Kingsoft Corp Ltd Net Income dropped on 173% in 2016 and EBITDA Margin showed almost no change
21/03/2017 • About Kingsoft Corp Ltd (
$3888) • By InTwits
Kingsoft Corp Ltd reported FY2016 financial results today. Overall the company's long term financial model is characterised by the following facts:
- EBITDA Margin is quite volatile: 15.1% in FY2016, 15.3% in FY2015, 20.1% in FY2014, 35.9% in FY2013, 35.6% in FY2012
- The company has potentially unprofitable business model: ROIC is at 5.9%
Below you can find a comprehensive analysis of the key data driving the company's performance and stock price.
Kingsoft Corp Ltd ($3888) key annual financial indicators
| mln. CNY | 2012 | 2013 | 2014 | 2015 | 2016 | 2016/2015 |
|---|
P&L
|
|---|
| Revenue | 1,411 | 2,173 | 3,350 | 5,676 | 8,282 | 45.9% |
| Gross Profit | 1,224 | 1,876 | 2,760 | 4,357 | 5,620 | 29.0% |
| SG&A | 367 | 561 | 1,076 | 2,173 | 2,524 | 16.1% |
| EBITDA | 503 | 781 | 672 | 868 | 1,253 | 44.3% |
| Net Income | 433 | 671 | 769 | 369 | -271 | -173.3% |
Balance Sheet
|
|---|
| Cash | 2,416 | 4,481 | 6,984 | 8,606 | 9,825 | 14.2% |
| Short Term Debt | 414 | 16 | 16 | 147 | 380 | 158.1% |
| Long Term Debt | 0 | 1,116 | 2,792 | 2,710 | 3,647 | 34.6% |
Cash flow
|
|---|
| Capex | 61 | 83 | 479 | 629 | | -100.0% |
Ratios
|
|---|
| Revenue growth | 38.3% | 54.0% | 54.2% | 69.4% | 45.9% | |
| EBITDA growth | 19.4% | 55.2% | -13.9% | 29.2% | 44.3% | |
| Gross Margin | 86.8% | 86.3% | 82.4% | 76.8% | 67.9% | -8.9% |
| EBITDA Margin | 35.6% | 35.9% | 20.1% | 15.3% | 15.1% | -0.2% |
| Net Income Margin | 30.7% | 30.9% | 22.9% | 6.5% | -3.3% | -9.8% |
| SG&A, % of revenue | 26.0% | 25.8% | 32.1% | 38.3% | 30.5% | -7.8% |
| CAPEX, % of revenue | 4.3% | 3.8% | 14.3% | 11.1% | | -11.1% |
| ROIC | 14.6% | 16.9% | 7.3% | 5.0% | 5.9% | 1.0% |
| ROE | 18.7% | 22.8% | 19.4% | 5.9% | -3.4% | -9.4% |
| Net Debt/EBITDA | -4.0x | -4.3x | -6.2x | -6.6x | -4.6x | 2.0x |
Revenue and profitability
The company's Revenue surged on 45.9%. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin increased on 3.0 pp from 43.4% to 46.3% in FY2016.
Gross Margin decreased on 8.9 pp from 76.8% to 67.9% in FY2016. SG&A as a % of Revenue decreased on 7.8 pp from 38.3% to 30.5% in FY2016.
Net Income marign decreased on 9.8 pp from 6.5% to -3.3% in FY2016.
Return on investment
The company operates at low but positive ROIC (5.92%) and negative ROE (-3.44%). ROIC increased slightly on 0.97 pp from 5.0% to 5.9% in FY2016. ROE decreased on 9.4 pp from 5.9% to -3.4% in FY2016.
Leverage (Debt)
Company's Net Debt / EBITDA is -4.6x and Debt / EBITDA is 3.2x. Net Debt / EBITDA surged on 2.0x from -6.6x to -4.6x in FY2016. Debt jumped on 40.9% while cash surged on 14.2%.
Management team
Tao Zou is a the company's CEO. Tao Zou has spent 2 years at the company. Ng Yuk Keung "Francis" is a Kingsoft Corp Ltd's CFO. Ng Yuk Keung "Francis" has spent 6 years at the company.
