ZTE Corp EBITDA dropped on 70.5% in 2016 and EBITDA Margin decreased on 5.3 pp from 7.4% to 2.2%
23/03/2017 • About ZTE Corp (
$763) • By InTwits
ZTE Corp reported 2016 financial results today. Overall the company's long term financial model is characterised by the following facts:
- ZTE Corp doesn't have a profitable business model yet: 2016 ROIC is -1.4%
- EBITDA Margin is quite volatile: 1.4% in 2016, 7.4% in 2015, 8.9% in 2014, 7.5% in 2013, 1.5% in 2012
- ZTE Corp has low CAPEX intensity: 5 year average CAPEX/Revenue was 1.7%. At the same time it's a lot of higher than industry average of 5.9%.
- CAPEX is quite volatile: 9,905 in 2016, 8,485 in 2015, 4,319 in 2014, 4,881 in 2013, 3,970 in 2012
- The company has unprofitable business model: ROIC is at -1.4%
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 | 2012 | 2013 | 2014 | 2015 | 2016 | 2016/2015 |
|---|
P&L
|
|---|
| Revenue | 84,119 | 75,234 | 80,140 | 98,883 | 101,233 | 2.4% |
| Gross Profit | 18,573 | 20,459 | 23,325 | 28,715 | 29,921 | 4.2% |
| SG&A | 13,790 | 12,417 | 12,325 | 14,267 | 15,353 | 7.6% |
| EBITDA | 1,279 | 5,676 | 7,103 | 7,337 | 1,420 | -80.7% |
| Net Income | -2,841 | 1,358 | 2,634 | 3,625 | -1,856 | -151.2% |
Balance Sheet
|
|---|
| Cash | 21,193 | 19,410 | 18,116 | 27,713 | 30,050 | 8.4% |
| Short Term Debt | 26,617 | 18,720 | 27,554 | 26,410 | 19,327 | -26.8% |
| Long Term Debt | 11,116 | 13,817 | 10,040 | 6,016 | 6,410 | 6.5% |
Cash flow
|
|---|
| Capex | 1,504 | 1,104 | 1,049 | 1,765 | 2,131 | 20.7% |
Ratios
|
|---|
| Revenue growth | -2.5% | -10.6% | 6.5% | 23.4% | 2.4% | |
| EBITDA growth | -78.3% | 343.7% | 25.2% | 3.3% | -80.7% | |
| Gross Margin | 22.1% | 27.2% | 29.1% | 29.0% | 29.6% | 0.5% |
| EBITDA Margin | 1.5% | 7.5% | 8.9% | 7.4% | 1.4% | -6.0% |
| Net Income Margin | -3.4% | 1.8% | 3.3% | 3.7% | -1.8% | -5.5% |
| SG&A, % of revenue | 16.4% | 16.5% | 15.4% | 14.4% | 15.2% | 0.7% |
| CAPEX, % of revenue | 1.8% | 1.5% | 1.3% | 1.8% | 2.1% | 0.3% |
| ROIC | -0.5% | 6.8% | 9.3% | 8.3% | -1.4% | -9.7% |
| ROE | -12.4% | 6.2% | 11.1% | 11.8% | -7.2% | -19.0% |
| Net Debt/EBITDA | 12.9x | 2.3x | 2.7x | 0.6x | -3.0x | -3.7x |
ZTE Corp ($763) key quoterly financial indicators
| mln. CNY | 16Q1 | 16Q2 | 16Q3 | 16Q4 | YoY change |
|---|
P&L
|
|---|
| Revenue | 21,437 | 25,950 | 23,671 | 29,308 | | | | |
| Net Income | 1,074 | 942 | 1,217 | -5,090 | | | | |
Balance Sheet
|
|---|
| Cash | 37,337 | 29,345 | 26,913 | 31,199 | | | | |
| Short Term Debt | 31,250 | 24,579 | 26,909 | 28,754 | | | | |
| Long Term Debt | 6,222 | 6,676 | 5,400 | 5,018 | | | | |
Ratios
|
|---|
| Gross Margin | 33.4% | 32.4% | 27.7% | 27.8% | | | | |
| Net Income Margin | 5.0% | 3.6% | 5.1% | -17.4% | | | | |
Revenue and profitability
The company's Revenue increased on 2.4%. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin increased on 2.1 pp from 31.4% to 33.5% in 2016.
Gross Margin increased slightly on 0.52 pp from 29.0% to 29.6% in 2016. SG&A as a % of Revenue increased slightly on 0.74 pp from 14.4% to 15.2% in 2016.
Net Income marign decreased on 5.5 pp from 3.7% to -1.8% in 2016.
