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Financial Indicators That Investors Are Concerned About

2013/11/3 20:20:00 22

low net profit margin and high return on net assets /p >

Taking Golden Mantis (002081.SZ) as an example, from the 2012 earnings report, < a href= "//www.sjfzxm.com/news/index_cj.asp" > net assets yield < /a > 30.8%, although 14.5% lower than 2011, but still maintain a high yield in Shanghai and Shenzhen two cities.

But its net profit rate is relatively low. In 2012, the net profit rate of its parent company was only 7.98% in 2011, but 7.25% in 2011.

why can the Golden Mantis's low profit margin bring such a high return on net assets?

Golden Mantis is a building decoration company listed on the small and medium-sized board in Shenzhen in 2006. From the top five accounts receivable, its main customers are Real Estate Company and local city investment company.

From the balance sheet, the company's current assets are as high as 12 billion yuan, rather than the current assets of only 1 billion 300 million yuan, so it can be said to be a light asset company.

from the debt structure, current liabilities are as high as 7 billion 900 million yuan, while non current liabilities are only 1 billion 200 million yuan. Liabilities are mostly concentrated in less than one year.

But it is worth noting that the interest rate liabilities of the Golden Mantis are very low, only 1 billion 165 million yuan in long-term loans and bonds payable, and only about 18000000 yuan in a year.

Therefore, a large amount of debt of the Golden Mantis comes from accounts payable in current liabilities, at the end of 2012, it was 6 billion 100 million yuan.

the accounts payable of the Golden Mantis are mostly the loans of their main suppliers.

At the end of 2012, the asset liability ratio of the Golden Mantis was as high as 68%, while the interest bearing debt and equity ratio was only 28%. However, the accounts payable and equity ratio were as high as 145%, so we can see that one of the largest building decoration companies in the country, through a large number of accounts payable, to raise their financial leverage ratio, in order to get a higher return on net assets.

As we all know, accounts payable are operating liabilities and do not need to be paid.

although the Golden Mantis has huge accounts payable, it also has an account receivable of up to about 7000000000 yuan in 2012. How to solve the relationship between receivables and receivables will determine whether the enterprise has healthy cash flow.

from the 2012 cash flow table, it can be seen that the reason why the Golden Mantis loan is not high reflects that in the face of huge accounts receivable, it solves the cash flow of the normal operation of the company well.

In 2012, the cash received by the company in selling goods and providing services increased by nearly 30% compared with 2011, and its operating income ratio was 75.5%, while the cash paid for purchases of goods and services increased by only 26%, accounting for 71% of its operating cost. Only a mere 4 points provided a large amount of operating capital for the company. At the end of 2012, the Golden Mantis maintained a 3 billion 800 million yuan monetary fund, up 58% from the previous year.

The net cash flow generated by the Golden Mantis business activities in 2012 was still up to 770 million yuan, which was 40% higher than the 550 million yuan in 2011.

The net cash flow from investment activities is only minus 460 million yuan, which saved a lot of interest cost for the Golden Mantis, so the company borrowed more than 4 billion yuan from the bank in 2012.

look at another case. 002589.SZ is a Shandong pharmaceutical enterprise mainly selling medicine and equipment. In 2012, the net profit rate of the parent company was only 2.4%, while the net assets yield was 12.8%, and the asset liability ratio was as high as 70%. Similar to the Golden Mantis, it had a higher net asset yield and a lower net profit rate. However, unlike the Golden Mantis, its interest bearing liabilities and equity ratio were as high as 113%.

Its short-term borrowing amounted to 640 million yuan, an increase of 101% over 2012, and notes payable of 314 million yuan, an increase of 28% over 2012, and an increase of 100 million yuan in 2012 compared with last year's accounts receivable as a pledge.

In fact, the cost of debt is greatly improved.

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similar to Golden Mantis, Rukang medicine also has a large amount of accounts receivable and accounts payable. According to its 2012 annual report, accounts receivable and payable accounts for more than half of its current assets and current liabilities.

But receivables and receivables grew very close to 2011, nearly 35%.

From the cash flow table, the cash paid for the purchase of goods and services in 2012 was 3 billion 850 million yuan, which was 90% of the operating cost of that year, while the cash received from the sales of goods provided by the labor service was 3 billion 920 million yuan, which was 84.8% of its current operating income, and the difference between the two was only 70 million yuan.

