China YCT International Group, Inc. :CYIG-US: Earnings Analysis: Q3, 2017 By the Numbers : March 14, 2017

China YCT International Group, Inc. reports financial results for the quarter ended December 31, 2016.

We analyze the earnings along side the following peers of China YCT International Group, Inc. – Pain Therapeutics, Inc. (PTIE-US) that have also reported for this period.

Highlights

  • Summary numbers: Revenues of USD 14.17 million, Net Earnings of USD 2.59 million.
  • Gross margins narrowed from 42.81% to 41.02% compared to the same period last year, operating (EBITDA) margins now 27.33% from 26.28%.
  • Earnings growth from operating margin improvements as well as one-time items.

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

2016-12-31 2016-09-30 2016-06-30 2016-03-31 2015-12-31
Relevant Numbers (Quarterly)
Revenues (mil) 14.17 11.59 9.71 10.36 11.86
Revenue Growth (%YOY) 19.51 41.04 1.36 49.65 32.98
Earnings (mil) 2.59 2 1.58 0.4 1.84
Earnings Growth (%YOY) 40.76 3.86 -28.04 -91.31 -18.38
Net Margin (%) 18.26 17.21 16.22 3.9 15.51
EPS 0.09 0.07 0.05 0.01 0.06
Return on Equity (%) 12.76 9.9 7.86 2.02 10.56
Return on Assets (%) 12.54 9.74 7.76 2 10.46

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Market Share Versus Profits

Revenues History
Earnings History

CYIG-US‘s change in revenue this period compared to the same period last year of 19.51% 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 CYIG-US is holding onto its market share. Also, for comparison purposes, revenues changed by 22.23% and earnings by 29.69% 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 gross margins showed no year-on-year improvement. In spite of this, the company’s earnings rose, influenced primarily by the improvement in operating margins (EBITDA margins) from 26.28% to 27.33%. For comparison, gross margins were 39.53% and EBITDA margins were 26.68% in the 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

CYIG-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 79.86 days from 146.44 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 earnings growth has also been influenced by the following factors: (1) Improvements in operating (EBIT) margins from 20.21% to 24.18% and (2) one-time items. The company’s pretax margins are now 24.26% compared to 20.25% for the same period last year.

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

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Company Profile

China YCT International Group, Inc. operates as a holding company. The company develops, manufactures and markets ginkgo healthcare products, ginkgo cosmetics, daily-use chemical products, ginkgo glycosides products and biological medicines through its subsidiary. It offers a wide variety of products in the categories of: Health Foods, Nutritional Foods, Health Supplies, Cosmetics and Personal Hygiene. The company operates through its branches in China and in Russia. It was founded by Tinghe Yan in January 1989 and is headquartered in Sichui, China.

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