China Modern Dairy Holdings Ltd reports 118% CAPEX growth while 4.0% Revenue decline
21/03/2016 • About China Modern Dairy Holdings Ltd (
$1117) • By InTwits
China Modern Dairy Holdings Ltd reported 2015 financial results today. Overall the company's long term financial model is characterised by the following facts:
- EBITDA Margin is declining: 21.1% in 2015 vs. 25.3% in 2014 vs. 33.9% in 2011
- The company has potentially unprofitable business model: ROIC is at 5.6%
- It operates with high leverage: Net Debt/EBITDA is 5.3x while industry average is -1.9x
Below you can find a comprehensive analysis of the key data driving the company's performance and stock price.
China Modern Dairy Holdings Ltd ($1117) key annual financial indicators
| mln. CNY | 2011 | 2012 | 2013 | 2014 | 2015 | 2015/2014 |
|---|
P&L
|
|---|
| Revenue | 1,113 | 1,678 | 3,289 | 5,027 | 4,826 | -4.0% |
| Gross Profit | | | | 1,865 | 1,659 | -11.1% |
| SG&A | | | | 326 | 438 | 34.2% |
| EBITDA | 377 | 562 | 887 | 1,270 | 1,020 | -19.6% |
| Net Income | 225 | 398 | 481 | 735 | 321 | -56.3% |
Balance Sheet
|
|---|
| Cash | 1,022 | 518 | 369 | 557 | 834 | 49.7% |
| Short Term Debt | 304 | 664 | 2,989 | 2,958 | 5,226 | 76.6% |
| Long Term Debt | 1,219 | 1,927 | 1,960 | 2,829 | 1,022 | -63.9% |
Cash flow
|
|---|
| Capex | 656 | 849 | | 939 | 2,045 | 117.7% |
Ratios
|
|---|
| Revenue growth | 88.8% | 50.7% | 96.1% | 52.8% | -4.0% | |
| EBITDA growth | 108.7% | 49.1% | 57.8% | 43.1% | -19.6% | |
| Gross Margin | | | | 37.1% | 34.4% | -2.7% |
| EBITDA Margin | 33.9% | 33.5% | 27.0% | 25.3% | 21.1% | -4.1% |
| Net Income Margin | 20.2% | 23.8% | 14.6% | 14.6% | 6.7% | -8.0% |
| SG&A, % of revenue | | | | 6.5% | 9.1% | 2.6% |
| CAPEX, % of revenue | 58.9% | 50.6% | | 18.7% | 42.4% | 23.7% |
| ROIC | 6.1% | 6.7% | 7.7% | 9.0% | 5.6% | -3.4% |
| ROE | 7.4% | 8.2% | 8.9% | 12.0% | 4.5% | -7.5% |
| Net Debt/EBITDA | 1.3x | 3.7x | 5.2x | 4.1x | 5.3x | 1.2x |
Revenue and profitability
The company's Revenue decreased on 4.0% in 2015. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin increased slightly on 1.2 pp from 11.2% to 12.4% in 2015.
Gross Margin decreased on 2.7 pp from 37.1% to 34.4% in 2015. SG&A as a % of Revenue increased on 2.6 pp from 6.5% to 9.1% in 2015.
Net Income marign decreased on 8.0 pp from 14.6% to 6.7% in 2015.
Capital expenditures (CAPEX) and working capital investments
The company's CAPEX/Revenue was 42.4% in 2015. CAPEX/Revenue decreased on 8.2 pp from 50.6% in 2012 to 42.4% in 2015.The company has spent a lot to CAPEX (200% of EBITDA) which didn't stop revenue from falling.
Return on investment
The company operates at low ROIC (5.59%) and ROE (4.50%). ROIC decreased on 3.4 pp from 9.0% to 5.6% in 2015. ROE decreased on 7.5 pp from 12.0% to 4.5% in 2015.
Leverage (Debt)
Debt level is 5.3x Net Debt / EBITDA and 6.1x Debt / EBITDA. Net Debt / EBITDA jumped on 1.2x from 4.1x to 5.3x in 2015. Debt increased on 7.9% in 2015 while cash surged on 49.7% in 2015.
Management team
The company's CEO Gao Lina has spent 10 years at the company.
