China Water Affairs Group Ltd reports 48.8% Net Income growth in 2016 and 41.1% Revenue growth
27/06/2016 • About China Water Affairs Group Ltd (
$855) • By InTwits
China Water Affairs Group Ltd reported FY2016 financial results today. Overall the company's long term financial model is characterised by the following facts:
- China Water Affairs Group Ltd has high CAPEX intensity: 5 year average CAPEX/Revenue was 31.1%. At the same time it's a lot of higher than industry average of 17.8%.
- CAPEX is quite volatile: 40.3 in FY2016, 44.4 in FY2015, 46.9 in FY2014, 42.5 in FY2013, 454 in FY2012
- The company has business model with low profitability: ROIC is at 9.0%
- It operates with high leverage: Net Debt/EBITDA is 3.0x while industry average is -0.6x
Below you can find a comprehensive analysis of the key data driving the company's performance and stock price.
China Water Affairs Group Ltd ($855) key annual financial indicators
| mln. HKD | 2012 | 2013 | 2014 | 2015 | 2016 | 2016/2015 |
|---|
P&L
|
|---|
| Revenue | 1,897 | 2,251 | 2,747 | 2,859 | 4,033 | 41.1% |
| Gross Profit | 835 | 970 | 1,147 | 1,352 | 1,901 | 40.5% |
| SG&A | 397 | 447 | 536 | 587 | 695 | 18.4% |
| EBITDA | 724 | 859 | 1,020 | 1,151 | 1,619 | 40.7% |
| Net Income | 315 | 286 | 281 | 371 | 552 | 48.8% |
Balance Sheet
|
|---|
| Cash | 1,068 | 918 | 1,590 | 1,501 | 2,552 | 70.0% |
| Short Term Debt | 634 | 953 | 1,299 | 2,376 | 2,294 | -3.4% |
| Long Term Debt | 2,325 | 2,294 | 3,537 | 3,024 | 5,076 | 67.8% |
Cash flow
|
|---|
| Capex | 769 | 879 | 826 | 811 | 700 | -13.8% |
Ratios
|
|---|
| Revenue growth | 28.3% | 18.6% | 22.0% | 4.1% | 41.1% | |
| EBITDA growth | 26.3% | 18.5% | 18.8% | 12.9% | 40.7% | |
| Gross Margin | 44.0% | 43.1% | 41.8% | 47.3% | 47.1% | -0.2% |
| EBITDA Margin | 38.2% | 38.1% | 37.1% | 40.3% | 40.2% | -0.1% |
| Net Income Margin | 16.6% | 12.7% | 10.2% | 13.0% | 13.7% | 0.7% |
| SG&A, % of revenue | 20.9% | 19.9% | 19.5% | 20.5% | 17.2% | -3.3% |
| CAPEX, % of revenue | 40.5% | 39.1% | 30.1% | 28.4% | 17.3% | -11.0% |
| ROIC | 6.3% | 6.8% | 7.0% | 7.2% | 9.0% | 1.8% |
| ROE | 10.3% | 8.6% | 8.1% | 10.0% | 12.9% | 3.0% |
| Net Debt/EBITDA | 2.6x | 2.7x | 3.2x | 3.4x | 3.0x | -0.4x |
Revenue and profitability
China Water Affairs Group Ltd's Revenue surged on 41.1%. Revenue decline was accompanies by EBITDA margin decline. EBITDA Margin decreased on 8.4 pp from 12.0% to 3.5% in FY2016.
Gross Margin showed almost no change in FY2016. SG&A as a % of Revenue decreased on 3.3 pp from 20.5% to 17.2% in FY2016.
Net Income marign increased slightly on 0.71 pp from 13.0% to 13.7% in FY2016.
Capital expenditures (CAPEX) and working capital investments
China Water Affairs Group Ltd's CAPEX/Revenue was 17.3% in FY2016. CAPEX/Revenue dropped on 21.7 pp from 39.1% in FY2013 to 17.3% in FY2016. Average CAPEX/Revenue for the last three years was 25.3%.
Return on investment
The company operates at good ROE (12.94%) while ROIC is low (8.99%). ROIC increased slightly on 1.8 pp from 7.2% to 9.0% in FY2016. ROE increased on 3.0 pp from 10.0% to 12.9% in FY2016.
Leverage (Debt)
Company's Net Debt / EBITDA is 3.0x and Debt / EBITDA is 4.6x. Net Debt / EBITDA dropped on 0.4x from 3.4x to 3.0x in FY2016. Debt surged on 36.5% while cash jumped on 70.0%.
