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Ningxia Xinri Hengli Steel Wire Rope Co. Ltd. reports financial results for the quarter ended September 30, 2017.
We analyze the earnings along side the following peers of Ningxia Xinri Hengli Steel Wire Rope Co. Ltd. ¨C Guizhou Wire Rope Co., Ltd. Class A, Henan Hengxing Science & Technology Co., Ltd. Class A and Jiangsu Fasten Co., Ltd. Class A (600992-CN, 002132-CN and 000890-CN) that have also reported for this period.
Highlights
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Summary numbers: Revenues of CNY 576.31 million, Net Earnings of CNY 11.29 million.
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Gross margins widened from 4.90% to 9.34% compared to the same period last year, operating (EBITDA) margins now -1.61% from 1.03%.
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Year-on-year change in operating cash flow of 208.34% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
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Earnings growth due to contribution of one-time items.
The table below shows the preliminary results and recent trends for key metrics such as revenues and net income growth:
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2017-09-30
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2017-06-30
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2017-03-31
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2016-12-31
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2016-09-30
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Relevant Numbers (Quarterly)
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Revenues (mil)
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576.31
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322.89
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234.27
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274.13
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910.21
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Revenue Growth (%YOY)
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-36.68
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-66.12
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-63.31
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-36.24
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248.55
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Earnings (mil)
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11.29
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-13.66
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1.58
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-110.56
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-28.04
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Earnings Growth (%YOY)
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140.28
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58.99
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107.88
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-274.32
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-168.58
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Net Margin (%)
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1.96
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-4.23
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0.68
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-40.33
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-3.08
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EPS
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0.02
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-0.02
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0
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-0.16
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-0.04
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Return on Equity (%)
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1.14
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-1.45
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0.18
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-11.63
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-2.84
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Return on Assets (%)
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1.55
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-1.62
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0.19
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-12.02
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-2.78
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Access our Ratings and Scores for Ningxia Xinri Hengli Steel Wire Rope Co. Ltd.
Market Share Versus Profits
600165-CN¡¯s change in revenue this period compared to the same period last year of -36.68% is almost the same as its change in earnings, and is about average among the announced results thus far in its peer group, suggesting that 600165-CN is holding onto its market share. Also, for comparison purposes, revenues changed by 78.48% and earnings by 182.66% compared to the immediate last period.
Quadrant label definitions. Hover to know more
Leader, Earnings Focus, Laggard, Revenues Focus
Earnings Growth Analysis
The company¡¯s earnings growth has been influenced by the year-on-year improvement in gross margins from 4.90% to 9.34%. However the company¡¯s overhead costs have prevented it from fully capitalizing on these gross margin improvements. In fact, the company¡¯s operating margins (EBITDA margins) showed no improvement over the same period last year.
Quadrant label definitions. Hover to know more
Differentiated; Low Cost, Commodity; Low Cost, Commodity; High Cost, Differentiated; High Cost
Gross Margin Trend
Companies sometimes sacrifice improvements in revenues and margins in order to extend friendlier terms to customers and vendors. Capital Cube probes for such activity by comparing the changes in gross margins with any changes in working capital. If the gross margins improved without a worsening of working capital, it is possible that the company¡¯s performance is a result of truly delivering in the marketplace and not simply an accounting prop-up using the balance sheet.
600165-CN¡¯s gross margin improvement has not produced any big difference in its working capital. Working capital days are currently -23.66, compared to last year¡¯s level of -50.92 days. This leads Capital Cube to conclude that the improvements in gross margins are likely from operating decisions and not trade-offs with the balance sheet.
Quadrant label definitions. Hover to know more
Customer Financed, Cash Starved, Supplier Financed, Cash Rich
Cash Versus Earnings ¨C Sustainable Performance?
It is important to examine a company�s cash versus earnings numbers to gauge whether its performance is sustainable.
600165-CN¡¯s change in operating cash flow of 208.34% compared to the same period last year is about the same as its change in earnings this period. Additionally, this change in operating cash flow is about average among its peer group. This suggests that the company did not use accruals or reserves to manage earnings this period, and that, all else being equal, the earnings number is sustainable.
Quadrant label definitions. Hover to know more
Cash Flow based Earnings, Likely Non-cash Earnings, Low Cash Flow Base, Likely Undeclared Earnings
Margins
The company¡¯s operating (EBIT) margins contracted from -1.09% to -1.61%. In spite of this, the company¡¯s earnings rose. This was influenced primarily by one-time items, which improved pretax margins from -2.48% to 2.80%.
Quadrant label definitions. Hover to know more
Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables
Access our Ratings and Scores for Ningxia Xinri Hengli Steel Wire Rope Co. Ltd.
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