ZTE Corp revenue surged on 23.4% in 2015 while EBITDA Margin decreased slightly on 1.4 pp from 8.9% to 7.4%
06/04/2016 • About ZTE Corp (
$763) • By InTwits
ZTE Corp reported 2015 financial results today. Overall the company's long term financial model is characterised by the following facts:
- EBITDA Margin is quite volatile: 7.4% in 2015, 8.9% in 2014, 7.5% in 2013, 1.5% in 2012, 6.8% in 2011
- ZTE Corp has low CAPEX intensity: 5 year average CAPEX/Revenue was 1.9%. At the same time it's a lot of higher than industry average of 7.4%.
- CAPEX is quite volatile: 1,765 in 2015, 1,049 in 2014, 1,104 in 2013, 1,504 in 2012, 2,673 in 2011
- The company has business model with low profitability: ROIC is at 8.3%
Below you can find a comprehensive analysis of the key data driving the company's performance and stock price.
ZTE Corp ($763) key annual financial indicators
| mln. CNY | 2011 | 2012 | 2013 | 2014 | 2015 | 2015/2014 |
|---|
P&L
|
|---|
| Revenue | 86,254 | 84,119 | 75,234 | 80,140 | 98,883 | 23.4% |
| Gross Profit | 24,168 | 18,573 | 20,459 | 23,325 | 28,715 | 23.1% |
| SG&A | 13,718 | 13,790 | 12,417 | 12,325 | 14,267 | 15.8% |
| EBITDA | 5,904 | 1,279 | 5,676 | 7,103 | 7,337 | 3.3% |
| Net Income | 2,060 | -2,841 | 1,358 | 2,634 | 3,625 | 37.6% |
Balance Sheet
|
|---|
| Cash | 19,937 | 21,193 | 19,410 | 18,116 | 27,713 | 53.0% |
| Short Term Debt | 15,666 | 26,617 | 18,720 | 27,554 | 26,410 | -4.2% |
| Long Term Debt | 14,981 | 11,116 | 13,817 | 10,040 | 6,016 | -40.1% |
Cash flow
|
|---|
| Capex | 2,673 | 1,504 | 1,104 | 1,049 | 1,765 | 68.3% |
Ratios
|
|---|
| Revenue growth | 23.4% | -2.5% | -10.6% | 6.5% | 23.4% | |
| EBITDA growth | -4.6% | -78.3% | 343.7% | 25.2% | 3.3% | |
| Gross Margin | 28.0% | 22.1% | 27.2% | 29.1% | 29.0% | -0.1% |
| EBITDA Margin | 6.8% | 1.5% | 7.5% | 8.9% | 7.4% | -1.4% |
| Net Income Margin | 2.4% | -3.4% | 1.8% | 3.3% | 3.7% | 0.4% |
| SG&A, % of revenue | 15.9% | 16.4% | 16.5% | 15.4% | 14.4% | -1.0% |
| CAPEX, % of revenue | 3.1% | 1.8% | 1.5% | 1.3% | 1.8% | 0.5% |
| ROIC | 8.7% | -0.5% | 6.8% | 9.3% | 8.3% | -1.0% |
| ROE | 8.7% | -12.4% | 6.2% | 11.1% | 11.8% | 0.7% |
| Net Debt/EBITDA | 1.8x | 12.9x | 2.3x | 2.7x | 0.6x | -2.1x |
Revenue and profitability
ZTE Corp's Revenue surged on 23.4% in 2015. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin increased on 2.7 pp from 12.3% to 15.0% in 2015.
Gross Margin showed almost no change in 2015. SG&A as a % of Revenue decreased slightly on 0.95 pp from 15.4% to 14.4% in 2015.
Net Income marign showed almost no change in 2015.
Capital expenditures (CAPEX) and working capital investments
The company's CAPEX/Revenue was 1.8% in 2015. CAPEX/Revenue showed almost no change from 2012 to 2015. It's average CAPEX/Revenue for the last three years was 1.5%.
Return on investment
The company operates at low ROIC (8.32%) and ROE (11.76%). ROIC decreased slightly on 1.0 pp from 9.3% to 8.3% in 2015. ROE increased slightly on 0.65 pp from 11.1% to 11.8% in 2015.
Leverage (Debt)
Company's Net Debt / EBITDA is 0.6x and Debt / EBITDA is 4.4x. Net Debt / EBITDA dropped on 2.1x from 2.7x to 0.6x in 2015. Debt dropped on 13.7% in 2015 while cash jumped on 53.0% in 2015.
