.00 16.00 16.00 Retained Earnings 30.00 33.00 38.00 47.00 50.00 Balance Sheet 2012 2013 2014 2015 2016 Equity and liabilities Share Capital (5/- F.V) 50.00 50.00 50.00 50.00 50.00 Res & Surplus 200.00 233.00 271.00 318.00 368.00 Non current liabilities loans funds 120.00 130.00 135.00 140.00 143.00 Total 370.00 413.00 456.00 508.00 561.00 Non Current Assets Net Fixed Assets 250.00 270.00 306.00 343.00 373.00 Investments 20.00 21.00 25.00 30.00 28.00 Current Assets 100.00 122.00 125.00 135.00 160.00 Total 370.00 413.00 456.00 508.00 561.00 Calculation of FCFF 2016 2015 EBIT(1-Tax rate) 82.60 86.80 Add: Depreciation 0 0 less: change in Working capital(Current yr WC-Pevious yr WC) 10 25 (135-125) (160-135) less: capital Expenditure 42 28 (343-306)+(30-25) (373-343)+(28-30) FCFF 30.60 33.80 Calculation Of CAGR (For Income Statement)(EBIT) 2016 value= 2012 value(1+R)^4 (4 is time passage b/w 2012 to 2016 during which growth made) 124= 80(1+R)^4 R=4.77% (For Balance sheet)(cap employed) 561=370(1+R)^4 R=4.28% Similiarly Various Growth rate can be calculated Calculation Of ROE ROE=Net Income Availiable to Equity Shareholders/Equity However ROE can be calculated using Decomposition in various factors As: NET income X Pretax Income(EBT) X EBIT X Revenue X Total Assets Pretax Income(EBT) EBIT Revenue Total Assets Equity Hence Forth ;66/418 418(Share capital and Res & Surplus) 15.79% Analyzing the Performance of Co. using Financial Ratios: Financial Ratios Are of four types but we here use only Solvency ratio and Profitability Ratio for Performance Analyses Remarks Solvency Ratio 2012 2013 2014 2015 2016 Interest Coverage Ratio EBIT/Interest 4.00 4.14 4.00 4.72 4.59 Co is able to meet its fixed cost i.e interest efficiently yet in 2016 it ICR is declined to 4.59 but still co has funds to pay it,s debts. Debt Equity Ratio loan/Equity 0.48 0.46 0.42 0.38 0.34 equity is less than debt in capital Structure which may insecure to loan holders for providing debts in future. Profitability Ratio P/E Ratio 8.75 8.89 10.85 9.05 9.85 co has stong position in matket due to increasing trend of P/E. (Market Price/Earning Per Share) Net Profit Ratio EBIT(1-Tax)/Net sales 0.08 0.09 0.09 0.11 0.10 Co has good Profit Margin yet in 2016 NP ratio Decrease still it has Good Margin.
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