Huazhang Technology Holding Ltd revenue dropped on 58.1% and EBITDA Margin decreased on 5.8 pp from -14.4% to -20.2%
25/09/2020 • About Huazhang Technology Holding Ltd (
$1673) • By InTwits
Huazhang Technology Holding Ltd reported FY2020 financial results today. Here are the key drivers of the company's long term financial model:
- The company operates at negative EBITDA Margin: -20.2%
- Huazhang Technology Holding Ltd spends a lot for Stock Based Compensation (SBC): average SBC/Revenue for FY2016-FY2020 is 0.0%. Average EBITDA Margin for the same period was -0.9%
- In the last 5 years the company invested considerably less than D&A: 40 HKDm vs. 51 HKDm. In FY2020 this situation was still the same: CAPEX was while D&A was 17
- The company has unprofitable business model: ROIC is -9.5%
- It operates with high leverage: Net Debt/EBITDA is 16.8x while industry average is 17.6x
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
The company's Revenue dropped on 58.1%. During FY2016-FY2020 Revenue growth topped in FY2018 at 55.3% and was decelerating since that time. Revenue decline was worsened by EBITDA margin decline. EBITDA Margin decreased on 5.8 pp from -14.4% to -20.2% in FY2020. EBITDA Margin stuck to a declining trend at -8.6 pp per annum in FY2016-FY2020.
Gross Margin increased on 4.3 pp from 15.8% to 20.2% in FY2020. SG&A as a % of Revenue increased on 8.8 pp from 9.2% to 18.0% in FY2020. During the last 5 years SG&A as a % of Revenue bottomed in FY2018 at 9.1% and was growing since that time.
Net Income margin decreased on 4.3 pp from -16.8% to -21.1% in FY2020. Net Income margin followed a declining trend at -8.4 pp per annum in FY2016-FY2020.
Investments (CAPEX, working capital and M&A)
Inventories as a % of Revenue surged on 19.6 pp from 11.3% to 30.9% in FY2020.
Return on investment
The company operates at negative ROIC (-9.5%) and ROE (-11.8%). ROIC increased on 4.6 pp from -14.2% to -9.5% in FY2020. ROE increased on 6.3 pp from -18.1% to -11.8% in FY2020. ROIC followed a declining trend at -6.8 pp per annum in the last 5 years. During FY2016-FY2020 ROE bottomed in FY2019 at -18.1%.
Leverage (Debt)
Company's Net Debt / EBITDA is 16.8x and Debt / EBITDA is . Net Debt / EBITDA didn't change in FY2020. Debt jumped on 27.6% while cash surged on 46.8%.
Huazhang Technology Holding Ltd has short term refinancing risk: cash is only 20.2% of short term debt.
Average interest expence paid by the company was 5.0% in FY2020.
Management team
Insider ownership is 0.33%. Insider ownership didn't change in 2020.
Financial and operational results
FY ended 30/06/2020
Huazhang Technology Holding Ltd ($1673) key annual financial indicators| mln. HKD | 2016 | 2017 | 2018 | 2019 | 2020 | 2020/2019 |
|---|
P&L
|
|---|
| Revenue | 393.8 | 474.5 | 736.8 | 877.6 | 368.2 | -58.1% |
| Gross Profit | 97.1 | 104.5 | 165.2 | 139.0 | 74.2 | -46.6% |
| SG&A | 48.0 | 48.0 | 67.0 | 80.8 | 66.3 | -18.0% |
| EBITDA | 42.5 | 48.1 | 84.1 | -126.3 | -74.3 | |
| EBIT | | 42.5 | 76.1 | -146.2 | -91.6 | |
| Interest expence | | 4.5 | 18.9 | 15.1 | 10.1 | -32.9% |
| Tax | | 7.2 | 15.1 | 10.1 | -5.7 | -156.7% |
| Net Income | 34.2 | 34.9 | 58.1 | -147.4 | -77.5 | |
