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Art Textile Technology International Co Ltd Net Debt / EBITDA surged on 82.8x from 3.9x to 86.8x in 2020 while Revenue dropped on 24.7%

30/09/2020 • About Art Textile Technology International Co Ltd ($565) • By InTwits

Art Textile Technology International Co Ltd reported FY2020 financial results today. Overall the company's long term financial model is characterised by the following facts:
  • EBITDA Margin is declining: 3.7% in FY2020 vs. 59.5% in FY2019 vs. 67.2% in FY2016
  • EBITDA Margin is quite volatile: 3.7% in FY2020, 59.5% in FY2019, 91.3% in FY2018, 101.8% in FY2017, 67.2% in FY2016
  • Art Textile Technology International Co Ltd has low CAPEX intensity: 5 year average CAPEX/Revenue was 3.6%. At the same time it's a lot of higher than industry average of 6.5%.
  • CAPEX is quite volatile: 6 HKDm in FY2020, 1 HKDm in FY2019, 2 HKDm in FY2018, 8 HKDm in FY2017, 12 HKDm in FY2016
  • The company has potentially unprofitable business model: ROIC is 0.1%
  • It operates with high leverage: Net Debt/EBITDA is 86.8x while industry average is 7.4x
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 24.7%. Revenue pursued a declining trend in the last 5 years. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin increased on 9.3 pp from 39.5% to 48.8% in FY2020. During the last 5 years EBITDA Margin topped in FY2017 at 102% and was declining since that time.

Gross Margin decreased on 9.8 pp from 69.9% to 60.1% in FY2020. During FY2016-FY2020 Gross Margin topped in FY2019 at 69.9%. SG&A as a % of Revenue increased on 6.2 pp from 12.6% to 18.8% in FY2020.

Net Income margin dropped on 45.6 pp from 26.4% to -19.2% in FY2020. Net Income margin followed a declining trend in the last 5 years.

Investments (CAPEX, working capital and M&A)


In FY2020 the company had CAPEX/Revenue of 4.1%. Art Textile Technology International Co Ltd showed almost no change in CAPEX/Revenue from FY2017 to FY2020. For the last three years the average CAPEX/Revenue was 1.8%. The company has spent a lot to CAPEX (111% of EBITDA) which didn't stop revenue from falling. During the last 5 years CAPEX as a % of Revenue bottomed in FY2019 at 0.59%.

Return on investment


The company operates at low but positive ROIC (0.1%) and negative ROE (-2.1%). ROIC decreased on 3.7 pp from 3.8% to 0.081% in FY2020. ROE decreased on 5.9 pp from 3.8% to -2.1% in FY2020. During the last 5 years ROIC topped in FY2017 at 6.4% and was declining since that time. ROE followed a declining trend in the last 5 years.

Leverage (Debt)


Company's Net Debt / EBITDA is 86.8x and Debt / EBITDA is 158.6x. Net Debt / EBITDA surged on 82.8x from 3.9x to 86.8x in FY2020. Debt surged on 74.7% while cash surged on 1,194%. During FY2016-FY2020 Net Debt/EBITDA bottomed in FY2018 at 3.4x and was growing since that time.

Art Textile Technology International Co Ltd has questionable short term financial stability: Interest coverage ratio (ICR) is only 0.041x. Art Textile Technology International Co Ltd has no short term refinancing risk: cash is higher than short term debt (487.2%).

Average interest expence paid by the company was 6.7% in FY2020.

Management team


35.9% of the company is owned by insiders. Insider ownership didn't change in 2020.

The company has 143 employees. The number of employees dropped on 10.1%. Average revenue per employee in FY2020 was 1,115,713 HKD and it dropped on 16.2%.

