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Bank of China Ltd CAPEX surged on 34.4% and Revenue increased on 3.2%

29/03/2018 • About Bank of China Ltd ($3988) • By InTwits

Bank of China Ltd reported 2017 financial results today. Overall the company's long term financial model is characterised by the following facts:
  • Bank of China Ltd has medium CAPEX intensity: 5 year average CAPEX/Revenue was 5.1%. At the same time it's a lot of higher than industry average of 2.3%.
  • CAPEX is quite volatile: 292 in 2017, 481 in 2016, 327 in 2015, 1,270 in 2014, 252 in 2013
  • The company has potentially unprofitable business model: ROIC is at 4.5%
  • It operates with high leverage: Net Debt/EBITDA is 2.6x while industry average is
Below you can find a comprehensive analysis of the key data driving the company's performance and stock price.

Bank of China Ltd ($3988) key annual financial indicators

mln. CNY201320142015201620172017/2016
P&L
Revenue649,194744,656767,159753,105776,8613.2%
Net Income156,911169,595170,845164,578172,4074.8%
Balance Sheet
Cash2,214,3402,391,2112,269,4342,349,1882,303,020-2.0%
Short Term Debt2,163,8782,461,0852,691,9222,683,9473,091,35015.2%
Long Term Debt182,224201,255249,261295,936399,55735.0%
Cash flow
Capex34,77135,10836,94234,24746,01134.4%
Ratios
Revenue growth4.6%14.7%3.0%-1.8%3.2%
Net Income Margin24.2%22.8%22.3%21.9%22.2%0.3%
CAPEX, % of revenue5.4%4.7%4.8%4.5%5.9%1.4%
ROIC6.3%6.2%5.4%4.8%4.5%-0.4%
ROE17.9%17.0%15.0%13.1%12.2%-0.8%


Bank of China Ltd ($3988) key quoterly financial indicators

mln. CNY17Q117Q217Q317Q4YoY change
P&L
Revenue198,239190,906192,512196,4073.7%-6.8%10.2%7.6%
Net Income46,64957,04141,81626,9010.1%22.9%0.1%-9.6%
Balance Sheet
Cash2,465,9862,595,7172,274,2892,303,02013.5%9.9%0.8%-2.0%
Short Term Debt2,526,6073,103,8202,785,2503,091,35011.0%4.2%16.7%15.2%
Long Term Debt409,997287,619510,779399,55728.6%9,696.3%34.4%35.0%
Ratios
Net Income Margin 23.5% 29.9% 21.7% 13.7%-0.9%7.2%-2.2%-2.6%

Revenue and profitability


The company's Revenue increased on 3.2%. Revenue growth showed acceleration in 17Q4 - it increased 7.6% YoY.

Net Income marign showed almost no change in 2017.

Capital expenditures (CAPEX) and working capital investments


The company's CAPEX/Revenue was 5.9% in 2017. The company showed small growth in CAPEX/Revenue of 1.2 pp from 4.7% in 2014 to 5.9% in 2017. Average CAPEX/Revenue for the last three years was 5.1%.

Return on investment


The company operates at good ROE (12.23%) while ROIC is low (4.46%). ROIC showed almost no change in 2017. ROE decreased slightly on 0.84 pp from 13.1% to 12.2% in 2017.

Leverage (Debt)


Debt surged on 17.1% while cash decreased slightly on 2.0%.

Appendix 1: Peers in Banks


Below you can find Bank of China Ltd benchmarking vs. other companies in Banks industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.

Top companies by Revenue growth, %

Top 5 FY2013 FY2014 FY2015 FY2016 FY2017
Shengjing Bank Co Ltd ($2066)36.3%40.1%24.3%17.5%
Huishang Bank Corp Ltd ($3698)22.8%24.3%24.6%17.3%
Chong Hing Bank Ltd ($1111)-1.2%121.1%-17.4%0.7%
Hang Seng Bank Ltd ($11)8.8%9.3%1.4%-2.0%
Chongqing Rural Commercial Bank Co Ltd ($3618)21.7%23.6%7.6%-4.7%
 
Median (8 companies)12.1%23.6%4.8%-3.3%7.1%


Top companies by CAPEX/Revenue, %

Top 5 FY2013 FY2014 FY2015 FY2016 FY2017
Shengjing Bank Co Ltd ($2066)2.2%5.0%3.0%2.3%
Chong Hing Bank Ltd ($1111)1.6%0.7%1.9%2.1%
Chongqing Rural Commercial Bank Co Ltd ($3618)4.3%4.8%4.4%2.0%
HSBC Holdings ($5)2.3%1.8%1.7%1.8%
Bank of East Asia Ltd/The ($23)2.9%1.1%1.6%1.8%
 
Median (8 companies)2.9%1.8%2.5%1.8%0.8%


Top companies by ROIC, %

Top 5 FY2013 FY2014 FY2015 FY2016 FY2017
Hang Seng Bank Ltd ($11)9.5%9.0%8.3%8.1%
Chong Hing Bank Ltd ($1111)5.2%16.4%5.7%5.6%
Chongqing Rural Commercial Bank Co Ltd ($3618)5.7%5.2%4.3%4.1%
Huishang Bank Corp Ltd ($3698)6.8%5.8%4.3%4.0%
Shengjing Bank Co Ltd ($2066)6.6%5.3%3.5%2.3%
 
Median (12 companies)6.2%5.4%4.3%3.1%1.5%