Leon Technology Co., Ltd. :300603-CN: Earnings Analysis: Q1, 2017 By the Numbers : August 11, 2017

Leon Technology Co., Ltd. reports financial results for the quarter ended March 31, 2017.

Highlights

  • Summary numbers: Revenues of CNY 122.23 million, Net Earnings of CNY 3.79 million.
  • Change in operating cash flow of -196.47% compared to same period last year is about the same as change in earnings, likely no significant movement in accruals or reserves.
  • 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:

2017-03-31 2016-12-31 2016-09-30 2016-06-30 2016-03-31
Relevant Numbers (Quarterly)
Revenues (mil) 122.23 166.12 85.8 76.45 33.72
Revenue Growth (%YOY) 262.53 N/A N/A N/A N/A
Earnings (mil) 3.79 19.1 1.06 17.69 -2.37
Earnings Growth (%YOY) 260.01 N/A N/A N/A N/A
Net Margin (%) 3.1 11.49 1.23 23.14 -7.03
EPS 0.04 0.19 0.01 0.17 -0.02
Return on Equity (%) 1.22 7.4 0.43 7.15 N/A
Return on Assets (%) 2.26 13.61 0.88 15.66 N/A

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Market Share Versus Profits

Revenues History
Earnings History

Compared to the same period last year, 300603-CN‘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 300603-CN‘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 -26.42% and earnings by -80.13% compared to the previous period.

Cash Versus Earnings – Sustainable Performance?

It is important to examine a company�s cash versus earnings numbers to gauge whether its performance is sustainable.

300603-CN‘s year-on-year change in operating cash flow of -196.47% is around its change in earnings. This suggests that there are likely no significant movement in accruals or reserves for managing earnings this period.

Margins

The company’s earnings growth has also been influenced by the following factors: (1) Improvements in operating (EBIT) margins from -7.26% to 2.77% and (2) one-time items. The company’s pretax margins are now 3.66% compared to -7.03% for the same period last year.

EBIT Margin History
PreTax Margin History

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Company Profile

Leon Technology Co., Ltd. engages in the provision of computer software and information technology services. Its business activities include security systems engineering, communications network design and engineering, operations management, and sale of equipment. The company was founded by Gang Wang on January 8, 1996 and is headquartered in Urumqi, China.

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