China Zenith Chemical Group Ltd revenue dropped on 39.8% while EBITDA Margin surged on 93.4 pp from -149% to -55.4%
30/09/2020 • About China Zenith Chemical Group Ltd (
$362) • By InTwits
China Zenith Chemical Group 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: -55.4%
- China Zenith Chemical Group Ltd spends a lot for Stock Based Compensation (SBC): average SBC/Revenue for FY2016-FY2020 is 1.4%. Average EBITDA Margin for the same period was -54.6%
- In the last 5 years the company invested considerably less than D&A: 266 HKDm vs. 469 HKDm. In FY2020 this situation was still the same: CAPEX was while D&A was 82
- The company has unprofitable business model: ROIC is -10.7%
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
China Zenith Chemical Group Ltd's Revenue dropped on 39.8%. During FY2016-FY2020 Revenue growth topped in FY2017 at 172% and was decelerating since that time. Revenue decline happened at the same time with EBITDA margin expansion. EBITDA Margin surged on 93.4 pp from -149% to -55.4% in FY2020.
Gross Margin dropped on 13.8 pp from 20.7% to 6.8% in FY2020. SG&A as a % of Revenue increased slightly on 0.70 pp from 56.7% to 57.4% in FY2020. During FY2016-FY2020 SG&A as a % of Revenue bottomed in FY2019 at 56.7%.
Net Income margin jumped on 57.7 pp from -207% to -149% in FY2020.
Investments (CAPEX, working capital and M&A)
Accounts receivable as a % of Revenue increased slightly on 0.78 pp from 13.3% to 14.0% in FY2020. Inventories as a % of Revenue decreased on 6.9 pp from 12.5% to 5.6% in FY2020. Accounts payable as a % of Revenue increased on 7.7 pp from 22.8% to 30.6% in FY2020.
Return on investment
The company operates at negative ROIC (-10.7%) and ROE (-45.9%). ROIC jumped on 16.0 pp from -26.7% to -10.7% in FY2020. ROE jumped on 10.1 pp from -56.0% to -45.9% in FY2020.
Leverage (Debt)
Debt level is -56.8x Net Debt / EBITDA and Debt / EBITDA. Net Debt / EBITDA didn't change in FY2020. Debt surged on 11.8% while cash surged on 13.3%.
China Zenith Chemical Group Ltd has short term refinancing risk: cash is only 6.3% of short term debt.
Average interest expence paid by the company was 9.8% in FY2020.
Management team
Insider ownership is 0.45%. Insider ownership didn't change in 2020.
At the end of financial year the company had 596 employees. The number of employees dropped on 12.1%. Average revenue per employee in FY2020 was 326,069 HKD and it dropped on 31.6%.
Financial and operational results
China Zenith Chemical Group Ltd ($362) key annual financial indicators| mln. HKD | 2016 | 2017 | 2018 | 2019 | 2020 | 2020/2019 |
|---|
P&L
|
|---|
| Revenue | 68.3 | 186.1 | 367.6 | 323.0 | 194.3 | -39.8% |
| Gross Profit | 21.1 | 33.8 | 68.4 | 66.7 | 13.3 | -80.1% |
| SG&A | 104.6 | 120.3 | 209.6 | 183.1 | 111.5 | -39.1% |
| EBITDA | -57.8 | 23.3 | 0.8 | -480.5 | -107.7 | |
| EBIT | | -91.8 | -144.5 | -607.4 | -189.5 | |
| Interest expence | | 60.1 | 82.2 | 92.6 | 110.6 | 19.4% |
| Tax | | -20.9 | -7.3 | -1.2 | | |
| Net Income | -421.6 | 68.5 | -199.3 | -667.4 | -289.3 | |
| Stock Based Compensation | | | 12.8 | 3.5 | | |
Balance Sheet
|
|---|
| Cash | 39.3 | 93.2 | 62.2 | 7.2 | 8.1 | 13.3% |
| Accounts Receivable | | 25.7 | 6.7 | 42.9 | 27.3 | -36.3% |
