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China Railway Construction Corp Ltd reports 8.8% revenue growth in 2017 and almost no change in EBITDA Margin of 5.3%

29/03/2018 • About China Railway Construction Corp Ltd ($1186) • By InTwits

China Railway Construction Corp Ltd reported 2017 financial results today. Overall the company's long term financial model is characterised by the following facts:
  • EBITDA Margin is relatively stable: 5.3% in 2017 vs. 5.3% in 2016 vs. 4.6% in 2013
  • China Railway Construction Corp Ltd has low CAPEX intensity: 5 year average CAPEX/Revenue was 4.2%. At the same time it's in pair with industry average of 26.8%.
  • 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 6.5%
Below you can find a comprehensive analysis of the key data driving the company's performance and stock price.

China Railway Construction Corp Ltd ($1186) key annual financial indicators

mln. CNY201320142015201620172017/2016
P&L
Revenue569,962575,260582,522621,183676,0318.8%
Gross Profit42,71446,88550,76649,80557,97116.4%
SG&A16,48216,38916,67817,81119,2508.1%
EBITDA25,96129,88531,75133,00335,7488.3%
Net Income10,34511,73512,64614,00016,05714.7%
Balance Sheet
Cash54,34489,950114,249120,128131,3069.3%
Short Term Debt82,94796,576107,20171,410100,10940.2%
Long Term Debt75,01983,76379,964114,82195,335-17.0%
Cash flow
Capex17,64521,83827,14429,81630,2311.4%
Ratios
Revenue growth21.3%0.9%1.3%6.6%8.8%
EBITDA growth8.8%15.1%6.2%3.9%8.3%
Gross Margin7.5%8.2%8.7%8.0%8.6%0.6%
EBITDA Margin4.6%5.2%5.5%5.3%5.3%-0.0%
Net Income Margin1.8%2.0%2.2%2.3%2.4%0.1%
SG&A, % of revenue2.9%2.8%2.9%2.9%2.8%-0.0%
CAPEX, % of revenue3.1%3.8%4.7%4.8%4.5%-0.3%
ROIC7.3%7.0%6.6%6.2%6.5%0.3%
ROE13.5%13.5%12.4%11.4%11.3%-0.1%
Net Debt/EBITDA4.0x3.0x2.3x2.0x1.8x-0.2x


China Railway Construction Corp Ltd ($1186) key quoterly financial indicators

mln. CNY17Q117Q217Q317Q4YoY change
P&L
Revenue122,306165,060170,753217,9125.8%12.5%9.1%7.7%
Net Income2,8793,6444,0065,52811.9%12.1%21.3%13.4%
Balance Sheet
Cash109,908101,879110,749131,306-1.0%-5.2%-5.6%9.3%
Short Term Debt79,76485,383100,466100,109-27.5%-7.9%23.8%40.2%
Long Term Debt123,305135,379131,92795,33535.2%26.7%14.5%-17.0%
Ratios
Gross Margin8.7%8.1%8.4%9.1%0.4%-1.0%-0.2%2.4%
Net Income Margin 2.4% 2.2% 2.3% 2.5%0.1%-0.0%0.2%0.1%

Revenue and profitability


The company's Revenue increased on 8.8%. Revenue growth showed slow down in 17Q4 - it was 7.7% YoY. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin increased on 5.0 pp from 69.9% to 75.0% in 2017.

Gross Margin increased slightly on 0.56 pp from 8.0% to 8.6% in 2017. SG&A as a % of Revenue showed almost no change in 2017.

Net Income marign showed almost no change in 2017.

Capital expenditures (CAPEX) and working capital investments


China Railway Construction Corp Ltd's CAPEX/Revenue was 4.5% in 2017. CAPEX/Revenue increased slightly on 0.68 pp from 3.8% in 2014 to 4.5% in 2017. For the last three years the average CAPEX/Revenue was 4.6%.The company maintained rich investment policy and has spent a big chunk of EBITDA (84.6%) to CAPEX.

Return on investment


The company operates at low ROIC (6.50%) and ROE (11.34%). ROIC showed almost no change in 2017. ROE showed almost no change in 2017.