Appendix 1: Peers in Food
Below we provide China Modern Dairy Holdings Ltd benchmarking against other companies in Food 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 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Wealth Glory Holdings Ltd ($8269) | | -16.5% | -53.8% | 555.7% | -12.4% |
| Natural Dairy NZ Holdings Ltd ($462) | | -47.2% | 19.1% | 76.6% | -54.8% |
| China Huishan Dairy Holdings Co Ltd ($6863) | | 256.3% | 91.5% | 38.3% | 11.1% |
| Asia Cassava Resources Holdings Ltd ($841) | | -3.0% | 99.6% | 32.6% | -28.4% |
| YuanShengTai Dairy Farm Ltd ($1431) | 44,049.9% | 363.2% | 27.8% | 32.0% | |
| |
|---|
| Median (37 companies) | 22.5% | 9.4% | 5.6% | 0.4% | -2.3% |
|---|
| China Modern Dairy Holdings Ltd ($1117) | | 50.7% | 96.1% | 52.8% | -4.0% |
Top companies by Gross margin, %
| Top 5 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Honworld Group Ltd ($2226) | 42.2% | 57.2% | 59.0% | 57.8% | |
| Shenguan Holdings Group Ltd ($829) | 61.9% | 58.2% | 58.5% | 54.9% | 44.2% |
| Yashili International Holdings Ltd ($1230) | 52.0% | 53.7% | 53.5% | 51.2% | |
| Natural Dairy NZ Holdings Ltd ($462) | 16.3% | -13.7% | 27.5% | 48.8% | 49.6% |
| Christine International Holdings Ltd ($1210) | 51.3% | 50.2% | 49.7% | 47.2% | |
| |
|---|
| Median (37 companies) | 17.7% | 16.5% | 19.6% | 19.8% | 19.4% |
|---|
| China Modern Dairy Holdings Ltd ($1117) | | | | 37.1% | 34.4% |
Top companies by EBITDA margin, %
| Top 5 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Shenguan Holdings Group Ltd ($829) | 57.2% | 58.7% | 59.2% | 54.5% | 43.6% |
| YuanShengTai Dairy Farm Ltd ($1431) | 147.8% | 40.3% | 48.4% | 47.1% | |
| China Huishan Dairy Holdings Co Ltd ($6863) | 109.2% | 45.1% | 47.9% | 47.1% | 37.2% |
| Honworld Group Ltd ($2226) | 28.4% | 44.4% | 42.1% | 42.0% | |
| Want Want China Holdings Ltd ($151) | 20.1% | 23.8% | 25.8% | 23.8% | 25.2% |
| |
|---|
| Median (37 companies) | 8.5% | 7.8% | 6.5% | 7.4% | 6.0% |
|---|
| China Modern Dairy Holdings Ltd ($1117) | 33.9% | 33.5% | 27.0% | 25.3% | 21.1% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| China Huishan Dairy Holdings Co Ltd ($6863) | 453.6% | 98.2% | 29.8% | 132.0% | 109.8% |
| Honworld Group Ltd ($2226) | 25.3% | 6.0% | 10.8% | 50.8% | |
| YuanShengTai Dairy Farm Ltd ($1431) | 182.5% | 26.1% | 18.3% | 43.4% | |
| Yashili International Holdings Ltd ($1230) | 3.6% | 8.2% | 7.1% | 20.1% | |
| Vedan International Holdings Ltd ($2317) | 2.8% | 2.5% | 2.4% | 18.8% | |
| |
|---|
| Median (37 companies) | 3.6% | 5.9% | 5.7% | 5.1% | 3.2% |
|---|
| China Modern Dairy Holdings Ltd ($1117) | 58.9% | 50.6% | | 18.7% | 42.4% |
Top companies by ROIC, %
| Top 5 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Honworld Group Ltd ($2226) | 22.1% | 50.4% | 44.5% | 23.6% | |
| Want Want China Holdings Ltd ($151) | 24.9% | 27.9% | 29.4% | 22.8% | 21.8% |
| Shenguan Holdings Group Ltd ($829) | 40.6% | 40.0% | 33.2% | 21.4% | 10.0% |
| Huisheng International Holdings Ltd ($1340) | 63.0% | 31.9% | 23.7% | 16.3% | |
| Asia Cassava Resources Holdings Ltd ($841) | 13.8% | 4.2% | 5.9% | 13.6% | 11.6% |
| |
|---|
| Median (38 companies) | 11.6% | 7.6% | 5.9% | 5.5% | 5.6% |
|---|
| China Modern Dairy Holdings Ltd ($1117) | 6.1% | 6.7% | 7.7% | 9.0% | 5.6% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| China Yurun Food Group Ltd ($1068) | 0.4x | 40.7x | 6.9x | 9.4x | |
| Beijing Jingkelong Co Ltd ($814) | 3.4x | 5.0x | 4.8x | 5.3x | 9.3x |
| CP Lotus Corp ($121) | 2.3x | | 6.5x | 5.1x | 3.0x |
| DaChan Food Asia Ltd ($3999) | -0.3x | 0.1x | 1.3x | 4.8x | |
| First Pacific Co Ltd/Hong Kong ($142) | 1.3x | 1.8x | 3.8x | 4.5x | |
| |
|---|
| Median (29 companies) | -0.1x | -0.5x | 0.6x | 0.7x | 0.9x |
|---|
| China Modern Dairy Holdings Ltd ($1117) | 1.3x | 3.7x | 5.2x | 4.1x | 5.3x |
