China Jo-Jo Drugstores, Inc. :CJJD-US: Earnings Analysis: Q2, 2018 By the Numbers : November 21, 2017

China Jo-Jo Drugstores, Inc. reports financial results for the quarter ended September 30, 2017.

We analyze the earnings along side the following peers of China Jo-Jo Drugstores, Inc. – CVS Health Corporation, PetMed Express, Inc., Rite Aid Corporation and Walgreens Boots Alliance Inc (CVS-US, PETS-US, RAD-US and WBA-US) that have also reported for this period.


  • Summary numbers: Revenues of USD 23.49 million, Net Earnings of USD -1.17 million.
  • Gross margins widened from 21.59% to 23.66% compared to the same period last year, operating (EBITDA) margins now -6.26% from 0.83%.
  • Year-on-year change in operating cash flow of -28.25% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • Narrowing of operating margins contributed to decline in earnings.

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

2017-09-30 2017-06-30 2017-03-31 2016-12-31 2016-09-30
Relevant Numbers (Quarterly)
Revenues (mil) 23.49 21.67 19.79 20.61 20.16
Revenue Growth (%YOY) 16.52 3.51 -3.3 -16.59 -10.7
Earnings (mil) -1.17 -1.42 -5.04 -0.83 0.1
Earnings Growth (%YOY) -1294.14 -1182.17 -727.53 -35.18 -35.26
Net Margin (%) -4.98 -6.55 -25.46 -4.05 0.49
EPS -0.05 -0.06 -0.25 -0.04 0.01
Return on Equity (%) -4.5 -5.39 -21.37 -4.1 0.49
Return on Assets (%) -6.9 -8.57 -33.19 -5.78 0.67

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Market Share Versus Profits

Revenues History
Earnings History

CJJD-US’s change in revenue this period compared to the same period last year of 16.52% 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 CJJD-US is holding onto its market share. Also, for comparison purposes, revenues changed by 8.40% and earnings by 17.66% compared to the immediate last period.

Revenues Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Leader, Earnings Focus, Laggard, Revenues Focus

Earnings Growth Analysis

The company’s earnings declined year-on-year largely because of the increases in operating costs. Its operating margins (EBITDA margins) went from 0.83% to -6.26%. This decline in earnings would have been worse except for the fact that the company showed improvement in gross margins, from 21.59% to 23.66%. For comparison, gross margins were 19.28% and EBITDA margins -5.42% in the immediate last period.

Gross Margin Versus EBITDA Margin

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.

Gross Margin History
Working Capital Days History

CJJD-US’s gross margin improvement has not produced any big difference in its working capital. Working capital days are currently 52.71, compared to last year’s level of 25.02 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?

It is important to examine a company�s cash versus earnings numbers to gauge whether its performance is sustainable.

CJJD-US’s change in operating cash flow of -28.25% 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


The company’s decline in earnings has been influenced by the following factors: (1) Decline in operating margins (EBIT margins) from -0.26% to -7.02% and (2) one-time items that contributed to a decrease in pretax margins from 0.57% to -4.90%

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 Jo-Jo Drugstores, Inc.

Company Profile

China Jo-Jo Drugstores, Inc. operates as a retail pharmacy chain in China. It operates through four reportable segments: Retail Drugstores, Online Pharmacy, Drug Wholesale, and Herb Farming. The Retail Drugstores segment markets prescription and Over-The-Counter (OTC) medicines, dietary supplement, medical devices and sundry items to retail customers. The Online Pharmacy segment sells OTC drugs, dietary supplements, medical devices and sundry items to customers through several third-party platforms such as Alibaba’s Tmall,,, and the Company’s own platform all over China. The Drug Wholesale segment supplies to the retail drugstores and sells prescription and over-the-counter medicines, dietary supplement, medical devices, Chinese white liquor and sundry items in batch to other drug vendors and hospitals. The Herb Farming segment cultivates selected herbs for sales to other drug vendors. The company was founded by Lei Liu and Li Qi on December 19, 2006 and is headquartered in Hangzhou, China.

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