Leverage (Debt)


Debt level is 1.8x Net Debt / EBITDA and 5.5x Debt / EBITDA. Net Debt / EBITDA dropped on 0.2x from 2.0x to 1.8x in 2017. Debt increased on 4.9% while cash increased on 9.3%.

Appendix 1: Peers in Engineering&Construction


Below you can find China Railway Construction Corp Ltd benchmarking vs. other companies in Engineering&Construction 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
China National Culture Group Ltd ($745)-76.8%-55.8%592.3%86.7%
Kingbo Strike Ltd ($1421)19.5%21.3%-47.7%81.8%
NEW Concepts Holdings Ltd ($2221)20.7%100.9%68.6%80.8%
Richly Field China Development Ltd ($313)-45.0%464.2%-65.7%77.2%
Glory Flame Holdings Ltd ($8059)30.8%20.2%1.0%42.9%
 
Median (35 companies)24.8%20.8%10.3%6.4%


Top companies by Gross margin, %

Top 5 FY2013 FY2014 FY2015 FY2016 FY2017
Broad Greenstate International Co Ltd ($1253)28.7%35.8%36.7%37.4%
PYI Corp Ltd ($498)5.1%16.3%24.1%31.1%
In Construction Holdings Ltd ($1500)21.9%21.6%29.5%26.3%
Tysan Holdings Ltd ($687)11.7%18.4%17.8%22.8%
Chevalier International Holdings Ltd ($25)26.3%25.9%24.2%21.9%
 
Median (27 companies)16.9%16.1%16.3%12.9%


Top companies by EBITDA margin, %

Top 5 FY2013 FY2014 FY2015 FY2016 FY2017
Beijing Capital International Airport Co Ltd ($694)52.9%50.3%51.6%50.9%
Cheung Kong Infrastructure Holdings Ltd ($1038)20.6%36.2%60.9%38.4%
Sino Credit Holdings Ltd ($628)16.0%-5.1%34.9%
Broad Greenstate International Co Ltd ($1253)24.4%28.8%31.0%30.9%
In Construction Holdings Ltd ($1500)20.4%19.1%25.9%23.3%
 
Median (31 companies)11.2%9.7%9.0%5.3%


Top companies by CAPEX/Revenue, %

Top 5 FY2013 FY2014 FY2015 FY2016 FY2017
Louis XIII Holdings Ltd ($577)29.5%9.3%16.1%47.3%
Sino Credit Holdings Ltd ($628)4.7%8.8%46.8%
Richly Field China Development Ltd ($313)6.7%1.1%7.6%30.5%
PYI Corp Ltd ($498)4.2%24.5%13.1%19.7%
Grand Ming Group Holdings Ltd ($1271)16.1%8.7%33.8%14.0%
 
Median (26 companies)3.3%1.8%2.1%2.4%


Top companies by ROIC, %

Top 5 FY2013 FY2014 FY2015 FY2016 FY2017
In Construction Holdings Ltd ($1500)52.8%37.0%49.4%40.4%
NEW Concepts Holdings Ltd ($2221)51.0%78.8%39.0%23.3%
Chun Sing Engineering Holdings Ltd ($2277)98.3%54.9%43.7%21.6%
Broad Greenstate International Co Ltd ($1253)85.1%51.2%26.0%20.9%
Tysan Holdings Ltd ($687)10.6%14.0%21.0%20.7%
 
Median (37 companies)6.1%5.4%5.6%2.5%


Top companies by Net Debt / EBITDA

Top 5 FY2013 FY2014 FY2015 FY2016 FY2017
Ngai Shun Holdings Ltd ($1246)-0.6x-0.8x-2.1x257.8x
Shun Cheong Holdings ($650)9.2x7.6x67.0x
KFM Kingdom Holdings Ltd ($3816)-0.1x0.5x0.4x53.8x
Chun Wo Development Holdings Ltd ($711)8.1x12.6x15.9x10.5x
Grand Ming Group Holdings Ltd ($1271)6.3x4.1x5.9x5.8x
 
Median (24 companies)0.3x0.2x0.7x0.9x