Nine Dragons Paper Holdings Ltd reports 30.6% EBITDA growth and 3.8 pp EBITDA Margin growth from 16.9% to 20.7%
21/09/2016 • About Nine Dragons Paper Holdings Ltd (
$2689) • By InTwits
Nine Dragons Paper Holdings Ltd reported FY2016 financial results today. Overall the company's long term financial model is characterised by the following facts:
- Nine Dragons Paper Holdings Ltd has high CAPEX intensity: 5 year average CAPEX/Revenue was 10.6%. At the same time it's in pair with industry average of 5.5%.
- CAPEX is quite volatile: 1,838 in FY2016, 1,763 in FY2015, 2,574 in FY2014, 4,445 in FY2013, 4,577 in FY2012
- The company has business model with low profitability: ROIC is at 7.7%
- It operates with medium-size leverage: Net Debt/EBITDA is 3.3x while industry average is 3.6x
Below you can find a comprehensive analysis of the key data driving the company's performance and stock price.
Nine Dragons Paper Holdings Ltd ($2689) key annual financial indicators
| mln. CNY | 2012 | 2013 | 2014 | 2015 | 2016 | 2016/2015 |
|---|
P&L
|
|---|
| Revenue | 27,170 | 28,739 | 28,929 | 30,093 | 32,093 | 6.6% |
| Gross Profit | 4,337 | 4,606 | 4,751 | 4,716 | 5,861 | 24.3% |
| SG&A | 1,126 | 1,270 | 1,143 | 1,367 | 1,527 | 11.7% |
| EBITDA | 4,463 | 4,945 | 5,369 | 5,079 | 6,634 | 30.6% |
| Net Income | 1,420 | 1,561 | 1,755 | 1,412 | 1,122 | -20.5% |
Balance Sheet
|
|---|
| Cash | 4,365 | 6,015 | 7,902 | 7,874 | 11,276 | 43.2% |
| Short Term Debt | 5,102 | 8,616 | 12,350 | 12,188 | 11,993 | -1.6% |
| Long Term Debt | 21,192 | 25,690 | 23,124 | 19,802 | 20,852 | 5.3% |
Cash flow
|
|---|
| Capex | 4,577 | 4,445 | 2,574 | 1,763 | 1,838 | 4.3% |
Ratios
|
|---|
| Revenue growth | 11.4% | 5.8% | 0.7% | 4.0% | 6.6% | |
| EBITDA growth | 7.1% | 10.8% | 8.6% | -5.4% | 30.6% | |
| Gross Margin | 16.0% | 16.0% | 16.4% | 15.7% | 18.3% | 2.6% |
| EBITDA Margin | 16.4% | 17.2% | 18.6% | 16.9% | 20.7% | 3.8% |
| Net Income Margin | 5.2% | 5.4% | 6.1% | 4.7% | 3.5% | -1.2% |
| SG&A, % of revenue | 4.1% | 4.4% | 4.0% | 4.5% | 4.8% | 0.2% |
| CAPEX, % of revenue | 16.8% | 15.5% | 8.9% | 5.9% | 5.7% | -0.1% |
| ROIC | 6.5% | 6.1% | 5.9% | 5.3% | 7.7% | 2.4% |
| ROE | 6.7% | 7.0% | 7.5% | 5.7% | 4.4% | -1.4% |
| Net Debt/EBITDA | 4.9x | 5.7x | 5.1x | 4.7x | 3.3x | -1.5x |
Revenue and profitability
The company's Revenue increased on 6.6%. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin increased on 3.5 pp from 16.8% to 20.3% in FY2016.
Gross Margin increased on 2.6 pp from 15.7% to 18.3% in FY2016. SG&A as a % of Revenue showed almost no change in FY2016.
Net Income marign decreased slightly on 1.2 pp from 4.7% to 3.5% in FY2016.
Capital expenditures (CAPEX) and working capital investments
In FY2016 Nine Dragons Paper Holdings Ltd had CAPEX/Revenue of 5.7%. Nine Dragons Paper Holdings Ltd showed decline in CAPEX/Revenue of 9.7 pp from 15.5% in FY2013 to 5.7% in FY2016. Average CAPEX/Revenue for the last three years was 6.8%.
Return on investment
The company operates at low ROIC (7.67%) and ROE (4.37%). ROIC increased on 2.4 pp from 5.3% to 7.7% in FY2016. ROE decreased slightly on 1.4 pp from 5.7% to 4.4% in FY2016.
Leverage (Debt)
Debt level is 3.3x Net Debt / EBITDA and 5.0x Debt / EBITDA. Net Debt / EBITDA dropped on 1.5x from 4.7x to 3.3x in FY2016. Debt increased on 2.7% while cash surged on 43.2%.
Management team
Nine Dragons Paper Holdings Ltd's CEO Liu Ming Chung has spent 12 years at the company. Zhang Yuanfu is a Nine Dragons Paper Holdings Ltd's CFO. Zhang Yuanfu has spent 10 years at the company.