Appendix 1: Peers in Software
Below we provide Kingsoft Corp Ltd benchmarking against other companies in Software 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 |
|---|
| Yunbo Digital Synergy Group Ltd ($8050) | | 241.6% | -31.9% | 348.0% | 99.6% |
| Pizu Group Holdings Ltd ($8053) | | -42.9% | 1,742.9% | 157.9% | 235.2% |
| China Eco-Farming Ltd ($8166) | -23.6% | -7.7% | 21.8% | 155.5% | |
| ICO Group Ltd ($8140) | | -11.1% | -3.1% | 104.9% | 29.8% |
| Aurum Pacific China Group Ltd ($8148) | | | 50.0% | 92.7% | -17.8% |
| |
|---|
| Median (38 companies) | 21.9% | 11.2% | 21.2% | 5.5% | 2.5% |
|---|
| Kingsoft Corp Ltd ($3888) | | 54.0% | 54.2% | 69.4% | 45.9% |
Top companies by Gross margin, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| China Bio Cassava Holdings Ltd ($8129) | 90.4% | 97.4% | 98.4% | 98.3% | |
| Chanjet Information Technology Co Ltd ($1588) | 89.2% | 91.3% | 92.4% | 91.4% | |
| China Binary Sale Technology Ltd ($8255) | 63.5% | 68.5% | 67.7% | 85.9% | |
| Kingdee International Software Group Co Ltd ($268) | 65.0% | 75.3% | 82.5% | 81.5% | 81.3% |
| Tian Ge Interactive Holdings Ltd ($1980) | 88.5% | 87.6% | 84.8% | 77.7% | |
| |
|---|
| Median (37 companies) | 44.3% | 40.5% | 42.1% | 40.1% | 36.5% |
|---|
| Kingsoft Corp Ltd ($3888) | 86.8% | 86.3% | 82.4% | 76.8% | 67.9% |
Top companies by EBITDA margin, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| International Entertainment Corp ($1009) | 50.8% | 64.0% | 54.9% | 62.0% | 45.5% |
| Sinosoft Technology Group Ltd ($1297) | 62.6% | 54.9% | 57.2% | 59.0% | |
| China Binary Sale Technology Ltd ($8255) | 35.1% | 35.4% | 44.4% | 50.5% | |
| Boyaa Interactive International Ltd ($434) | 38.5% | 25.8% | 30.7% | 47.6% | |
| TravelSky Technology Ltd ($696) | 38.1% | 35.8% | 31.9% | 41.1% | |
| |
|---|
| Median (38 companies) | 8.5% | 11.1% | 8.9% | 8.5% | 2.8% |
|---|
| Kingsoft Corp Ltd ($3888) | 35.6% | 35.9% | 20.1% | 15.3% | 15.1% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| NetDragon Websoft Inc ($777) | 21.1% | 34.6% | 54.6% | 42.9% | |
| China Information Technology Development Ltd ($8178) | 4.1% | 1.1% | 0.5% | 40.7% | |
| Aurum Pacific China Group Ltd ($8148) | | 2.9% | 7.5% | 20.6% | |
| TravelSky Technology Ltd ($696) | 8.9% | 21.7% | 18.1% | 18.1% | |
| Beijing Beida Jade Bird Universal Sci-Tech Co Ltd ($8095) | 8.7% | 5.5% | 4.3% | 10.9% | |
| |
|---|
| Median (38 companies) | 1.4% | 1.5% | 2.6% | 2.0% | 0.5% |
|---|
| Kingsoft Corp Ltd ($3888) | 4.3% | 3.8% | 14.3% | 11.1% | |
Top companies by ROIC, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Pizu Group Holdings Ltd ($8053) | -21.8% | -13.4% | -6.8% | 120.0% | 51.7% |
| ICO Group Ltd ($8140) | | 43.5% | 6.8% | 37.7% | 27.1% |
| IGG Inc ($8002) | | 55.9% | 41.4% | 25.9% | |
| Boyaa Interactive International Ltd ($434) | 75.3% | 21.3% | 20.0% | 21.4% | |
| Sinosoft Technology Group Ltd ($1297) | 34.0% | 21.9% | 20.2% | 20.8% | |
| |
|---|
| Median (38 companies) | 4.7% | 6.1% | 3.3% | 2.0% | 4.1% |
|---|
| Kingsoft Corp Ltd ($3888) | 14.6% | 16.9% | 7.3% | 5.0% | 5.9% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Epicurean and Co Ltd ($8213) | 2.3x | 4.7x | 12.3x | 12.0x | 13.9x |
| Sing Lee Software Group Ltd ($8076) | | | 6.2x | 4.4x | |
| Century Sage Scientific Holdings Ltd ($1450) | 0.2x | 0.0x | -0.2x | 1.8x | |
| Microsoft Corp ($4338) | | | 0.4x | 1.2x | 1.4x |
| Chinasoft International Ltd ($354) | -0.7x | 0.7x | 1.5x | 0.7x | |
| |
|---|
| Median (21 companies) | -1.0x | -1.3x | -1.6x | -1.0x | -0.1x |
|---|
| Kingsoft Corp Ltd ($3888) | -4.0x | -4.3x | -6.2x | -6.6x | -4.6x |
