China Southern Airlines Co Ltd reports 56.3% CAPEX growth in 2016 and 2.6% Revenue growth
30/03/2017 • About China Southern Airlines Co Ltd (
$1055) • By InTwits
China Southern Airlines Co Ltd reported 2016 financial results today. Overall the company's long term financial model is characterised by the following facts:
- China Southern Airlines Co Ltd has high CAPEX intensity: 5 year average CAPEX/Revenue was 12.7%. At the same time it's in pair with industry average of 16.0%.
- CAPEX is quite volatile: 0.80 in 2016, 44,757 in 2015, 44,005 in 2014, 20,932 in 2013, 24,279 in 2012
- The company has potentially unprofitable business model: ROIC is at 6.2%
Below you can find a comprehensive analysis of the key data driving the company's performance and stock price.
China Southern Airlines Co Ltd ($1055) key annual financial indicators
| mln. CNY | 2012 | 2013 | 2014 | 2015 | 2016 | 2016/2015 |
|---|
P&L
|
|---|
| Revenue | 99,514 | 98,547 | 108,584 | 111,652 | 114,557 | 2.6% |
| Gross Profit | | | | | 18,189 | |
| SG&A | 9,559 | 10,224 | 10,178 | 9,440 | 9,213 | -2.4% |
| EBITDA | 13,437 | 10,906 | 15,706 | 25,382 | 21,799 | -14.1% |
| Net Income | 2,619 | 1,986 | 1,777 | 3,736 | 5,056 | 35.3% |
Balance Sheet
|
|---|
| Cash | 10,082 | 11,748 | 15,414 | 4,560 | 4,760 | 4.4% |
| Short Term Debt | 24,393 | 23,878 | 26,971 | 36,418 | 13,855 | -62.0% |
| Long Term Debt | 49,567 | 68,619 | 85,985 | 65,292 | 72,285 | 10.7% |
Cash flow
|
|---|
| Capex | 15,733 | 12,308 | 8,649 | 12,139 | 18,974 | 56.3% |
Ratios
|
|---|
| Revenue growth | 10.1% | -1.0% | 10.2% | 2.8% | 2.6% | |
| EBITDA growth | 10.9% | -18.8% | 44.0% | 61.6% | -14.1% | |
| Gross Margin | | | | | 15.9% | 15.9% |
| EBITDA Margin | 13.5% | 11.1% | 14.5% | 22.7% | 19.0% | -3.7% |
| Net Income Margin | 2.6% | 2.0% | 1.6% | 3.3% | 4.4% | 1.1% |
| SG&A, % of revenue | 9.6% | 10.4% | 9.4% | 8.5% | 8.0% | -0.4% |
| CAPEX, % of revenue | 15.8% | 12.5% | 8.0% | 10.9% | 16.6% | 5.7% |
| ROIC | 4.7% | 1.2% | 3.2% | 8.7% | 6.2% | -2.5% |
| ROE | 8.1% | 5.9% | 5.1% | 10.0% | 12.3% | 2.3% |
| Net Debt/EBITDA | 4.8x | 7.4x | 6.2x | 3.8x | 3.7x | -0.1x |
China Southern Airlines Co Ltd ($1055) key quoterly financial indicators
| mln. CNY | 16Q1 | 16Q2 | 16Q3 | 16Q4 | YoY change |
|---|
P&L
|
|---|
| Revenue | 27,944 | 26,020 | 32,536 | 28,057 | | | | |
| Net Income | 2,693 | 439 | 3,309 | -1,385 | | | | |
Balance Sheet
|
|---|
| Cash | 3,704 | 6,451 | 4,654 | 4,760 | | | | |
| Short Term Debt | 24,898 | 17,542 | 14,642 | 13,855 | | | | |
| Long Term Debt | 15,364 | 65,298 | 15,599 | 72,285 | | | | |
Ratios
|
|---|
| Gross Margin | 21.9% | 13.8% | 21.8% | 5.0% | | | | |
| Net Income Margin | 9.6% | 1.7% | 10.2% | -4.9% | | | | |
Revenue and profitability
China Southern Airlines Co Ltd's Revenue increased on 2.6%. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin surged on 41.6 pp from 46.6% to 88.2% in 2016.
SG&A as a % of Revenue showed almost no change in 2016.
Net Income marign increased slightly on 1.1 pp from 3.3% to 4.4% in 2016.
Capital expenditures (CAPEX) and working capital investments
In 2016 the company had CAPEX/Revenue of 16.6%. China Southern Airlines Co Ltd showed CAPEX/Revenue growth of 4.1 pp from 12.5% in 2013 to 16.6% in 2016. It's average level of CAPEX/Revenue for the last three years was 11.8%.The company invested a large share of EBITDA (87.0%) to CAPEX.
Return on investment
The company operates at good ROE (12.28%) while ROIC is low (6.23%). ROIC decreased on 2.5 pp from 8.7% to 6.2% in 2016. ROE increased on 2.3 pp from 10.0% to 12.3% in 2016.
Leverage (Debt)
Debt level is 3.7x Net Debt / EBITDA and 4.0x Debt / EBITDA. Net Debt / EBITDA decreased on 0.1x from 3.8x to 3.7x in 2016. Debt dropped on 15.3% while cash increased on 4.4%.
Appendix 1: Peers in Airlines
Below you can find China Southern Airlines Co Ltd benchmarking vs. other companies in Airlines 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 | 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 |
|---|
