Looking for fundamental growth story? Pay attention to Huazhang Technology Holding Ltd
24/09/2015 • About Huazhang Technology Holding Ltd (
$1673) • By InTwits
Huazhang Technology Holding Ltd is a growth stock in Machinery-Diversified industry. Its revenue performance, profitability and healthy financial model stands it out vs. other public companies on the market.
Growth story
Huazhang Technology Holding Ltd showed fast growth in the last financial year. Huazhang Technology Holding Ltd's revenue surged on 23.5% in FY2015. The growth also happened in EBITDA of 11.5% for the same period.
If we look for the longer period Huazhang Technology Holding Ltd showed fast revenue growth of 18.4% from FY2012 to FY2015 annualy. EBITDA surged on 17.2% from FY2012 to FY2015 annualy.
Huazhang Technology Holding Ltd ($1673) financials for the last 5 years
| mln. HKD | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Revenue | 99 | 230 | 251 | 309 | 381 |
|---|
| Revenue growth, % | | 131.6% | 9.5% | 22.9% | 23.5% |
|---|
| Gross margin, % | 29.0% | 28.0% | 28.5% | 27.9% | 24.7% |
|---|
| SG&A, % | 23.2% | 15.0% | 18.7% | 13.9% | 11.2% |
|---|
| EBITDA | 3 | 27 | 28 | 39 | 43 |
|---|
| EBITDA growth, % | | 755.3% | 5.3% | 37.2% | 11.5% |
|---|
| EBITDA margin, % | 3.15% | 11.6% | 11.2% | 12.5% | 11.3% |
|---|
| Net Income | 1 | 19 | 18 | 28 | 34 |
|---|
| Net Income margin, % | 0.550% | 8.31% | 7.03% | 9.22% | 9.03% |
|---|
| |
| CAPEX | 4 | 10 | 1 | 8 | 18 |
|---|
| CAPEX/Revenue, % | 3.95% | 4.52% | 0.488% | 2.56% | 4.82% |
|---|
| Debt | 18 | 26 | 16 | 24 | 26 |
|---|
| Cash | 20 | 44 | 76 | 92 | 47 |
|---|
| Net Debt/EBITDA | -0.6x | -0.7x | -2.1x | -1.8x | -0.5x |
|---|
| |
| ROIC, % | | 29.6% | 16.2% | 16.3% | 16.2% |
|---|
| ROE, % | | 33.5% | 13.9% | 15.3% | 16.9% |
|---|
Profitability and return on investment
Despite revenue growth EBITDA margin declined slightly from 12.5% in FY2014 to 11.3% in FY2015. In the longer period the company's EBITDA margin decreased slightly on 0.300 pp from 11.6% in FY2012 to 11.3% in FY2015.
Huazhang Technology Holding Ltd shows attractive ROIC at 16.2% for the last 12 months which assumes stable development model. During the last three years it dropped - it was 29.6% in FY2012. Average ROIC for the last three years was 16.2%.
Huazhang Technology Holding Ltd showed small Net Income margin decline of 0.200 pp from 9.20% to 9% in FY2015. In the last 3 years Net Income margin increased on 0.700 pp from 8.30% in FY2012 to 9% in FY2015.
Huazhang Technology Holding Ltd operates at ROE of 16.9%. It's average ROE for the last three years was 15.4%.
Capital expenditures (CAPEX)
The company's CAPEX/Revenue was 4.82% in FY2015. Huazhang Technology Holding Ltd's CAPEX/Revenue increased on 0.304 pp from 4.52% in FY2012 to 4.82% in FY2015. It's average CAPEX/Revenue for the last three years was 2.62%.
Leverage (Debt)
Having such a fast growth profile the company keeps negative net debt at -0.5x Net Debt/EBITDA. In the longer period the company's leverage surged on 0.18x from -0.66x in FY2012 to -0.48x in FY2015.
Valuation vs. comparable companies
The company trades at 23.8x EV/EBITDA which is 10.3% lower than 26.6x Machinery-Diversified industry avearge calculated based on 25 companies. The company trades at 30.4x P/E which is 46.1% lower than 56.3x Machinery-Diversified industry avearge calculated based on 6 companies.
For capital intensive compnanies it's worth taking a look at EV/(EBITDA-CAPEX) multiple. The company trades at 41.7x EV/(EBITDA-CAPEX) which is higher vs. -1.1x Machinery-Diversified industry avearge calculated based on 6 companies.