Appendix 1: Peers in Forest Products&Paper
Below we provide Nine Dragons Paper Holdings Ltd benchmarking against other companies in Forest Products&Paper 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 |
|---|
| KuangChi Science Ltd ($439) | | | 39.7% | 211.9% | |
| Merdeka Mobile Group Ltd ($8163) | -11.0% | 415.4% | 71.4% | 88.0% | |
| Youyuan International Holdings Ltd ($2268) | 0.4% | 6.7% | 0.8% | 10.3% | |
| PNG Resources Holdings Ltd ($221) | | 248.6% | 8.5% | 8.7% | -44.3% |
| China Sunshine Paper Holdings Co Ltd ($2002) | -0.5% | -1.3% | -5.7% | 8.1% | |
| |
|---|
| Median (11 companies) | 0.4% | 3.6% | 2.8% | 6.2% | -24.8% |
|---|
| Nine Dragons Paper Holdings Ltd ($2689) | | 5.8% | 0.7% | 4.0% | 6.6% |
Top companies by Gross margin, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| KuangChi Science Ltd ($439) | | 20.3% | 17.3% | 63.6% | |
| PNG Resources Holdings Ltd ($221) | 19.4% | 18.6% | 24.2% | 35.3% | 31.9% |
| Youyuan International Holdings Ltd ($2268) | 29.8% | 32.9% | 31.3% | 29.2% | |
| China Asean Resources Ltd ($8186) | 19.8% | 40.3% | | 27.8% | |
| Shandong Chenming Paper Holdings Ltd ($1812) | 15.2% | 18.0% | 19.4% | 26.6% | |
| |
|---|
| Median (12 companies) | 16.4% | 18.0% | 18.2% | 20.0% | 20.8% |
|---|
| Nine Dragons Paper Holdings Ltd ($2689) | 16.0% | 16.0% | 16.4% | 15.7% | 18.3% |
Top companies by EBITDA margin, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Youyuan International Holdings Ltd ($2268) | 27.2% | 30.8% | 29.8% | 30.0% | |
| PNG Resources Holdings Ltd ($221) | -6.1% | 9.6% | 12.2% | 26.5% | 21.9% |
| Shandong Chenming Paper Holdings Ltd ($1812) | 11.4% | 13.2% | 14.5% | 20.4% | |
| Changgang Dunxin Enterprise Co Ltd ($2229) | 20.9% | 22.2% | 22.8% | 19.9% | |
| China Sunshine Paper Holdings Co Ltd ($2002) | 14.3% | 12.7% | 14.5% | 15.5% | |
| |
|---|
| Median (12 companies) | 10.3% | 10.3% | 7.0% | 9.0% | 12.6% |
|---|
| Nine Dragons Paper Holdings Ltd ($2689) | 16.4% | 17.2% | 18.6% | 16.9% | 20.7% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| KuangChi Science Ltd ($439) | | 3.2% | 0.5% | 65.6% | |
| PNG Resources Holdings Ltd ($221) | 133.1% | 35.6% | 53.0% | 44.8% | 31.1% |
| Changgang Dunxin Enterprise Co Ltd ($2229) | 2.1% | 15.8% | 2.0% | 36.7% | |
| China Agroforestry Low-Carbon Holdings Ltd ($1069) | 0.2% | 11.5% | 26.7% | 26.3% | |
| Shandong Chenming Paper Holdings Ltd ($1812) | 14.4% | 18.8% | 16.3% | 18.5% | |
| |
|---|
| Median (12 companies) | 14.4% | 9.9% | 5.9% | 9.7% | 16.9% |
|---|
| Nine Dragons Paper Holdings Ltd ($2689) | 16.8% | 15.5% | 8.9% | 5.9% | 5.7% |
Top companies by ROIC, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| PNG Resources Holdings Ltd ($221) | -1.2% | 5.8% | 8.3% | 19.9% | 8.1% |
| Youyuan International Holdings Ltd ($2268) | 12.6% | 12.9% | 10.4% | 10.6% | |
| Changgang Dunxin Enterprise Co Ltd ($2229) | 41.0% | 32.5% | 23.3% | 10.4% | |
| China Sunshine Paper Holdings Co Ltd ($2002) | 6.8% | 5.1% | 5.5% | 7.6% | |
| Shandong Chenming Paper Holdings Ltd ($1812) | 1.9% | 3.3% | 3.0% | 4.5% | |
| |
|---|
| Median (13 companies) | 0.2% | 2.0% | -0.5% | 2.6% | 5.1% |
|---|
| Nine Dragons Paper Holdings Ltd ($2689) | 6.5% | 6.1% | 5.9% | 5.3% | 7.7% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Greenheart Group Ltd ($94) | | 7.1x | 26.8x | 53.0x | |
| Shandong Chenming Paper Holdings Ltd ($1812) | 10.4x | 9.0x | 10.9x | 12.4x | |
| Samson Paper Holdings Ltd ($731) | 8.3x | 13.0x | 9.3x | 8.9x | 11.3x |
| China Sunshine Paper Holdings Co Ltd ($2002) | 5.9x | 6.9x | 6.0x | 4.1x | |
| Youyuan International Holdings Ltd ($2268) | 1.5x | 2.1x | 1.5x | 1.4x | |
| |
|---|
| Median (9 companies) | 2.5x | 3.6x | 3.8x | 1.4x | 5.3x |
|---|
| Nine Dragons Paper Holdings Ltd ($2689) | 4.9x | 5.7x | 5.1x | 4.7x | 3.3x |