Financial and operational results


FY ended 30/06/2020

Art Textile Technology International Co Ltd ($565) key annual financial indicators

mln. HKD201620172018201920202020/2019
P&L
Revenue140.0185.4199.2211.8159.5-24.7%
Gross Profit91.2125.8138.1148.195.9-35.2%
SG&A20.026.827.026.729.912.1%
EBITDA94.0188.7181.9126.05.8-95.4%
EBIT186.6179.3122.82.5-97.9%
Interest expence40.532.729.461.8110.2%
Tax33.816.5-22.5-236.5%
Net Income441.391.167.655.9-30.7-154.8%
Stock Based Compensation54.0
Balance Sheet
Cash62.330.518.132.4419.11,194.4%
Short Term Debt367.370.185.789.886.0-4.2%
Long Term Debt701.3608.0543.1439.8839.190.8%
Cash flow
Capex11.78.01.61.26.5420.8%
Ratios
Revenue growth551.4%32.4%7.4%6.3%-24.7%
EBITDA growth-1,466.2%100.7%-3.6%-30.7%-95.4%

Gross Margin65.1%67.8%69.3%69.9%60.1%-9.8%
EBITDA Margin67.2%101.8%91.3%59.5%3.7%-55.8%
EBIT Margin100.6%90.0%58.0%1.6%-56.4%
SG&A, % of revenue14.3%14.4%13.5%12.6%18.8%6.2%
SBC, % of revenue27.1%
Net Income Margin315.1%49.1%33.9%26.4%-19.2%-45.6%
CAPEX, % of revenue8.3%4.3%0.8%0.6%4.1%3.5%

ROIC2.7%6.4%5.9%3.8%0.1%-3.7%
ROE36.4%7.0%4.8%3.8%-2.1%-5.9%
Net Debt/EBITDA10.7x3.4x3.4x3.9x86.8x82.8x
Interest coverage ratio (ICR)4.6x5.5x4.2x0.0x-4.1x
Interest expence / Average debt4.6%5.0%5.1%6.7%1.6%
People
Insider ownership35.9%35.9%35.9%35.9%0.0%
Employees161170159143-10.1%
Revenue/Employee, th. HKD1,1521,1721,3321,116-16.2%

Peers in Textiles


Below you can find Art Textile Technology International Co Ltd benchmarking vs. other companies in Textiles 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  FY2016 FY2017 FY2018 FY2019 FY2020
TAI Ping Carpet International Ltd ($146)0.6%-66.2%21.1%1.3%-
 
Median (1 company)-0.1%-66.2%21.1%1.3%-
Art Textile Technology International Co Ltd ($565)-32.4%7.4%6.3%-24.7%


Top companies by Gross margin, %

Top  FY2016 FY2017 FY2018 FY2019 FY2020
TAI Ping Carpet International Ltd ($146)-47.6%54.3%54.6%-
 
Median (1 company)21.7%47.6%54.3%54.6%-
Art Textile Technology International Co Ltd ($565)65.1%67.8%69.3%69.9%60.1%


Top companies by EBITDA margin, %

Top  FY2016 FY2017 FY2018 FY2019 FY2020
TAI Ping Carpet International Ltd ($146)--29.2%-3.2%9.9%-
 
Median (1 company)14.8%-29.2%-3.2%9.9%-
Art Textile Technology International Co Ltd ($565)67.2%101.8%91.3%59.5%3.7%


Top companies by CAPEX/Revenue, %

Top  FY2016 FY2017 FY2018 FY2019 FY2020
TAI Ping Carpet International Ltd ($146)-23.2%9.8%2.7%-
 
Median (1 company)3.7%23.2%9.8%2.7%-
Art Textile Technology International Co Ltd ($565)8.3%4.3%0.8%0.6%4.1%


Top companies by ROIC, %

Top  FY2016 FY2017 FY2018 FY2019 FY2020
TAI Ping Carpet International Ltd ($146)--22.8%-8.1%-1.3%-
 
Median (1 company)9.5%-22.8%-8.1%-1.3%-
Art Textile Technology International Co Ltd ($565)2.7%6.4%5.9%3.8%0.1%


Top companies by Net Debt / EBITDA

Top  FY2016 FY2017 FY2018 FY2019 FY2020
TAI Ping Carpet International Ltd ($146)----0.6x-
 
Median (1 company)-0.6x---0.6x-
Art Textile Technology International Co Ltd ($565)10.7x3.4x3.4x3.9x86.8x