Peers in Machinery-Diversified
Below we provide Huazhang Technology Holding Ltd benchmarking against other companies in Machinery-Diversified 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, %
| FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Top 5 |
|---|
| Sun East Technology Holdings Ltd ($365) | | -25.1% | -10.7% | 39.3% | 6.4% |
| Shanghai Prime Machinery Co Ltd ($2345) | 30.3% | 2.6% | -8.9% | 37.3% | |
| Sinoref Holdings Ltd ($1020) | 1.5% | -0.2% | -42.2% | 29.2% | |
| North Asia Strategic Holdings Ltd ($8080) | | -52.2% | -29.1% | 23.7% | 42.6% |
| Asia Tele-Net & Technology Corp Ltd ($679) | 3.5% | -36.9% | 23.0% | 18.6% | |
| |
|---|
| Median (22 companies) | 13.8% | -5.2% | -4.7% | -0.7% | 12.5% |
|---|
| Huazhang Technology Holding Ltd ($1673) | | 131.6% | 9.5% | 22.9% | 23.5% |
Top companies by Gross margin, %
| FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Top 5 |
|---|
| Jingwei Textile Machinery ($350) | 38.3% | 49.1% | 51.7% | 54.9% | |
| Renheng Enterprise Holdings Ltd ($3628) | 36.4% | 44.3% | 44.8% | 45.4% | |
| Haitian International Holdings Ltd ($1882) | 29.7% | 30.1% | 31.6% | 32.4% | |
| CHTC Fong's Industries Co Ltd ($641) | 26.5% | 24.4% | 30.0% | 32.3% | |
| Good Friend International Holdings Inc ($2398) | 23.3% | 20.1% | 22.9% | 26.5% | |
| |
|---|
| Median (22 companies) | 23.6% | 22.7% | 20.8% | 18.6% | 17.4% |
|---|
| Huazhang Technology Holding Ltd ($1673) | 29.0% | 28.0% | 28.5% | 27.9% | 24.7% |
Top companies by EBITDA margin, %
| FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Top 5 |
|---|
| Jingwei Textile Machinery ($350) | 18.5% | 24.0% | 26.9% | 28.0% | |
| Haitian International Holdings Ltd ($1882) | 20.5% | 19.7% | 20.7% | 21.9% | |
| Renheng Enterprise Holdings Ltd ($3628) | 22.9% | 24.7% | 23.9% | 20.7% | |
| Good Friend International Holdings Inc ($2398) | 11.7% | 6.7% | 9.1% | 12.9% | |
| Shandong Molong Petroleum Machinery Co Ltd ($568) | 12.9% | 12.9% | 6.5% | 12.3% | |
| |
|---|
| Median (22 companies) | 9.6% | 8.3% | 8.5% | 8.1% | 4.0% |
|---|
| Huazhang Technology Holding Ltd ($1673) | 3.1% | 11.6% | 11.2% | 12.5% | 11.3% |
Top companies by CAPEX/Revenue, %
| FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Top 5 |
|---|
| China High Precision Automation Group Ltd ($591) | 33.0% | 20.5% | 9.1% | 18.4% | |
| Shandong Molong Petroleum Machinery Co Ltd ($568) | 14.9% | 20.5% | 20.3% | 11.6% | |
| LK Technology Holdings Ltd ($558) | 7.6% | 9.3% | 10.2% | 9.1% | 5.6% |
| First Tractor Co Ltd ($38) | 6.3% | 4.9% | 4.3% | 7.3% | |
| Greens Holdings Ltd ($1318) | 9.3% | 8.9% | 3.1% | 7.1% | |
| |
|---|
| Median (22 companies) | 6.2% | 4.2% | 3.9% | 4.4% | 1.8% |
|---|
| Huazhang Technology Holding Ltd ($1673) | 4.0% | 4.5% | 0.5% | 2.6% | 4.8% |
Top companies by ROIC, %
| FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Top 5 |
|---|
| Haitian International Holdings Ltd ($1882) | 26.8% | 19.8% | 21.2% | 19.4% | |
| Jingwei Textile Machinery ($350) | 23.3% | 19.4% | 20.9% | 17.4% | |
| Good Friend International Holdings Inc ($2398) | 20.0% | 6.5% | 8.7% | 12.1% | |
| China CNR Corp Ltd ($6199) | 11.1% | 7.9% | 9.3% | 10.6% | |
| Shanghai Electric Group Co Ltd ($2727) | 9.8% | 10.9% | 8.6% | 8.9% | |
| |
|---|
| Median (22 companies) | 9.8% | 6.8% | 3.6% | 2.6% | 1.7% |
|---|
| Huazhang Technology Holding Ltd ($1673) | | 29.6% | 16.2% | 16.3% | 16.2% |
Top companies by Net Debt / EBITDA
| FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Top 5 |
|---|
| First Tractor Co Ltd ($38) | 1.1x | 0.5x | 2.5x | 9.2x | |
| Shanghai Prime Machinery Co Ltd ($2345) | -0.0x | -0.6x | 0.3x | 6.0x | |
| Shandong Molong Petroleum Machinery Co Ltd ($568) | 1.9x | 3.0x | 11.4x | 5.6x | |
| Honghua Group Ltd ($196) | 0.1x | 1.2x | 3.2x | 5.2x | |
| LK Technology Holdings Ltd ($558) | 0.9x | 2.5x | 5.1x | 4.9x | 4.6x |
| |
|---|
| Median (18 companies) | -0.4x | -1.6x | -0.4x | 0.2x | -1.5x |
|---|
| Huazhang Technology Holding Ltd ($1673) | -0.6x | -0.7x | -2.1x | -1.8x | -0.5x |
