ZTE Corp EBITDA surged on 611% and EBITDA Margin increased on 7.9 pp from 1.4% to 9.3%
01/02/2018 • About ZTE Corp (
$763) • By InTwits
ZTE Corp reported 2017 financial results today. Overall the company's long term financial model is characterised by the following facts:
- EBITDA Margin is quite volatile: 9.3% in 2017, 1.4% in 2016, 7.4% in 2015, 8.9% in 2014, 7.5% in 2013
- ZTE Corp has low CAPEX intensity: 5 year average CAPEX/Revenue was 2.1%. At the same time it's a lot of higher than industry average of 6.1%.
- CAPEX is quite volatile: 4,154 in 2017, 2,131 in 2016, 1,765 in 2015, 1,049 in 2014, 1,104 in 2013
- The company has business model with average profitability: ROIC is at 10.3%
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 | 2013 | 2014 | 2015 | 2016 | 2017 | 2017/2016 |
|---|
P&L
|
|---|
| Revenue | 75,234 | 80,140 | 98,883 | 101,233 | 108,815 | 7.5% |
| Gross Profit | 20,459 | 23,325 | 28,715 | 29,921 | 32,699 | 9.3% |
| SG&A | 12,417 | 12,325 | 14,267 | 15,353 | 15,498 | 0.9% |
| EBITDA | 5,676 | 7,103 | 7,337 | 1,420 | 10,088 | 610.5% |
| Net Income | 1,358 | 2,634 | 3,625 | -1,856 | 5,069 | |
Balance Sheet
|
|---|
| Cash | 19,410 | 18,116 | 27,713 | 30,050 | 30,109 | 0.2% |
| Short Term Debt | 18,720 | 27,554 | 26,410 | 19,327 | 19,616 | 1.5% |
| Long Term Debt | 13,817 | 10,040 | 6,016 | 6,410 | 5,950 | -7.2% |
Cash flow
|
|---|
| Capex | 1,104 | 1,049 | 1,765 | 2,131 | 4,154 | 95.0% |
Ratios
|
|---|
| Revenue growth | -10.6% | 6.5% | 23.4% | 2.4% | 7.5% | |
| EBITDA growth | 343.7% | 25.2% | 3.3% | -80.7% | 610.5% | |
| Gross Margin | 27.2% | 29.1% | 29.0% | 29.6% | 30.0% | 0.5% |
| EBITDA Margin | 7.5% | 8.9% | 7.4% | 1.4% | 9.3% | 7.9% |
| Net Income Margin | 1.8% | 3.3% | 3.7% | -1.8% | 4.7% | 6.5% |
| SG&A, % of revenue | 16.5% | 15.4% | 14.4% | 15.2% | 14.2% | -0.9% |
| CAPEX, % of revenue | 1.5% | 1.3% | 1.8% | 2.1% | 3.8% | 1.7% |
| ROIC | 6.8% | 9.3% | 8.3% | -1.4% | 10.3% | 11.7% |
| ROE | 6.2% | 11.1% | 11.8% | -7.2% | 15.7% | 23.0% |
| Net Debt/EBITDA | 2.3x | 2.7x | 0.6x | -3.0x | -0.5x | 2.6x |
ZTE Corp ($763) key quoterly financial indicators
| mln. CNY | 17Q1 | 17Q2 | 17Q3 | 17Q4 | YoY change |
|---|
P&L
|
|---|
| Revenue | 25,515 | 27,963 | 22,414 | 31,981 | 19.0% | 7.8% | -5.3% | 9.1% |
| Net Income | 1,339 | 1,204 | 1,737 | 790 | 24.6% | 27.9% | 42.7% | |
Balance Sheet
|
|---|
| Cash | 29,249 | 26,066 | 26,182 | 30,342 | -21.7% | -11.2% | -2.7% | -2.7% |
| Short Term Debt | 26,657 | 29,379 | 30,266 | 29,384 | -14.7% | 19.5% | 12.5% | 2.2% |
| Long Term Debt | 5,160 | 4,377 | 2,030 | 3,002 | -17.1% | -34.4% | -62.4% | -40.2% |
Ratios
|
|---|
| Gross Margin | 31.9% | 31.8% | 29.0% | 29.2% | -1.5% | -0.6% | 1.3% | 1.4% |
| Net Income Margin | 5.2% | 4.3% | 7.7% | 2.5% | 0.2% | 0.7% | 2.6% | 19.8% |
Revenue and profitability
ZTE Corp's Revenue increased on 7.5%. Revenue growth showed acceleration in 17Q4 - it increased 9.1% YoY. Despite revenue decline the EBITDA margin expanded. EBITDA Margin increased slightly on 0.62 pp from 20.4% to 21.0% in 2017.
Gross Margin showed almost no change in 2017. SG&A as a % of Revenue decreased slightly on 0.92 pp from 15.2% to 14.2% in 2017.
Net Income marign increased on 6.5 pp from -1.8% to 4.7% in 2017.
Capital expenditures (CAPEX) and working capital investments
In 2017 ZTE Corp had CAPEX/Revenue of 3.8%. The company's CAPEX/Revenue increased on 2.5 pp from 1.3% in 2014 to 3.8% in 2017. For the last three years the average CAPEX/Revenue was 2.6%.
Return on investment
The company operates at good ROE (15.74%) while ROIC is low (10.31%). ROIC surged on 11.7 pp from -1.4% to 10.3% in 2017. ROE jumped on 23.0 pp from -7.2% to 15.7% in 2017.
