China XD Plastics Co., Ltd. :CXDC-US: Earnings Analysis: Q1, 2017 By the Numbers : June 22, 2017

China XD Plastics Co., Ltd. reports financial results for the quarter ended March 31, 2017.

We analyze the earnings along side the following peers of China XD Plastics Co., Ltd. – UFP Technologies, Inc. and Aspen Aerogels Inc (UFPT-US and ASPN-US) that have also reported for this period.

Highlights

  • Summary numbers: Revenues of USD 237.84 million, Net Earnings of USD 7.44 million.
  • Gross margins narrowed from 15.56% to 13.97% compared to the same period last year, operating (EBITDA) margins now 13.34% from 14.69%.
  • 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:

2017-03-31 2016-12-31 2016-09-30 2016-06-30 2016-03-31
Relevant Numbers (Quarterly)
Revenues (mil) 237.84 377.66 331.85 277.14 215.03
Revenue Growth (%YOY) 10.61 38.46 38.79 4.42 -3.11
Earnings (mil) 7.44 27.53 15.14 24.98 8.5
Earnings Growth (%YOY) -12.48 2.66 235.53 31.12 -55.21
Net Margin (%) 3.13 7.29 4.56 9.01 3.95
EPS 0.15 0.56 0.31 0.51 0.17
Return on Equity (%) 4.03 15.14 8.47 14.28 4.97
Return on Assets (%) 1.4 5.38 3.1 5.2 1.86

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Market Share Versus Profits

Revenues History
Earnings History

CXDC-US‘s change in revenue this period compared to the same period last year of 10.61% 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 CXDC-US is holding onto its market share. Also, for comparison purposes, revenues changed by -37.02% and earnings by -72.97% 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 year-on-year decline in earnings was influenced by a weakening in gross margins from 15.56% to 13.97%, as well as issues with cost controls. As a result, operating margins (EBITDA margins) went from 14.69% to 13.34% in this time frame. For comparison, gross margins were 21.39% and EBITDA margins were 13.95% in the previous 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

CXDC-US‘s decline in gross margins were offset by some improvements on the balance sheet. The management of working capital, for example, shows progress. The company’s working capital days have fallen to 11.42 days from 84.05 days for the same period last year. This leads Capital Cube to conclude that the gross margin decline is not altogether bad.

Gross Margin Versus Working Capital Days

Quadrant label definitions. Hover to know more

Customer Financed, Cash Starved, Supplier Financed, Cash Rich

Margins

The company’s decline in earnings has been influenced by the following factors: (1) Decline in operating margins (EBIT margins) from 11.42% to 8.98% and (2) one-time items that contributed to a decrease in pretax margins from 7.39% to 5.66%

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 XD Plastics Co., Ltd.

Company Profile

China XD Plastics Co., Ltd. is a holding company, which engages in the development, manufacture, and trade of plastics. Its products are used in the production of exterior and interior trim and functional components of automobiles. The company was founded on November 16, 1999 and is headquartered in Harbin, China.

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