Appendix 1: Peers in Telecommunications
Below you can find ZTE Corp benchmarking vs. other companies in Telecommunications 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 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Hong Kong Television Network Ltd ($1137) | | | 107.4% | -82.2% | 8,010.0% |
| Hanny Holdings Ltd ($275) | | 236.4% | 131.2% | -85.2% | 349.3% |
| CCT Fortis Holdings Ltd ($138) | | -24.1% | -55.3% | -71.3% | 207.1% |
| Xi'an Haitian Antenna Technologies Co Ltd ($8227) | | -8.5% | -45.9% | -56.2% | 111.6% |
| China Trends Holdings Ltd ($8171) | | 167.0% | -70.2% | -16.7% | 106.0% |
| |
|---|
| Median (55 companies) | | 9.7% | 8.3% | 8.4% | 3.5% |
|---|
| ZTE Corp ($763) | | -2.5% | -10.6% | 6.5% | 23.4% |
Top companies by Gross margin, %
| Top 5 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| HKBN Ltd ($1310) | | | 84.3% | 86.5% | 86.9% |
| Netel Technology Holdings Ltd ($8256) | 40.8% | 27.9% | 42.1% | 54.9% | 72.3% |
| Great World Co Holdings Ltd ($8003) | 34.2% | -11.0% | 43.0% | 45.5% | 67.9% |
| APT Satellite Holdings Ltd ($1045) | 52.3% | 58.7% | 64.1% | 62.5% | 61.0% |
| Cisco Systems Inc ($4333) | 61.4% | 61.2% | 60.6% | 58.9% | 60.4% |
| |
|---|
| Median (49 companies) | 27.3% | 23.6% | 24.3% | 25.0% | 22.7% |
|---|
| ZTE Corp ($763) | 28.0% | 22.1% | 27.2% | 29.1% | 29.0% |
Top companies by EBITDA margin, %
| Top 5 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Asia Satellite Telecommunications Holdings Ltd ($1135) | 83.5% | 86.5% | 85.8% | 81.6% | 82.4% |
| APT Satellite Holdings Ltd ($1045) | 76.7% | 81.0% | 78.9% | 77.5% | 78.8% |
| Synertone Communication Corp ($1613) | 49.5% | 44.9% | 48.5% | 49.4% | 51.5% |
| HKBN Ltd ($1310) | | | 39.2% | 40.1% | 39.0% |
| China Mobile Ltd ($941) | 47.1% | 43.7% | 38.2% | 36.9% | 36.0% |
| |
|---|
| Median (55 companies) | 12.0% | 9.9% | 6.4% | 7.3% | 9.4% |
|---|
| ZTE Corp ($763) | 6.8% | 1.5% | 7.5% | 8.9% | 7.4% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| APT Satellite Holdings Ltd ($1045) | 155.2% | 74.3% | 2.5% | 27.2% | 115.8% |
| Hong Kong Television Network Ltd ($1137) | | 12,435.9% | 504.9% | 1,283.5% | 79.4% |
| Asia Satellite Telecommunications Holdings Ltd ($1135) | 61.8% | 93.8% | 71.7% | 75.0% | 52.8% |
| China Unicom Hong Kong Ltd ($762) | 37.2% | 34.9% | 24.7% | 24.4% | 31.9% |
| China Fiber Optic Network System Group Ltd ($3777) | 24.5% | 4.8% | 16.3% | 13.1% | 31.9% |
| |
|---|
| Median (55 companies) | 2.9% | 2.5% | 3.3% | 3.6% | 2.7% |
|---|
| ZTE Corp ($763) | 3.1% | 1.8% | 1.5% | 1.3% | 1.8% |
Top companies by ROIC, %
| Top 5 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Telecom Service One Holdings Ltd ($8145) | | 95.0% | 5.4% | 26.7% | 39.8% |
| VTech Holdings Ltd ($303) | 40.5% | 37.6% | 39.5% | 40.0% | 39.8% |
| Coolpad Group Ltd ($2369) | 7.2% | 8.1% | 6.0% | 9.6% | 29.1% |
| SmarTone Telecommunications Holdings Ltd ($315) | 30.2% | 37.2% | 23.1% | 12.8% | 17.7% |
| TCL Communication Technology Holdings Ltd ($2618) | 6.4% | -1.6% | 6.0% | 17.2% | 13.4% |
| |
|---|
| Median (56 companies) | 7.1% | 7.1% | 5.9% | 6.2% | 5.9% |
|---|
| ZTE Corp ($763) | 8.7% | -0.5% | 6.8% | 9.3% | 8.3% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| CCT Land Holdings Ltd ($261) | | 10.1x | 23.8x | 48.4x | 44.8x |
| China Energine International Holdings Ltd ($1185) | | | | 13.3x | 31.7x |
| China Ground Source Energy Industry Group Ltd ($8128) | -0.6x | -1.6x | 3.5x | 14.3x | 11.3x |
| China Electronics Corp Holdings Co Ltd ($85) | -2.1x | -2.0x | -1.3x | 12.5x | 7.6x |
| China All Access Holdings Ltd ($633) | -1.0x | 0.9x | 1.8x | 5.2x | 5.6x |
| |
|---|
| Median (41 companies) | -0.2x | -0.2x | 0.6x | 0.7x | 0.6x |
|---|
| ZTE Corp ($763) | 1.8x | 12.9x | 2.3x | 2.7x | 0.6x |
