China Telecom Corp Ltd CAPEX decreased on 9.7% while Revenue increased on 3.9%
28/03/2018 • About China Telecom Corp Ltd (
$728) • By InTwits
China Telecom Corp Ltd reported 2017 financial results today. Overall the company's long term financial model is characterised by the following facts:
- China Telecom Corp Ltd has high CAPEX intensity: 5 year average CAPEX/Revenue was 25.8%. At the same time it's in pair with industry average of 26.8%.
- CAPEX is quite volatile: 9,619 in 2017, 5,310 in 2016, 8,384 in 2015, 5,048 in 2014, 3,724 in 2013
- 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 Telecom Corp Ltd ($728) key annual financial indicators
| mln. CNY | 2013 | 2014 | 2015 | 2016 | 2017 | 2017/2016 |
|---|
P&L
|
|---|
| Revenue | 321,584 | 324,394 | 331,202 | 352,534 | 366,229 | 3.9% |
| SG&A | 70,448 | 62,719 | 54,472 | 56,426 | 58,434 | 3.6% |
| EBITDA | 96,551 | 94,853 | 94,106 | 95,162 | 102,171 | 7.4% |
| Net Income | 17,545 | 17,680 | 20,054 | 18,018 | 18,617 | 3.3% |
Balance Sheet
|
|---|
| Cash | 16,070 | 20,436 | 31,869 | 24,617 | 19,410 | -21.2% |
| Short Term Debt | 47,760 | 44,058 | 51,758 | 103,108 | 55,755 | -45.9% |
| Long Term Debt | 62,617 | 62,918 | 64,911 | 9,420 | 48,622 | 416.2% |
Cash flow
|
|---|
| Capex | 71,032 | 80,457 | 102,022 | 96,777 | 87,423 | -9.7% |
Ratios
|
|---|
| Revenue growth | 13.6% | 0.9% | 2.1% | 6.4% | 3.9% | |
| EBITDA growth | 36.2% | -1.8% | -0.8% | 1.1% | 7.4% | |
| EBITDA Margin | 30.0% | 29.2% | 28.4% | 27.0% | 27.9% | 0.9% |
| Net Income Margin | 5.5% | 5.5% | 6.1% | 5.1% | 5.1% | -0.0% |
| SG&A, % of revenue | 21.9% | 19.3% | 16.4% | 16.0% | 16.0% | -0.1% |
| CAPEX, % of revenue | 22.1% | 24.8% | 30.8% | 27.5% | 23.9% | -3.6% |
| ROIC | 7.3% | 7.2% | 6.4% | 6.3% | 6.2% | -0.1% |
| ROE | 6.5% | 6.2% | 6.8% | 5.8% | 5.8% | -0.0% |
| Net Debt/EBITDA | 1.0x | 0.9x | 0.9x | 0.9x | 0.8x | -0.1x |
China Telecom Corp Ltd ($728) key quoterly financial indicators
| mln. CNY | 17Q1 | 17Q2 | 17Q3 | 17Q4 | YoY change |
|---|
P&L
|
|---|
| Revenue | 91,491 | 92,824 | 90,715 | 91,527 | 5.9% | 2.7% | 4.3% | 3.2% |
| EBITDA | 24,820 | 27,624 | 26,445 | 23,327 | 4.2% | 3.3% | 3.8% | 21.9% |
| Net Income | 5,351 | 7,204 | 5,976 | 115 | 4.5% | 9.9% | 1.8% | -75.8% |
Balance Sheet
|
|---|
Ratios
|
|---|
| EBITDA Margin | 27.1% | 29.8% | 29.2% | 25.5% | -0.4% | 0.2% | -0.1% | 3.9% |
| Net Income Margin | 5.8% | 7.8% | 6.6% | 0.1% | -0.1% | 0.5% | -0.2% | -0.4% |
Revenue and profitability
The company's Revenue increased on 3.9%. Revenue growth showed slow down in 17Q4 - it was 3.2% YoY. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin increased on 5.0 pp from 69.9% to 75.0% 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
China Telecom Corp Ltd's CAPEX/Revenue was 23.9% in 2017. CAPEX/Revenue decreased slightly on 0.93 pp from 24.8% in 2014 to 23.9% in 2017. It's average CAPEX/Revenue for the last three years was 27.4%.The company maintained rich investment policy and has spent a big chunk of EBITDA (85.6%) to CAPEX.
Return on investment
The company operates at low ROIC (6.24%) and ROE (5.81%). ROIC showed almost no change in 2017. ROE showed almost no change in 2017.
Leverage (Debt)
Company's Net Debt / EBITDA is 0.8x and Debt / EBITDA is 1.0x. Net Debt / EBITDA decreased on 0.1x from 0.9x to 0.8x in 2017. Debt decreased on 7.2% while cash dropped on 21.2%.
Appendix 1: Peers in Telecommunications
Below you can find China Telecom Corp Ltd 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 | 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) | 8.3% | 9.6% | 6.1% | -2.4% | 6.9% |
|---|
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% | 12.9% |
|---|
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% | 4.0% |
|---|
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% | 1.1% |
|---|
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% | 9.8% |
|---|
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 | -3.5x |
|---|