Capital expenditures (CAPEX) and working capital investments
In 2016 the company had CAPEX/Revenue of 2.1%. The company showed small growth in CAPEX/Revenue of 0.64 pp from 1.5% in 2013 to 2.1% in 2016. For the last three years the average CAPEX/Revenue was 1.7%.ZTE Corp maintained rich investment policy and has spent a lot to CAPEX (150% of EBITDA).
Return on investment
The company operates at negative ROIC (-1.42%) and ROE (-7.21%). ROIC decreased on 9.7 pp from 8.3% to -1.4% in 2016. ROE dropped on 19.0 pp from 11.8% to -7.2% in 2016.
Leverage (Debt)
Debt level is -3.0x Net Debt / EBITDA and 18.1x Debt / EBITDA. Net Debt / EBITDA dropped on 3.7x from 0.6x to -3.0x in 2016. Debt dropped on 20.6% while cash increased on 8.4%.
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 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Hong Kong Television Network Ltd ($1137) | | 107.4% | -82.2% | 8,010.0% | 65.8% |
| Hanny Holdings Ltd ($275) | | 131.2% | -85.2% | 349.3% | -78.5% |
| 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) | | -70.2% | -16.7% | 106.0% | -22.7% |
| |
|---|
| Median (54 companies) | 12.2% | 9.8% | 9.6% | 6.1% | -2.7% |
|---|
Top companies by Gross margin, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| HKBN Ltd ($1310) | | 84.3% | 86.5% | 86.9% | 83.8% |
| Netel Technology Holdings Ltd ($8256) | 27.9% | 42.1% | 54.9% | 72.3% | 73.1% |
| Great World Co Holdings Ltd ($8003) | -11.0% | 43.0% | 45.5% | 67.9% | 42.0% |
| APT Satellite Holdings Ltd ($1045) | 58.7% | 64.1% | 62.5% | 61.0% | |
| Cisco Systems Inc ($4333) | 61.2% | 60.6% | 58.9% | 60.4% | 62.9% |
| |
|---|
| Median (51 companies) | 23.6% | 24.3% | 25.0% | 22.7% | 35.6% |
|---|
Top companies by EBITDA margin, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Asia Satellite Telecommunications Holdings Ltd ($1135) | 86.5% | 85.8% | 81.6% | 82.4% | 81.5% |
| APT Satellite Holdings Ltd ($1045) | 81.0% | 78.9% | 77.5% | 78.8% | |
| Synertone Communication Corp ($1613) | 44.9% | 48.5% | 49.4% | 51.5% | -77.6% |
| HKBN Ltd ($1310) | | 39.2% | 40.1% | 39.0% | 35.2% |
| HKT Trust & HKT Ltd ($6823) | 36.3% | 35.0% | 35.9% | 34.9% | 37.2% |
| |
|---|
| Median (54 companies) | 7.2% | 5.5% | 5.4% | 8.3% | 8.9% |
|---|
Top companies by CAPEX/Revenue, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| APT Satellite Holdings Ltd ($1045) | 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) | 93.8% | 71.7% | 75.0% | 52.8% | |
| China Fiber Optic Network System Group Ltd ($3777) | 4.8% | 16.3% | 13.1% | 31.9% | |
| Directel Holdings Ltd ($8337) | 2.1% | 0.1% | 0.6% | 30.2% | |
| |
|---|
| Median (54 companies) | 2.1% | 2.9% | 2.9% | 2.6% | 8.4% |
|---|
Top companies by ROIC, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Telecom Service One Holdings Ltd ($8145) | 95.0% | 5.4% | 26.7% | 39.8% | 37.4% |
| VTech Holdings Ltd ($303) | 37.6% | 39.5% | 40.0% | 39.8% | 37.9% |
| Coolpad Group Ltd ($2369) | 8.1% | 6.0% | 9.6% | 29.1% | |
| Telecom Digital Holdings Ltd ($8336) | | 13.3% | 20.2% | 18.9% | 16.7% |
| SmarTone Telecommunications Holdings Ltd ($315) | 37.2% | 23.1% | 12.8% | 17.7% | 14.5% |
| |
|---|
| Median (55 companies) | 7.3% | 6.0% | 5.8% | 5.4% | 5.2% |
|---|
Top companies by Net Debt / EBITDA
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| 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) | -1.6x | 3.5x | 14.3x | 11.3x | |
| China Electronics Corp Holdings Co Ltd ($85) | -2.0x | -1.3x | 12.5x | 7.6x | |
| China All Access Holdings Ltd ($633) | 0.9x | 1.8x | 5.2x | 5.6x | |
| |
|---|
| Median (39 companies) | -0.2x | 0.6x | 0.6x | 0.6x | 1.7x |
|---|