Leverage (Debt)
Company's Net Debt / EBITDA is -0.5x and Debt / EBITDA is 2.5x. Net Debt / EBITDA surged on 2.6x from -3.0x to -0.5x in 2017. Debt decreased slightly on 0.66% while cash showed almost no change in 2017.
Appendix 1: Peers in Telecommunications
Below we provide ZTE Corp benchmarking against other companies in Telecommunications 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 | FY2013 | FY2014 | FY2015 | FY2016 | FY2017 |
|---|
| Great World Co Holdings Ltd ($8003) | -81.7% | 61.9% | -3.7% | 1,112.5% | |
| Zheda Lande Scitech Ltd ($8106) | 6.9% | -21.6% | 34.3% | 117.3% | |
| Hong Kong Television Network Ltd ($1137) | 107.4% | -82.2% | 8,010.0% | 65.8% | |
| Xi'an Haitian Antenna Technologies Co Ltd ($8227) | -45.9% | -56.2% | 111.6% | 55.3% | |
| CCT Fortis Holdings Ltd ($138) | -55.3% | -71.3% | 207.1% | 47.2% | |
| |
|---|
| Median (37 companies) | 9.8% | 9.6% | 6.1% | -2.4% | |
|---|
Top companies by Gross margin, %
| Top 5 | FY2013 | FY2014 | FY2015 | FY2016 | FY2017 |
|---|
| HKBN Ltd ($1310) | 84.3% | 86.5% | 86.9% | 83.8% | |
| Netel Technology Holdings Ltd ($8256) | 42.1% | 54.9% | 72.3% | 73.1% | |
| Hutchison Telecommunications Hong Kong Holdings Ltd ($215) | 69.1% | 52.7% | 36.2% | 64.1% | |
| Cisco Systems Inc ($4333) | 60.6% | 58.9% | 60.4% | 62.9% | |
| HKT Trust & HKT Ltd ($6823) | 55.7% | 58.2% | 55.3% | 57.3% | |
| |
|---|
| Median (26 companies) | 24.3% | 25.0% | 22.7% | 33.5% | |
|---|
Top companies by EBITDA margin, %
| Top 5 | FY2013 | FY2014 | FY2015 | FY2016 | FY2017 |
|---|
| Asia Satellite Telecommunications Holdings Ltd ($1135) | 85.8% | 81.6% | 82.4% | 81.5% | |
| Champion Technology Holdings Ltd ($92) | 41.1% | 33.1% | 25.6% | 58.1% | |
| HKT Trust & HKT Ltd ($6823) | 35.0% | 35.9% | 34.9% | 37.2% | |
| HKBN Ltd ($1310) | 39.2% | 40.1% | 39.0% | 35.2% | |
| PCCW Ltd ($8) | 31.9% | 39.2% | 30.6% | 31.9% | |
| |
|---|
| Median (28 companies) | 5.5% | 5.4% | 8.3% | 8.1% | |
|---|
Top companies by CAPEX/Revenue, %
| Top 5 | FY2013 | FY2014 | FY2015 | FY2016 | FY2017 |
|---|
| Hanny Holdings Ltd ($275) | 11.6% | 28.3% | 0.2% | 643.1% | |
| Vision Values Holdings Ltd ($862) | 1.2% | 8.4% | 3.0% | 72.5% | |
| Netel Technology Holdings Ltd ($8256) | 15.4% | 16.6% | 9.0% | 25.0% | |
| Great World Co Holdings Ltd ($8003) | 108.7% | 7.8% | 0.4% | 14.6% | |
| Synertone Communication Corp ($1613) | 38.4% | 15.8% | 2.1% | 14.3% | |
| |
|---|
| Median (18 companies) | 2.9% | 2.9% | 2.6% | 6.1% | |
|---|
Top companies by ROIC, %
| Top 5 | FY2013 | FY2014 | FY2015 | FY2016 | FY2017 |
|---|
| VTech Holdings Ltd ($303) | 39.5% | 40.0% | 39.8% | 37.9% | |
| Telecom Service One Holdings Ltd ($8145) | 5.4% | 26.7% | 39.8% | 37.4% | |
| Champion Technology Holdings Ltd ($92) | 3.0% | 5.2% | 0.9% | 17.4% | |
| Telecom Digital Holdings Ltd ($8336) | 13.3% | 20.2% | 18.9% | 16.7% | |
| Cisco Systems Inc ($4333) | 15.8% | 12.1% | 13.4% | 14.7% | |
| |
|---|
| Median (38 companies) | 6.0% | 5.8% | 5.4% | 6.0% | |
|---|
Top companies by Net Debt / EBITDA
| Top 5 | FY2013 | FY2014 | FY2015 | FY2016 | FY2017 |
|---|
| Z-Obee Holdings Ltd ($948) | 5.9x | | | 70.9x | |
| HKBN Ltd ($1310) | 3.8x | 3.0x | 3.0x | 3.5x | |
| PCCW Ltd ($8) | 2.7x | 2.6x | 2.9x | 3.3x | |
| CITIC Telecom International Holdings Ltd ($1883) | 3.5x | 3.4x | 3.2x | 3.2x | |
| Asia Satellite Telecommunications Holdings Ltd ($1135) | -1.2x | -1.0x | 3.2x | 2.9x | |
| |
|---|
| Median (18 companies) | 0.6x | 0.6x | 0.6x | 1.6x | |
|---|
