Lenovo Group Ltd EBITDA dropped on 55.5% in 2016 and Revenue decreased on 3.0%
26/05/2016 • About Lenovo Group Ltd (
$992) • By InTwits
Lenovo Group Ltd reported FY2016 financial results today. Overall the company's long term financial model is characterised by the following facts:
- Lenovo Group Ltd doesn't have a profitable business model yet: FY2016 ROIC is 1.0%
- Lenovo Group Ltd has low CAPEX intensity: 5 year average CAPEX/Revenue was 1.4%. At the same time it's a lot of higher than industry average of 6.6%.
- CAPEX is quite volatile: 780 in FY2016, 676 in FY2015, 566 in FY2014, 388 in FY2013, 307 in FY2012
- The company has potentially unprofitable business model: ROIC is at 1.0%
- It operates with high leverage: Net Debt/EBITDA is 1.6x while industry average is 0.1x
Below you can find a comprehensive analysis of the key data driving the company's performance and stock price.
Lenovo Group Ltd ($992) key annual financial indicators
| mln. $ | 2012 | 2013 | 2014 | 2015 | 2016 | 2016/2015 |
|---|
P&L
|
|---|
| Revenue | 29,574 | 33,873 | 38,707 | 46,296 | 44,912 | -3.0% |
| Gross Profit | 3,446 | 4,074 | 5,064 | 6,682 | 6,624 | -0.9% |
| SG&A | 2,421 | 2,735 | 3,303 | 4,185 | 4,482 | 7.1% |
| EBITDA | 755 | 1,047 | 1,386 | 1,807 | 804 | -55.5% |
| Net Income | 473 | 635 | 817 | 829 | -128 | -115.5% |
Balance Sheet
|
|---|
| Cash | 3,758 | 3,454 | 3,858 | 2,855 | 1,927 | -32.5% |
| Short Term Debt | 63 | 176 | 445 | 1,168 | 746 | -36.2% |
| Long Term Debt | 0 | 303 | 10 | 1,886 | 2,505 | 32.8% |
Cash flow
|
|---|
| Capex | 307 | 388 | 566 | 676 | 780 | 15.4% |
Ratios
|
|---|
| Revenue growth | 37.0% | 14.5% | 14.3% | 19.6% | -3.0% | |
| EBITDA growth | 35.2% | 38.7% | 32.4% | 30.4% | -55.5% | |
| Gross Margin | 11.7% | 12.0% | 13.1% | 14.4% | 14.7% | 0.3% |
| EBITDA Margin | 2.6% | 3.1% | 3.6% | 3.9% | 1.8% | -2.1% |
| Net Income Margin | 1.6% | 1.9% | 2.1% | 1.8% | -0.3% | -2.1% |
| SG&A, % of revenue | 8.2% | 8.1% | 8.5% | 9.0% | 10.0% | 0.9% |
| CAPEX, % of revenue | 1.0% | 1.1% | 1.5% | 1.5% | 1.7% | 0.3% |
| ROIC | 26.2% | 30.5% | 34.7% | 24.5% | 1.0% | -23.5% |
| ROE | 22.5% | 25.3% | 28.8% | 23.4% | -3.6% | -27.0% |
| Net Debt/EBITDA | -4.9x | -2.8x | -2.5x | 0.1x | 1.6x | 1.5x |
Revenue and profitability
The company's Revenue decreased on 3.0%. Revenue decline was accompanies by EBITDA margin decline. EBITDA Margin decreased on 2.1 pp from 3.9% to 1.8% in FY2016.
Gross Margin showed almost no change in FY2016. SG&A as a % of Revenue increased slightly on 0.94 pp from 9.0% to 10.0% in FY2016.
Net Income marign decreased on 2.1 pp from 1.8% to -0.29% in FY2016.
Capital expenditures (CAPEX) and working capital investments
In FY2016 the company had CAPEX/Revenue of 1.7%. CAPEX/Revenue increased slightly on 0.59 pp from 1.1% in FY2013 to 1.7% in FY2016. For the last three years the average CAPEX/Revenue was 1.6%.Lenovo Group Ltd invested a big chunk of EBITDA (97.0%) to CAPEX which didn't stop revenue from falling.
Return on investment
The company operates at low but positive ROIC (0.98%) and negative ROE (-3.62%). ROIC dropped on 23.5 pp from 24.5% to 0.98% in FY2016. ROE dropped on 27.0 pp from 23.4% to -3.6% in FY2016.
Leverage (Debt)
Debt level is 1.6x Net Debt / EBITDA and 4.0x Debt / EBITDA. Net Debt / EBITDA jumped on 1.5x from 0.1x to 1.6x in FY2016. Debt increased on 6.4% while cash dropped on 32.5%.
Management team
Lenovo Group Ltd's CEO is Yang Yuanqing. Yang Yuanqing has 9 years tenure at the company. Lenovo Group Ltd's CFO is Wai Ming Wong. Wai Ming Wong has 11 years tenure at the company.
