Silvercorp Metals, Inc. :SVM-CA: Earnings Analysis: Q1, 2018 By the Numbers : August 7, 2017

Silvercorp Metals, Inc. reports financial results for the quarter ended June 30, 2017.

We analyze the earnings along side the following peers of Silvercorp Metals, Inc. – Excellon Resources Inc. and Endeavour Silver Corp. (EXN-CA and EXK-US) that have also reported for this period.

Highlights

  • Summary numbers: Revenues of CAD 53.38 million, Net Earnings of CAD 14.71 million.
  • Gross margins widened from 43.33% to 49.42% compared to the same period last year, operating (EBITDA) margins now 48.73% from 42.48%.
  • Year-on-year change in operating cash flow of -12.68% is about the same as the 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:

2017-06-30 2017-03-31 2016-12-31 2016-09-30 2016-06-30
Relevant Numbers (Quarterly)
Revenues (mil) 53.38 45.08 63.83 60.39 45.47
Revenue Growth (%YOY) 17.39 68.93 64.38 69.61 14.76
Earnings (mil) 14.71 17.88 17.5 16.15 6.03
Earnings Growth (%YOY) 144.07 956.06 294.03 452.38 113.42
Net Margin (%) 27.55 39.65 27.42 26.74 13.25
EPS 0.08 0.11 0.11 0.09 0.04
Return on Equity (%) 3.42 4.3 4.37 4.22 1.62
Return on Assets (%) 10.96 13.5 13.44 12.81 4.96

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Market Share Versus Profits

Revenues History
Earnings History

SVM-CA‘s change in revenue this period compared to the same period last year of 17.39% 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 SVM-CA is holding onto its market share. Also, for comparison purposes, revenues changed by 18.40% and earnings by -17.73% 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 earnings growth was influenced by year-on-year improvement in gross margins from 43.33% to 49.42% as well as better cost controls. As a result, operating margins (EBITDA margins) rose from 42.48% to 48.73% compared to the same period last year. For comparison, gross margins were 58.58% and EBITDA margins were 51.43% in the last reporting 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

SVM-CA‘s gross margin improvement has not produced any big difference in its working capital. Working capital days are currently 169.63, compared to last year’s level of 100.79 days. This leads Capital Cube to conclude that the improvements in gross margins are likely from operating decisions and not trade-offs with the balance sheet.

Gross Margin Versus Working Capital Days

Quadrant label definitions. Hover to know more

Customer Financed, Cash Starved, Supplier Financed, Cash Rich

Cash Versus Earnings – Sustainable Performance?

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

SVM-CA‘s change in operating cash flow of -12.68% compared to the same period last year is about the same as its change in earnings this period. Additionally, this change in operating cash flow is about average among its peer group. This suggests that the company did not use accruals or reserves to manage earnings this period, and that, all else being equal, the earnings number is sustainable.

Operating Cash Flow Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Cash Flow based Earnings, Likely Non-cash Earnings, Low Cash Flow Base, Likely Undeclared Earnings

Margins

The company’s earnings growth has also been influenced by the following factors: (1) Improvements in operating (EBIT) margins from 27.10% to 36.50% and (2) one-time items. The company’s pretax margins are now 44.79% compared to 26.38% 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

Access our Ratings and Scores for Silvercorp Metals, Inc.

Company Profile

Silvercorp Metals, Inc. is a low-cost silver producing Canadian mining company with multiple mines in China. It engages in the acquisition, exploration, development and mining of precious and base metal properties in China and Canada. The company was founded by Rui Feng on October 31, 1991 and is headquartered in Vancouver, Canada.

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