China Southern Airlines Co Ltd reports 27.0% CAPEX decline in 2017 while 11.6% Revenue growth
26/03/2018 • About China Southern Airlines Co Ltd (
$1055) • By InTwits
China Southern Airlines Co Ltd reported 2017 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 11.7%. At the same time it's a lot of higher than industry average of 0.5%.
- CAPEX is quite volatile: 3,464 in 2017, 2,559 in 2016, 2,617 in 2015, 5,106 in 2014, 5,311 in 2013
- The company has potentially unprofitable business model: ROIC is at 5.7%
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 | 2013 | 2014 | 2015 | 2016 | 2017 | 2017/2016 |
|---|
P&L
|
|---|
| Revenue | 98,547 | 108,584 | 111,652 | 114,557 | 127,806 | 11.6% |
| Gross Profit | | | | 18,189 | | -100.0% |
| SG&A | 10,224 | 10,178 | 9,440 | 9,213 | 10,272 | 11.5% |
| EBITDA | 10,906 | 15,706 | 25,382 | 21,799 | 22,479 | 3.1% |
| Net Income | 1,986 | 1,777 | 3,736 | 5,056 | 5,961 | 17.9% |
Balance Sheet
|
|---|
| Cash | 11,748 | 15,414 | 4,560 | 4,760 | 6,826 | 43.4% |
| Short Term Debt | 23,878 | 26,971 | 36,418 | 13,855 | 35,909 | 159.2% |
| Long Term Debt | 68,619 | 85,985 | 65,292 | 72,285 | 80,302 | 11.1% |
Cash flow
|
|---|
| Capex | 12,308 | 8,649 | 12,139 | 18,974 | 13,846 | -27.0% |
Ratios
|
|---|
| Revenue growth | -1.0% | 10.2% | 2.8% | 2.6% | 11.6% | |
| EBITDA growth | -18.8% | 44.0% | 61.6% | -14.1% | 3.1% | |
| Gross Margin | | | | 15.9% | | -15.9% |
| EBITDA Margin | 11.1% | 14.5% | 22.7% | 19.0% | 17.6% | -1.4% |
| Net Income Margin | 2.0% | 1.6% | 3.3% | 4.4% | 4.7% | 0.3% |
| SG&A, % of revenue | 10.4% | 9.4% | 8.5% | 8.0% | 8.0% | -0.0% |
| CAPEX, % of revenue | 12.5% | 8.0% | 10.9% | 16.6% | 10.8% | -5.7% |
| ROIC | 1.2% | 3.2% | 8.7% | 6.2% | 5.7% | -0.5% |
| ROE | 5.9% | 5.1% | 10.0% | 12.3% | 12.8% | 0.5% |
| Net Debt/EBITDA | 7.4x | 6.2x | 3.8x | 3.7x | 4.9x | 1.1x |
China Southern Airlines Co Ltd ($1055) key quoterly financial indicators
| mln. CNY | 17Q1 | 17Q2 | 17Q3 | 17Q4 | YoY change |
|---|
P&L
|
|---|
| Revenue | 30,933 | 29,294 | 35,758 | 31,296 | 10.7% | 12.6% | 9.9% | 11.5% |
| Net Income | 1,550 | 1,218 | 4,282 | -1,136 | -42.4% | 177.4% | 29.4% | |
Balance Sheet
|
|---|
| Cash | 5,201 | 4,581 | 6,323 | 7,139 | 40.4% | -29.0% | 35.9% | 50.0% |
| Short Term Debt | 22,178 | 29,970 | 24,455 | 35,909 | -10.9% | 70.8% | 67.0% | 159.2% |
| Long Term Debt | 18,797 | 78,331 | 27,293 | 80,302 | 22.3% | 20.0% | 75.0% | 11.1% |
Ratios
|
|---|
| Gross Margin | 14.6% | 9.3% | 21.5% | 2.1% | -7.3% | -4.5% | -0.2% | -2.9% |
| Net Income Margin | 5.0% | 4.2% | 12.0% | -3.6% | -4.6% | 2.5% | 1.8% | 1.3% |
Revenue and profitability
China Southern Airlines Co Ltd's Revenue jumped on 11.6%. Revenue growth showed slow down in 17Q4 - it was 11.5% YoY. Revenue growth was financed by EBITDA margin decline. EBITDA Margin decreased slightly on 1.4 pp from 19.0% to 17.6% in 2017.
SG&A as a % of Revenue showed almost no change in 2017.
Net Income marign showed almost no change in 2017.
Capital expenditures (CAPEX) and working capital investments
In 2017 the company had CAPEX/Revenue of 10.8%. CAPEX/Revenue increased on 2.9 pp from 8.0% in 2014 to 10.8% in 2017. For the last three years the average CAPEX/Revenue was 12.8%.To maintain this fast growth China Southern Airlines Co Ltd invested a large share of EBITDA (61.6%) to CAPEX.
Return on investment
The company operates at good ROE (12.80%) while ROIC is low (5.73%). ROIC showed almost no change in 2017. ROE increased slightly on 0.53 pp from 12.3% to 12.8% in 2017.
Leverage (Debt)
Debt level is 4.9x Net Debt / EBITDA and 5.2x Debt / EBITDA. Net Debt / EBITDA jumped on 1.1x from 3.7x to 4.9x in 2017. Debt surged on 34.9% while cash jumped on 43.4%.
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 | FY2013 | FY2014 | FY2015 | FY2016 | FY2017 |
|---|
| Cathay Pacific Airways Ltd ($293) | | 5.5% | -3.4% | -9.4% | 4.9% |
| |
|---|
| Median (1 company) | | 5.5% | -3.4% | -9.4% | 4.9% |
|---|
Top companies by EBITDA margin, %
| Top | FY2013 | FY2014 | FY2015 | FY2016 | FY2017 |
|---|
| Cathay Pacific Airways Ltd ($293) | 11.2% | 12.3% | 15.0% | 9.0% | 8.2% |
| |
|---|
| Median (1 company) | 11.2% | 12.3% | 15.0% | 9.0% | 8.2% |
|---|
Top companies by CAPEX/Revenue, %
| Top | FY2013 | FY2014 | FY2015 | FY2016 | FY2017 |
|---|
| Cathay Pacific Airways Ltd ($293) | 20.4% | 14.0% | 12.9% | 16.0% | 17.4% |
| |
|---|
| Median (1 company) | 20.4% | 14.0% | 12.9% | 16.0% | 17.4% |
|---|
Top companies by ROIC, %
| Top | FY2013 | FY2014 | FY2015 | FY2016 | FY2017 |
|---|
| Cathay Pacific Airways Ltd ($293) | 2.9% | 3.5% | 5.3% | -0.2% | -1.0% |
| |
|---|
| Median (1 company) | 2.9% | 3.5% | 5.3% | -0.2% | -1.0% |
|---|
Top companies by Net Debt / EBITDA
| Top | FY2013 | FY2014 | FY2015 | FY2016 | FY2017 |
|---|
| Cathay Pacific Airways Ltd ($293) | 4.1x | 3.5x | 3.3x | 6.7x | 8.4x |
| |
|---|
| Median (1 company) | 4.1x | 3.5x | 3.3x | 6.7x | 8.4x |
|---|
