China Green Agriculture, Inc. :CGA-US: Earnings Analysis: Q1, 2017 By the Numbers : November 29, 2016

China Green Agriculture, Inc. reports financial results for the quarter ended September 30, 2016.

We analyze the earnings along side the following peers of China Green Agriculture, Inc. – Terra Nitrogen Company, L.P., CVR Partners, LP, Agrium Inc., CF Industries Holdings, Inc., Scotts Miracle-Gro Company Class A and Rentech, Inc. (TNH-US, UAN-US, AGU-US, CF-US, SMG-US and RTK-US) that have also reported for this period.

Highlights

  • Year-on-year change in operating cash flow of -27.07% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • Earnings rose compared to same period last year, despite decline in operating and pretax margins.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income growth:

2016-09-30 2016-06-30 2016-03-31 2015-12-31 2015-09-30
Relevant Numbers (Quarterly)
Revenues (mil) 61.88 N/A 78.64 56.97 54.18
Revenue Growth (%YOY) 14.21 N/A -1.07 5.39 5.62
Earnings (mil) 7.35 N/A 8.25 4.27 7.25
Earnings Growth (%YOY) 1.46 N/A -16.78 -18.17 -10.54
Net Margin (%) 11.88 N/A 10.49 7.49 13.37
EPS 0.2 0.15 0.22 0.12 0.2
Return on Equity (%) 7.87 N/A 8.92 4.67 7.84
Return on Assets (%) 7.08 N/A 7.97 3.9 6.62

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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.

Gross Margin History
Working Capital Days History

CGA-US‘s gross margin improvement has not produced any big difference in its working capital. Working capital days are currently 432.68, compared to last year’s level of 423.40 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.

Gross Margin Versus Working Capital Days

Quadrant label definitions. Hover to know more

Customer Financed, Cash Starved, Supplier Financed, Cash Rich

Cash Versus Earnings – Sustainable Performance?

CGA-US‘s change in operating cash flow of -27.07% 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.

Operating Cash Flow Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Cash Flow based Earnings, Likely Non-cash Earnings, Low Cash Flow Base, Likely Undeclared Earnings

Margins

Despite a decline in operating (EBIT) margins as well as a decline in pretax margins, the company’s earnings rose.

EBIT Margin Versus PreTax Margin

Quadrant label definitions. Hover to know more

Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables
EBIT Margin History
PreTax Margin History

Access our Ratings and Scores for China Green Agriculture, Inc.

Company Profile

China Green Agriculture, Inc. engages in the research, development, manufacture, distribution, and sale of humic acid based compound fertilizers, blended fertilizers, organic compound fertilizers, mixed organic-inorganic compound fertilizers, slow-release fertilizers and highly-concentrated water soluble fertilizers, mixed organic-inorganic compound fertilizers. It also engages in the development, production, and distribution of agricultural products, such as fruits, vegetables, flowers, and colored seedlings. It operates through the following three segments: Fertilizer Products (Jinong), Fertilizer Products (Gufeng), and Agricultural Products (Yuxing). The company was founded by Tao Li on February 6, 1987 and is headquartered in Xi’an, China.

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