Appendix 1: Peers in Computers
Below we provide Lenovo Group Ltd benchmarking against other companies in Computers 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 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Shinhint Acoustic Link Holdings Ltd ($2728) | -65.4% | 8.8% | 27.1% | 759.3% | |
| Beautiful China Holdings Co Ltd ($706) | -7.8% | -23.3% | -37.1% | 267.1% | |
| Powerleader Science & Technology Group Ltd ($8236) | 2.5% | -10.3% | 18.8% | 45.0% | |
| Alibaba Health Information Technology Ltd ($241) | 29.4% | -96.7% | 73.0% | 35.3% | |
| Thiz Technology Group Ltd ($8119) | -4.1% | -95.1% | 72.2% | 31.9% | |
| |
|---|
| Median (23 companies) | 3.8% | -1.8% | 7.2% | -3.9% | |
|---|
| Lenovo Group Ltd ($992) | | 14.5% | 14.3% | 19.6% | -3.0% |
Top companies by Gross margin, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Universal Technologies Holdings Ltd ($1026) | 87.3% | 79.7% | 90.3% | 98.4% | |
| Thiz Technology Group Ltd ($8119) | 8.8% | 63.8% | 86.2% | 96.0% | |
| Computer & Technologies Holdings Ltd ($46) | 45.3% | 54.0% | 52.1% | 54.2% | |
| Alibaba Health Information Technology Ltd ($241) | 11.4% | -12.6% | 49.3% | 53.7% | |
| CCID Consulting Co Ltd ($8235) | 43.7% | 49.1% | 51.8% | 48.7% | |
| |
|---|
| Median (23 companies) | 14.2% | 17.0% | 17.2% | 19.5% | |
|---|
| Lenovo Group Ltd ($992) | 11.7% | 12.0% | 13.1% | 14.4% | 14.7% |
Top companies by EBITDA margin, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Thiz Technology Group Ltd ($8119) | -47.4% | -847.3% | -506.6% | 74.0% | |
| World Wide Touch Technology Holdings Ltd ($1282) | 3.4% | -6.4% | -6.4% | 35.7% | |
| Ju Teng International Holdings Ltd ($3336) | 15.1% | 19.9% | 19.3% | 23.8% | |
| Computer & Technologies Holdings Ltd ($46) | 12.9% | 19.9% | 20.1% | 23.2% | |
| PAX Global Technology Ltd ($327) | 16.5% | 17.4% | 18.8% | 22.7% | |
| |
|---|
| Median (24 companies) | 3.2% | 2.2% | -1.5% | 4.6% | |
|---|
| Lenovo Group Ltd ($992) | 2.6% | 3.1% | 3.6% | 3.9% | 1.8% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Beautiful China Holdings Co Ltd ($706) | 8.4% | 2.2% | 26.2% | 743.7% | |
| North Asia Resources Holdings Ltd ($61) | 4.6% | 94.2% | 177.8% | 110.2% | |
| China Uptown Group Co Ltd ($2330) | 0.0% | 0.2% | 1.0% | 20.5% | |
| Universal Technologies Holdings Ltd ($1026) | 20.0% | 5.7% | 14.2% | 20.3% | |
| Ju Teng International Holdings Ltd ($3336) | 14.1% | 18.7% | 20.0% | 17.3% | |
| |
|---|
| Median (24 companies) | 1.2% | 1.6% | 2.1% | 1.8% | |
|---|
| Lenovo Group Ltd ($992) | 1.0% | 1.1% | 1.5% | 1.5% | 1.7% |
Top companies by ROIC, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| PAX Global Technology Ltd ($327) | 12.3% | 12.8% | 18.7% | 22.4% | |
| CCID Consulting Co Ltd ($8235) | 11.3% | 10.7% | 10.2% | 15.0% | |
| TPV Technology Ltd ($903) | 7.7% | 1.8% | 10.1% | 12.0% | |
| Computer & Technologies Holdings Ltd ($46) | 6.0% | 8.6% | 9.4% | 10.8% | |
| World Wide Touch Technology Holdings Ltd ($1282) | -3.5% | -10.8% | -11.5% | 9.0% | |
| |
|---|
| Median (24 companies) | 0.9% | -0.2% | -1.4% | 2.1% | |
|---|
| Lenovo Group Ltd ($992) | 26.2% | 30.5% | 34.7% | 24.5% | 1.0% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Shinhint Acoustic Link Holdings Ltd ($2728) | -2.8x | -2.5x | -20.8x | 8.8x | |
| Thiz Technology Group Ltd ($8119) | | | | 8.2x | |
| Powerleader Science & Technology Group Ltd ($8236) | 2.7x | 3.6x | 4.6x | 6.7x | |
| EVOC Intelligent Technology Co Ltd ($2308) | 0.5x | 5.8x | 5.7x | 5.4x | |
| Perception Digital Holdings Ltd ($1822) | | | | 1.8x | |
| |
|---|
| Median (15 companies) | -2.1x | -1.3x | -4.1x | 0.8x | |
|---|
| Lenovo Group Ltd ($992) | -4.9x | -2.8x | -2.5x | 0.1x | 1.6x |