Balance Sheet
|
|---|
| Cash | 74.1 | 58.3 | 86.3 | 27.5 | 40.4 | 46.8% |
| Inventory | | 68.7 | 95.0 | 98.8 | 113.7 | 15.0% |
| Short Term Debt | 5.4 | 10.0 | 25.9 | 159.6 | 199.7 | 25.1% |
| Long Term Debt | 0.0 | 77.1 | 89.7 | 0.0 | 4.0 | |
Cash flow
|
|---|
| Capex | 3.7 | 0.9 | 20.6 | 14.9 | | |
| Dividends | | 12.0 | 15.0 | 22.0 | | |
Ratios
|
|---|
| Revenue growth | 3.3% | 20.5% | 55.3% | 19.1% | -58.1% | |
| EBITDA growth | -1.3% | 13.3% | 74.8% | -250.2% | -41.2% | |
|
|---|
| Gross Margin | 24.7% | 22.0% | 22.4% | 15.8% | 20.2% | 4.3% |
| EBITDA Margin | 10.8% | 10.1% | 11.4% | -14.4% | -20.2% | -5.8% |
| EBIT Margin | | 9.0% | 10.3% | -16.7% | -24.9% | -8.2% |
| SG&A, % of revenue | 12.2% | 10.1% | 9.1% | 9.2% | 18.0% | 8.8% |
| Net Income Margin | 8.7% | 7.4% | 7.9% | -16.8% | -21.1% | -4.3% |
| CAPEX, % of revenue | 0.9% | 0.2% | 2.8% | 1.7% | | |
|
|---|
| ROIC | 12.8% | 9.3% | 8.9% | -14.2% | -9.5% | 4.6% |
| ROE | 12.8% | 10.3% | 8.9% | -18.1% | -11.8% | 6.3% |
| Net Debt/EBITDA | -1.6x | 0.6x | 0.3x | | |
| Interest coverage ratio (ICR) | | 9.4x | 4.0x | | |
| Interest expence / Average debt | | 9.8% | 18.6% | 11.0% | 5.0% | -6.0% |
People
|
|---|
| Insider ownership | | 0.3% | 0.3% | 0.3% | 0.3% | 0.0% |
| Employees | | 285 | 318 | 314 | | |
| Revenue/Employee, th. HKD | | 1,665 | 2,317 | 2,795 | | |
Peers in Machinery-Diversified
Below we provide Huazhang Technology Holding Ltd benchmarking against other companies in Machinery-Diversified 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 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| China High Precision Automation Group Ltd ($591) | -44.1% | -23.8% | -11.9% | 23.8% | - |
| |
|---|
| Median (1 company) | -8.5% | -23.8% | -11.9% | 23.8% | - |
|---|
| Huazhang Technology Holding Ltd ($1673) | - | 20.5% | 55.3% | 19.1% | -58.1% |
Top companies by Gross margin, %
| Top | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| China High Precision Automation Group Ltd ($591) | -21.4% | -37.3% | -21.0% | 3.0% | - |
| |
|---|
| Median (1 company) | 17.0% | -37.3% | -21.0% | 3.0% | - |
|---|
| Huazhang Technology Holding Ltd ($1673) | 24.7% | 22.0% | 22.4% | 15.8% | 20.2% |
Top companies by EBITDA margin, %
| Top | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| China High Precision Automation Group Ltd ($591) | -26.4% | -35.8% | -20.2% | -3.5% | - |
| |
|---|
| Median (1 company) | 0.8% | -35.8% | -20.2% | -3.5% | - |
|---|
| Huazhang Technology Holding Ltd ($1673) | 10.8% | 10.1% | 11.4% | -14.4% | -20.2% |
Top companies by CAPEX/Revenue, %
| Top | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| China High Precision Automation Group Ltd ($591) | 0.2% | 0.6% | 8.0% | 1.1% | - |
| |
|---|
| Median (1 company) | 1.3% | 0.6% | 8.0% | 1.1% | - |
|---|
| Huazhang Technology Holding Ltd ($1673) | 0.9% | 0.2% | 2.8% | 1.7% | - |
Top companies by ROIC, %
| Top | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| China High Precision Automation Group Ltd ($591) | -4.4% | -4.5% | -3.4% | -2.6% | - |
| |
|---|
| Median (1 company) | -0.0% | -4.5% | -3.4% | -2.6% | - |
|---|
| Huazhang Technology Holding Ltd ($1673) | 12.8% | 9.3% | 8.9% | -14.2% | -9.5% |
