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Bank of Communications Co Ltd reports 22.1% CAPEX decline in 2017 while 11.3% Revenue growth

29/03/2018 • About Bank of Communications Co Ltd ($3328) • By InTwits

Bank of Communications Co Ltd reported 2017 financial results today. Overall the company's long term financial model is characterised by the following facts:
  • Bank of Communications Co Ltd has medium CAPEX intensity: 5 year average CAPEX/Revenue was 7.0%. At the same time it's a lot of higher than industry average of 2.3%.
  • CAPEX is quite volatile: 9,619 in 2017, 5,310 in 2016, 8,384 in 2015, 5,048 in 2014, 3,724 in 2013
  • The company has potentially unprofitable business model: ROIC is at 2.5%
  • It operates with high leverage: Net Debt/EBITDA is 3.2x 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 Communications Co Ltd ($3328) key annual financial indicators

mln. CNY201320142015201620172017/2016
P&L
Revenue297,013333,632357,489350,511390,04911.3%
Net Income62,29565,85066,52867,21070,2234.5%
Balance Sheet
Cash896,556938,055920,228991,435938,571-5.3%
Short Term Debt1,127,7271,413,6221,658,6512,051,8512,397,05416.8%
Long Term Debt82,238129,547170,106229,515287,66225.3%
Cash flow
Capex15,10517,79325,71135,58427,736-22.1%
Ratios
Revenue growth9.4%12.3%7.2%-2.0%11.3%
Net Income Margin21.0%19.7%18.6%19.2%18.0%-1.2%
CAPEX, % of revenue5.1%5.3%7.2%10.2%7.1%-3.0%
ROIC5.1%4.5%3.8%3.0%2.5%-0.5%
ROE15.6%14.8%13.4%11.7%10.9%-0.8%


Bank of Communications Co Ltd ($3328) key quoterly financial indicators

mln. CNY17Q117Q217Q317Q4YoY change
P&L
Revenue100,54996,26695,78196,9225.6%12.2%12.1%
Net Income19,32319,65215,44415,8041.3%5.7%8.0%
Balance Sheet
Cash1,010,524963,575950,286938,57114.4%-7.4%-5.3%
Short Term Debt2,192,7942,362,2412,388,2072,397,05431.4%14.7%16.8%
Long Term Debt228,024260,945259,744287,66227.9%45.6%25.3%
Ratios
Net Income Margin 19.2% 20.4% 16.1% 16.3%-0.8%-1.3%-0.6%

Revenue and profitability


The company's Revenue surged on 11.3%. Revenue growth showed acceleration in 17Q4 - it increased 12.1% YoY.

Net Income marign decreased slightly on 1.2 pp from 19.2% to 18.0% in 2017.

Capital expenditures (CAPEX) and working capital investments


In 2017 Bank of Communications Co Ltd had CAPEX/Revenue of 7.1%. Bank of Communications Co Ltd showed small growth in CAPEX/Revenue of 1.8 pp from 5.3% in 2014 to 7.1% in 2017. It's average level of CAPEX/Revenue for the last three years was 8.2%.

Return on investment


The company operates at low ROIC (2.51%) and ROE (10.89%). ROIC decreased slightly on 0.53 pp from 3.0% to 2.5% in 2017. ROE decreased slightly on 0.81 pp from 11.7% to 10.9% in 2017.

Leverage (Debt)


Debt surged on 17.7% while cash decreased on 5.3%.

Appendix 1: Peers in Banks


Below you can find Bank of Communications Co 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%