China XD Plastics Co., Ltd. :CXDC-US: Earnings Analysis: Q2, 2017 By the Numbers : October 10, 2017

China XD Plastics Co., Ltd. reports financial results for the quarter ended June 30, 2017.

Highlights

  • Summary numbers: Revenues of USD 313.56 million, Net Earnings of USD 21.09 million.
  • Gross margins narrowed from 21.28% to 19.60% compared to the same period last year, operating (EBITDA) margins now 17.37% from 19.67%.
  • 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:

2017-06-30 2017-03-31 2016-12-31 2016-09-30 2016-06-30
Relevant Numbers (Quarterly)
Revenues (mil) 313.56 237.84 377.66 331.85 277.14
Revenue Growth (%YOY) 13.14 10.61 38.46 38.79 4.42
Earnings (mil) 21.09 7.44 27.53 15.14 24.98
Earnings Growth (%YOY) -15.56 -12.48 2.66 235.53 31.12
Net Margin (%) 6.73 3.13 7.29 4.56 9.01
EPS 0.43 0.15 0.56 0.31 0.51
Return on Equity (%) 2.75 1.01 3.79 2.12 3.57
Return on Assets (%) 3.82 1.4 5.38 3.1 5.2

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Market Share Versus Profits

Revenues History
Earnings History

Compared to the same period last year, CXDC-US’s change in revenue was close to the amount of its change in earnings. It remains to be seen how the rest of its peer group’s results will turn out and if CXDC-US’s performance is a sign of any major shift in the composition of market share in this sector. Also, for comparison purposes, revenues changed by 31.83% and earnings by 183.45% compared to the previous period.

Earnings Growth Analysis

The company’s year-on-year decline in earnings was influenced by a weakening in gross margins from 21.28% to 19.60%, as well as issues with cost controls. As a result, operating margins (EBITDA margins) went from 19.67% to 17.37% in this time frame. For comparison, gross margins were 13.97% and EBITDA margins were 13.34% in the previous period.

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 are now 0.85 days from 34.10 days for the same period last year. This leads Capital Cube to conclude that the gross margin decline is not altogether bad.

Margins

The company’s decline in earnings has been influenced by the following factors: (1) Decline in operating margins (EBIT margins) from 17.12% to 14.04% and (2) one-time items that contributed to a decrease in pretax margins from 13.93% to 10.26%

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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