Jupai Holdings Ltd. :JP-US: Earnings Analysis: Q4, 2016 By the Numbers : April 24, 2017

Jupai Holdings Ltd. reports financial results for the quarter ended December 31, 2016.

Highlights

  • Summary numbers: Revenues of USD 49.29 million, Net Earnings of USD 9.07 million.
  • Gross margins widened from 54.54% to 56.90% compared to the same period last year, operating (EBITDA) margins now 27.80% from 20.25%.
  • One-time items weakened operating performance.

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) 49.29 48.06 36.11 33.67 32.31
Revenue Growth (%YOY) 52.56 58.85 115.47 143.27 178.75
Earnings (mil) 9.07 11.82 5.92 3.98 5.81
Earnings Growth (%YOY) 56.09 60.25 -1.71 -18.1 70.65
Net Margin (%) 18.4 24.6 16.39 11.83 17.98
EPS 0.27 0.35 0.18 0.12 0.18
Return on Equity (%) 16.44 22.37 11.76 8.65 13.96
Return on Assets (%) 12.18 16.86 8.77 6.25 10.32

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Market Share Versus Profits

Revenues History
Earnings History

Compared to the same period last year, JP-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 JP-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 2.54% and earnings by -23.32% compared to the previous period.

Earnings Growth Analysis

The company’s earnings growth was influenced by year-on-year improvement in gross margins from 54.54% to 56.90% as well as better cost controls. As a result, operating margins (EBITDA margins) rose from 20.25% to 27.80% compared to the same period last year. For comparison, gross margins were 62.47% and EBITDA margins were 35.90% in the last reporting 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

JP-US‘s improvement in gross margin has been accompanied by an improvement in its balance sheet as well. This suggests that gross margin improvements are likely from operating decisions and not accounting gimmicks. Its working capital days have declined to 266.04 days from 272.82 days for the same period last year.

Margins

The expansion in operating (EBIT) margins from 20.25% to 27.80% has also impacted the company’s earnings growth. However, one-time items have been a drag on the operating performance. As a result, the company’s pretax margins contracted from 28.76% to 28.23%.

EBIT Margin History
PreTax Margin History

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Company Profile

Jupai Holdings Ltd. is engaged in the third party wealth management services provider focusing on distributing wealth management products and providing quality product advisory services to high-net-worth individuals. The company was founded in July 2010 and is headquartered in Shanghai, China.

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