China Eastern Airlines Corp Ltd reports 345% CAPEX growth in 2016 and 4.6% Revenue growth
30/03/2017 • About China Eastern Airlines Corp Ltd (
$670) • By InTwits
China Eastern Airlines Corp Ltd reported 2016 financial results today. Overall the company's long term financial model is characterised by the following facts:
- China Eastern Airlines Corp Ltd has high CAPEX intensity: 5 year average CAPEX/Revenue was 12.9%. At the same time it's in pair with industry average of 16.0%.
- CAPEX is quite volatile: 38,715 in 2016, 8,691 in 2015, 5,828 in 2014, 1,822 in 2013, 6,148 in 2012
- The company has potentially unprofitable business model: ROIC is at 4.2%
- It operates with medium-size leverage: Net Debt/EBITDA is 6.5x while industry average is 6.7x
Below you can find a comprehensive analysis of the key data driving the company's performance and stock price.
China Eastern Airlines Corp Ltd ($670) key annual financial indicators
| mln. CNY | 2012 | 2013 | 2014 | 2015 | 2016 | 2016/2015 |
|---|
P&L
|
|---|
| Revenue | 85,253 | 88,245 | 90,185 | 93,969 | 98,323 | 4.6% |
| Gross Profit | | | | | 15,736 | |
| SG&A | 3,727 | | 4,120 | 3,651 | 8,264 | 126.3% |
| EBITDA | 11,909 | 9,803 | 15,241 | 23,467 | 19,242 | -18.0% |
| Net Income | 3,072 | 2,373 | 3,410 | 4,537 | 4,508 | -0.6% |
Balance Sheet
|
|---|
| Cash | 2,512 | 1,995 | 1,355 | 9,080 | 1,698 | -81.3% |
| Short Term Debt | 25,245 | 26,266 | 33,272 | 44,323 | 44,839 | 1.2% |
| Long Term Debt | 42,349 | 47,470 | 64,612 | 74,788 | 82,484 | 10.3% |
Cash flow
|
|---|
| Capex | 6,148 | 1,822 | 5,828 | 8,691 | 38,715 | 345.5% |
Ratios
|
|---|
| Revenue growth | 3.5% | 3.5% | 2.2% | 4.2% | 4.6% | |
| EBITDA growth | 7.0% | -17.7% | 55.5% | 54.0% | -18.0% | |
| Gross Margin | | | | | 16.0% | 16.0% |
| EBITDA Margin | 14.0% | 11.1% | 16.9% | 25.0% | 19.6% | -5.4% |
| Net Income Margin | 3.6% | 2.7% | 3.8% | 4.8% | 4.6% | -0.2% |
| SG&A, % of revenue | 4.4% | | 4.6% | 3.9% | 8.4% | 4.5% |
| CAPEX, % of revenue | 7.2% | 2.1% | 6.5% | 9.2% | 39.4% | 30.1% |
| ROIC | 5.0% | 1.6% | 5.2% | 8.7% | 4.2% | -4.5% |
| ROE | 15.2% | 10.1% | 12.0% | 13.5% | 10.7% | -2.8% |
| Net Debt/EBITDA | 5.5x | 7.3x | 6.3x | 4.7x | 6.5x | 1.8x |
China Eastern Airlines Corp Ltd ($670) key quoterly financial indicators
| mln. CNY | 16Q1 | 16Q2 | 16Q3 | 16Q4 | YoY change |
|---|
P&L
|
|---|
| Revenue | 23,503 | 22,757 | 29,041 | 23,022 | | | | |
| Net Income | 2,602 | 631 | 3,461 | -2,186 | | | | |
Balance Sheet
|
|---|
| Cash | 1,300 | 13,220 | 1,370 | 1,698 | | | | |
| Short Term Debt | 35,729 | 59,410 | 13,038 | 44,839 | | | | |
| Long Term Debt | 14,771 | 65,918 | 22,559 | 82,484 | | | | |
Ratios
|
|---|
| Gross Margin | 21.2% | 15.6% | 23.8% | 1.3% | | | | |
| Net Income Margin | 11.1% | 2.8% | 11.9% | -9.5% | | | | |
Revenue and profitability
The company's Revenue increased on 4.6%. Revenue decline was accompanies by EBITDA margin decline. EBITDA Margin decreased on 6.0 pp from 15.0% to 9.0% in 2016.
SG&A as a % of Revenue increased on 4.5 pp from 3.9% to 8.4% in 2016.
Net Income marign showed almost no change in 2016.
Capital expenditures (CAPEX) and working capital investments
In 2016 the company had CAPEX/Revenue of 39.4%. The company's CAPEX/Revenue surged on 37.3 pp from 2.1% in 2013 to 39.4% in 2016. Average CAPEX/Revenue for the last three years was 18.4%.The company investments to CAPEX were large: 201% of EBITDA.
Return on investment
The company operates at low ROIC (4.19%) and ROE (10.66%). ROIC decreased on 4.5 pp from 8.7% to 4.2% in 2016. ROE decreased on 2.8 pp from 13.5% to 10.7% in 2016.
Leverage (Debt)
Company's Net Debt / EBITDA is 6.5x and Debt / EBITDA is 6.6x. Net Debt / EBITDA jumped on 1.8x from 4.7x to 6.5x in 2016. Debt increased on 6.9% while cash dropped on 81.3%.
Appendix 1: Peers in Airlines
Below we provide China Eastern Airlines Corp Ltd benchmarking against other companies in Airlines 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 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Cathay Pacific Airways Ltd ($293) | | 1.1% | 5.5% | -3.4% | -9.4% |
| |
|---|
| Median (1 company) | | 1.1% | 5.5% | -3.4% | -9.4% |
|---|
Top companies by EBITDA margin, %
| Top | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Cathay Pacific Airways Ltd ($293) | 8.2% | 11.2% | 12.3% | 15.0% | 9.0% |
| |
|---|
| Median (1 company) | 8.2% | 11.2% | 12.3% | 15.0% | 9.0% |
|---|
Top companies by CAPEX/Revenue, %
| Top | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Cathay Pacific Airways Ltd ($293) | 21.1% | 20.4% | 14.0% | 12.9% | 16.0% |
| |
|---|
| Median (1 company) | 21.1% | 20.4% | 14.0% | 12.9% | 16.0% |
|---|
Top companies by ROIC, %
| Top | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Cathay Pacific Airways Ltd ($293) | 1.2% | 2.9% | 3.5% | 5.3% | -0.2% |
| |
|---|
| Median (1 company) | 1.2% | 2.9% | 3.5% | 5.3% | -0.2% |
|---|
Top companies by Net Debt / EBITDA
| Top | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Cathay Pacific Airways Ltd ($293) | 4.4x | 4.1x | 3.5x | 3.3x | 6.7x |
| |
|---|
| Median (1 company) | 4.4x | 4.1x | 3.5x | 3.3x | 6.7x |
|---|
