China Railway Group Ltd reports 16.3% EBITDA growth in 2017 and almost no change in EBITDA Margin of 4.5%
29/03/2018 • About China Railway Group Ltd (
$390) • By InTwits
China Railway Group 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: 4.5% in 2017 vs. 4.2% in 2016 vs. 4.5% in 2013
- China Railway Group Ltd has low CAPEX intensity: 5 year average CAPEX/Revenue was 1.7%. 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 6.1%
Below you can find a comprehensive analysis of the key data driving the company's performance and stock price.
China Railway Group Ltd ($390) key annual financial indicators
| mln. CNY | 2013 | 2014 | 2015 | 2016 | 2017 | 2017/2016 |
|---|
P&L
|
|---|
| Revenue | 540,394 | 590,166 | 599,942 | 635,355 | 688,773 | 8.4% |
| Gross Profit | 40,340 | 48,515 | 48,686 | 50,742 | 62,729 | 23.6% |
| SG&A | 16,722 | 19,529 | 19,851 | 18,192 | 22,971 | 26.3% |
| EBITDA | 24,204 | 25,659 | 25,824 | 26,416 | 30,723 | 16.3% |
| Net Income | 9,374 | 10,360 | 12,258 | 12,509 | 16,067 | 28.4% |
Balance Sheet
|
|---|
| Cash | 75,658 | 68,679 | 93,304 | 114,473 | 116,688 | 1.9% |
| Short Term Debt | 82,855 | 90,015 | 85,555 | 105,749 | 88,832 | -16.0% |
| Long Term Debt | 104,352 | 95,345 | 96,705 | 91,403 | 85,505 | -6.5% |
Cash flow
|
|---|
| Capex | 8,327 | 8,050 | 8,052 | 12,789 | 13,751 | 7.5% |
Ratios
|
|---|
| Revenue growth | 16.1% | 9.2% | 1.7% | 5.9% | 8.4% | |
| EBITDA growth | 15.5% | 6.0% | 0.6% | 2.3% | 16.3% | |
| Gross Margin | 7.5% | 8.2% | 8.1% | 8.0% | 9.1% | 1.1% |
| EBITDA Margin | 4.5% | 4.3% | 4.3% | 4.2% | 4.5% | 0.3% |
| Net Income Margin | 1.7% | 1.8% | 2.0% | 2.0% | 2.3% | 0.4% |
| SG&A, % of revenue | 3.1% | 3.3% | 3.3% | 2.9% | 3.3% | 0.5% |
| CAPEX, % of revenue | 1.5% | 1.4% | 1.3% | 2.0% | 2.0% | -0.0% |
| ROIC | 6.6% | 6.5% | 5.8% | 5.3% | 6.1% | 0.9% |
| ROE | 11.4% | 11.3% | 10.9% | 9.5% | 11.8% | 2.3% |
| Net Debt/EBITDA | 4.6x | 4.5x | 3.4x | 3.1x | 1.9x | -1.3x |
China Railway Group Ltd ($390) key quoterly financial indicators
| mln. CNY | 17Q1 | 17Q2 | 17Q3 | 17Q4 | YoY change |
|---|
P&L
|
|---|
| Revenue | 133,464 | 164,940 | 170,871 | 219,449 | 7.6% | 13.2% | 1.0% | 11.7% |
| Net Income | 2,623 | 5,085 | 3,328 | 5,031 | 15.3% | 59.5% | -12.0% | 54.1% |
Balance Sheet
|
|---|
| Cash | 96,663 | 77,746 | 92,303 | 102,984 | 15.6% | 1.5% | 4.3% | -10.0% |
| Short Term Debt | 109,057 | 112,467 | 123,930 | 125,227 | 9.2% | 11.3% | 20.6% | 18.4% |
| Long Term Debt | 91,372 | 88,464 | 90,089 | 83,610 | -4.4% | -3.3% | -4.5% | -8.5% |
Ratios
|
|---|
| Gross Margin | 8.5% | 9.6% | 8.5% | 9.6% | 0.4% | 1.3% | -0.2% | 2.6% |
| Net Income Margin | 2.0% | 3.1% | 1.9% | 2.3% | 0.1% | 0.9% | -0.3% | 0.6% |
Revenue and profitability
The company's Revenue increased on 8.4%. Revenue growth showed acceleration in 17Q4 - it increased 11.7% YoY. Despite revenue decline the EBITDA margin expanded. EBITDA Margin increased on 5.0 pp from 69.9% to 75.0% in 2017.
Gross Margin increased slightly on 1.1 pp from 8.0% to 9.1% 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
In 2017 the company had CAPEX/Revenue of 2.0%. CAPEX/Revenue increased slightly on 0.63 pp from 1.4% in 2014 to 2.0% in 2017. Average CAPEX/Revenue for the last three years was 1.8%.
Return on investment
The company operates at low ROIC (6.14%) and ROE (11.83%). ROIC increased slightly on 0.88 pp from 5.3% to 6.1% in 2017. ROE increased on 2.3 pp from 9.5% to 11.8% in 2017.
Leverage (Debt)
Company's Net Debt / EBITDA is 1.9x and Debt / EBITDA is 5.7x. Net Debt / EBITDA dropped on 1.3x from 3.1x to 1.9x in 2017. Debt dropped on 11.6% while cash increased slightly on 1.9%.
Appendix 1: Peers in Engineering&Construction
Below we provide China Railway Group Ltd benchmarking against other companies in Engineering&Construction industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.
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 | -2.1x | 257.8x | |
| Shun Cheong Holdings ($650) | 9.2x | | 7.6x | 67.0x | |
| KFM Kingdom Holdings Ltd ($3816) | -0.1x | 0.5x | 0.4x | 53.8x | |
| Chun Wo Development Holdings Ltd ($711) | 8.1x | 12.6x | 15.9x | 10.5x | |
| Grand Ming Group Holdings Ltd ($1271) | 6.3x | 4.1x | 5.9x | 5.8x | |
| |
|---|
| Median (24 companies) | 0.3x | 0.2x | 0.7x | 0.9x | |
|---|
