Chunghwa Telecom Co. Ltd. :CHT-US: Earnings Analysis: 2016 By the Numbers : January 30, 2017

Chunghwa Telecom Co. Ltd. reports financial results for the year ended December 31, 2016.


  • Gross margins narrowed from 35.05% to 21.11% compared to the same period last year, operating (EBITDA) margins now 21.11% from 36.20%.
  • 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:

2016 2015 2014 2013 2012
Relevant Numbers (Annual)
Revenues 7144.11 7299.23 7464.49 7669.29 7462.44
Revenue Growth (YOY) N/A N/A N/A N/A N/A
Earnings 1243.33 1347.95 1272.02 1336.04 1382.43
Earnings Growth (YOY) -7.76 5.97 -4.79 -3.36 -13.64
Net Margin 17.4 18.47 17.04 17.42 18.53
EPS N/A 1.73 1.64 1.72 1.78
Return on Equity 10.92 11.68 10.62 10.69 11.03
Return on Assets 9.02 9.65 8.79 8.93 9.29

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Earnings Growth Analysis

The company’s year-on-year decline in earnings was influenced by a weakening in gross margins from 35.05% to 21.11%, as well as issues with cost controls. As a result, operating margins (EBITDA margins) went from 36.20% to 21.11% in this time frame. For comparison, gross margins were 35.05% and EBITDA margins were 36.20% 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

CHT-US‘s decline in gross margins has not produced any significant offsetting improvement in its working capital . This leads Capital Cube to conclude that the decline in gross margins are likely from operating issues and not trade-offs with the balance sheet. Working capital days are currently 27.50 days, compared to last year’s level of 21.77 days.


The company’s decline in earnings has been influenced by the following factors: (1) Decline in operating margins (EBIT margins) from 21.77% to 21.11% and (2) one-time items that contributed to a decrease in pretax margins from 22.03% to 21.45%

EBIT Margin History
PreTax Margin History

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Company Profile

Chunghwa Telecom Co., Ltd. engages in the provision of telecommunication and information related services. It operates through the following business segments: Domestic Fixed Communications, Mobile Communications, Internet, International Fixed Communications, and Others. The company was founded on June 15, 1996 and is headquartered in Taipei, Taiwan.

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