Appendix 1: Peers in Environmental Control
Below you can find China Water Affairs Group Ltd benchmarking vs. other companies in Environmental Control 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 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Sky Forever Supply Chain Management Group Ltd ($8047) | | 446.4% | -62.3% | 12,494.5% | 1.5% |
| Pan Asia Environmental Protection Group Ltd ($556) | -13.7% | 43.1% | -1.8% | 85.0% | |
| CT Environmental Group Ltd ($1363) | -18.7% | 23.1% | 112.9% | 75.4% | |
| ELL Environmental Holdings Ltd ($1395) | 5.3% | 38.8% | 30.9% | 70.8% | |
| Ozner Water International Holding Ltd ($2014) | 183.9% | 38.5% | 27.2% | 45.7% | |
| |
|---|
| Median (24 companies) | 2.3% | 18.4% | 22.4% | 3.1% | 68.4% |
|---|
| China Water Affairs Group Ltd ($855) | | 18.6% | 22.0% | 4.1% | 41.1% |
Top companies by Gross margin, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| EverChina International Holdings Co Ltd ($202) | 51.8% | 53.4% | 95.3% | 95.4% | 93.5% |
| Ozner Water International Holding Ltd ($2014) | 64.5% | 67.8% | 65.4% | 58.9% | |
| CT Environmental Group Ltd ($1363) | 65.8% | 63.1% | 56.4% | 49.9% | |
| Kangda International Environmental Co Ltd ($6136) | 44.2% | 38.3% | 40.0% | 47.6% | |
| China Everbright International Ltd ($257) | 49.4% | 44.7% | 46.7% | 45.8% | |
| |
|---|
| Median (23 companies) | 33.2% | 30.5% | 31.3% | 32.7% | 0.6% |
|---|
| China Water Affairs Group Ltd ($855) | 44.0% | 43.1% | 41.8% | 47.3% | 47.1% |
Top companies by EBITDA margin, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| CT Environmental Group Ltd ($1363) | 63.6% | 62.8% | 58.7% | 64.6% | |
| Tianjin Capital Environmental Protection Group Co Ltd ($1065) | 57.5% | 56.6% | 57.8% | 57.9% | |
| China Everbright International Ltd ($257) | 44.6% | 40.7% | 43.6% | 44.1% | |
| Kangda International Environmental Co Ltd ($6136) | 37.1% | 33.6% | 32.4% | 36.6% | |
| New Universe International Group Ltd ($8068) | 40.2% | 37.8% | 39.3% | 36.6% | |
| |
|---|
| Median (24 companies) | 9.9% | 10.8% | 3.1% | 13.1% | -15.6% |
|---|
| China Water Affairs Group Ltd ($855) | 38.2% | 38.1% | 37.1% | 40.3% | 40.2% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Chaoyue Group Ltd ($147) | | 18.1% | 9.2% | 100.9% | 1.4% |
| Ozner Water International Holding Ltd ($2014) | 94.9% | 102.2% | 148.5% | 90.9% | |
| Integrated Waste Solutions Group Holdings Ltd ($923) | 13.2% | 10.6% | 41.7% | 88.1% | |
| Green Energy Group Ltd ($979) | 169.0% | 270.8% | 41.9% | 59.0% | |
| CT Environmental Group Ltd ($1363) | 65.0% | 27.1% | 51.4% | 40.5% | |
| |
|---|
| Median (23 companies) | 11.7% | 6.6% | 7.6% | 3.2% | 1.4% |
|---|
| China Water Affairs Group Ltd ($855) | 40.5% | 39.1% | 30.1% | 28.4% | 17.3% |
Top companies by ROIC, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| CT Environmental Group Ltd ($1363) | 25.9% | 20.5% | 20.8% | 20.1% | |
| China Everbright International Ltd ($257) | 10.4% | 11.2% | 10.5% | 10.8% | |
| Sound Global Ltd ($967) | 12.8% | 11.5% | 10.8% | 9.3% | |
| Baguio Green Group Ltd ($1397) | 20.1% | 29.2% | 9.6% | 9.0% | |
| Tianjin Capital Environmental Protection Group Co Ltd ($1065) | 7.1% | 6.8% | 7.8% | 8.8% | |
| |
|---|
| Median (24 companies) | 0.5% | 4.0% | 2.5% | 3.2% | -18.9% |
|---|
| China Water Affairs Group Ltd ($855) | 6.3% | 6.8% | 7.0% | 7.2% | 9.0% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Kangda International Environmental Co Ltd ($6136) | 4.4x | 5.1x | 4.8x | 5.2x | |
| Dynagreen Environmental Protection Group Co Ltd ($1330) | 3.2x | | | 3.2x | |
| Sound Global Ltd ($967) | -0.1x | 0.3x | 1.9x | 2.8x | |
| China Everbright International Ltd ($257) | 2.1x | 0.5x | 1.5x | 2.6x | |
| Dongjiang Environmental Co Ltd ($895) | -1.7x | -1.5x | 0.9x | 2.5x | |
| |
|---|
| Median (15 companies) | 2.2x | 0.3x | 0.9x | 1.2x | |
|---|
| China Water Affairs Group Ltd ($855) | 2.6x | 2.7x | 3.2x | 3.4x | 3.0x |