| Inventory | | 19.9 | 28.2 | 40.5 | 10.9 | -73.0% |
| Accounts Payable | | 42.1 | 100.2 | 58.6 | 55.4 | -5.4% |
| Short Term Debt | 100.3 | 106.7 | 126.9 | 92.0 | 128.9 | 40.1% |
| Long Term Debt | 446.3 | 677.6 | 844.7 | 916.5 | 998.2 | 8.9% |
Cash flow
|
|---|
| Capex | 130.7 | 92.4 | 25.1 | 18.2 | | |
Ratios
|
|---|
| Revenue growth | 8.6% | 172.5% | 97.5% | -12.1% | -39.8% | |
| EBITDA growth | -61.4% | -140.4% | -96.5% | -58,558.6% | -77.6% | |
|
|---|
| Gross Margin | 30.9% | 18.2% | 18.6% | 20.7% | 6.8% | -13.8% |
| EBITDA Margin | -84.6% | 12.5% | 0.2% | -148.7% | -55.4% | 93.4% |
| EBIT Margin | | -49.3% | -39.3% | -188.0% | -97.5% | 90.5% |
| SG&A, % of revenue | 153.2% | 64.6% | 57.0% | 56.7% | 57.4% | 0.7% |
| SBC, % of revenue | | | 3.5% | 1.1% | |
| Net Income Margin | -617.3% | 36.8% | -54.2% | -206.6% | -148.9% | 57.7% |
| CAPEX, % of revenue | 191.4% | 49.6% | 6.8% | 5.6% | | |
|
|---|
| ROIC | -7.1% | -3.6% | -5.4% | -26.7% | -10.7% | 16.0% |
| ROE | -22.1% | 4.0% | -11.9% | -56.0% | -45.9% | 10.1% |
| Net Debt/EBITDA | | 29.6x | 1,106.2x | | |
| Interest expence / Average debt | | 9.0% | 9.4% | 9.4% | 9.8% | 0.5% |
People
|
|---|
| Insider ownership | | 0.5% | 0.5% | 0.5% | 0.5% | 0.0% |
| Employees | | 589 | 717 | 678 | 596 | -12.1% |
| Revenue/Employee, th. HKD | | 316 | 513 | 476 | 326 | -31.6% |
Peers in Chemicals
Below we provide China Zenith Chemical Group Ltd benchmarking against other companies in Chemicals 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 |
|---|
| Ngai Hing Hong Co Ltd ($1047) | - | 4.9% | 26.3% | -7.1% | -14.8% |
| |
|---|
| Median (1 company) | 5.3% | 4.9% | 26.3% | -7.1% | -14.8% |
|---|
| China Zenith Chemical Group Ltd ($362) | - | 172.5% | 97.5% | -12.1% | -39.8% |
Top companies by Gross margin, %
| Top | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Ngai Hing Hong Co Ltd ($1047) | 12.5% | 13.8% | 12.7% | 10.4% | 12.0% |
| |
|---|
| Median (1 company) | 17.8% | 13.8% | 12.7% | 10.4% | 12.0% |
|---|
| China Zenith Chemical Group Ltd ($362) | 30.9% | 18.2% | 18.6% | 20.7% | 6.8% |
Top companies by EBITDA margin, %
| Top | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Ngai Hing Hong Co Ltd ($1047) | 1.9% | 4.7% | 4.9% | 2.8% | 2.4% |
| |
|---|
| Median (1 company) | 12.0% | 4.7% | 4.9% | 2.8% | 2.4% |
|---|
| China Zenith Chemical Group Ltd ($362) | -84.6% | 12.5% | 0.2% | -148.7% | -55.4% |
Top companies by CAPEX/Revenue, %
| Top | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Ngai Hing Hong Co Ltd ($1047) | 0.5% | 0.8% | 1.1% | 0.4% | - |
| |
|---|
| Median (1 company) | 1.4% | 0.8% | 1.1% | 0.4% | - |
|---|
| China Zenith Chemical Group Ltd ($362) | 191.4% | 49.6% | 6.8% | 5.6% | - |
Top companies by ROIC, %
| Top | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Ngai Hing Hong Co Ltd ($1047) | 1.3% | 7.5% | 9.2% | 3.6% | 2.4% |
| |
|---|
| Median (1 company) | 7.4% | 7.5% | 9.2% | 3.6% | 2.4% |
|---|
| China Zenith Chemical Group Ltd ($362) | -7.1% | -3.6% | -5.4% | -26.7% | -10.7% |
Top companies by Net Debt / EBITDA
| Top | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Ngai Hing Hong Co Ltd ($1047) | 7.1x | 3.0x | 2.6x | 6.0x | 6.5x |
| |
|---|
| Median (1 company) | 0.7x | 3.0x | 2.6x | 6.0x | 6.5x |
|---|