In 2011, the cash paid for the purchase of goods and services was 2 billion 920 million yuan, which was 99.6% of its operating cost at that time. However, the cash received from the sales of goods and services provided was 2 billion 620 million yuan, which was only 82% of its current operating income, and the difference between the two was negative 300 million yuan.

The net cash flow of Rukang medical company has been negative for two consecutive years.

Unlike the Golden Mantis, Rukang pharmaceutical has to borrow heavily to meet the company's capital needs under the background of < a href= "//www.sjfzxm.com/news/index_s.asp" > operating liabilities < /a > without providing a large amount of operating cash flow for the company. In 2012, the company borrowed more than 10 billion yuan from the bank to increase the working capital of the company.

Although RGC has a higher net asset return rate than its net profit margin, the interest bearing debt and equity ratio is as high as 113%, indicating that the company's daily cash flow does not provide a good capital and blood circulation for the company in the past two years, and if it simply relies on bank loans later, it will inevitably bury potential risks for the future industry downturn.

high net profit rate and low return on net assets /p >

Guilin 002275.SZ is a company with a high net profit margin, but the net assets yield is not too high.

because its main products belong to the enterprise's independent research and development, it has a relatively high gross profit margin. Its 2012 annual report shows that the gross profit margin of the proprietary medicine product is as high as 76.5%, and its net profit rate of the parent company is also as high as 25%.

In today's highly competitive pharmaceutical companies, Guilin San Jin has such a high net profit margin is not easy, but the company's net assets yield is not high, only 16.5% in 2012.

through its balance sheet, the total assets and liabilities ratio is only 16%, of which the interest bearing loan is only about 1000000 yuan, and all the debts of Guilin and its equity ratio are only 19%, and the financial leverage ratio is very low, that is, the enterprise mainly relies on equity to finance.

Therefore, although Guilin three gold has a higher profit margin, but it has not effectively improved its net assets yield, so in the case of suitable industry boom, appropriate liabilities can effectively improve the net assets yield.

Wuliangye (000858.SZ) also has a relatively high net profit margin. In 2012, its net profit rate of its parent company was 36.5%, and it also maintained a high return on net assets. In 2012, it was 36.82%. Why did the three metals in Guilin have higher profit margins, but the average return on net assets was harvested, while Wuliangye kept the two high? /p

this is also related to Wuliangye's capital structure.

Wuliangye didn't have a cent of interest loan in 2012, but maintained a high pre payment account. In 2012, the advanced accounts receivable amounted to 6 billion 500 million yuan, which was close to half of its total liabilities. Because Wuliangye's product sales were very smooth in the year, it could maintain its dealers' pre payment in advance.

For Wuliangye, it is a small interest free loan.

So as to improve their leverage ratio.

In 2012, its assets and liabilities ratio was 30%, not high, but its debt to equity ratio was 43%.

This data is much higher than the 19% of Guilin's three gold.

Therefore, for Wuliangye, a large amount of advance receipts increased the leverage ratio of capital structure, which also brought a higher return on shareholders' equity.

However, with the decline of the spirit of the liquor industry, the profit margin of Wuliangye's dealers will be reduced. It is very likely to reduce the payment in advance. Wuliangye's advance receipts may decrease, and the high return on net assets can hardly be maintained.

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the rate of return on capital before investment and net asset yield /p >

interest tax before investment < a href= "//www.sjfzxm.com/pioneer/" > capital yield < /a > also has an interesting contrast with net asset yield.

Taking a real estate listed in Shenzhen stock market as an example, the real estate enterprise is a typical capital intensive enterprise, and it needs to rely on a large amount of funds to maintain the normal operation of the enterprise.

According to its 2012 annual report, the ratio of interest bearing liabilities to equity ratio is 159%, asset liability ratio is as high as 76%, and net debt ratio is also very high, 135%.

That is to say, the company mainly relies on a large number of loans to raise its financial leverage ratio. In 2012, though its net profit margin attributable to the parent company was only 8%, its net assets yield was 27%.

although the company has such a high return on net assets, it is open to question if we consider the enterprise with interest rate before tax.

Before P, 2012, the rate of return on capital invested before tax is only 6.8%, while the cost of borrowing at the end of the year is about 12.6%, that is, the total interest at the end of the year is divided by its total interest loan at the end of the year.

The pre tax rate of return on capital yields a huge contrast with the cost of borrowing at the end of the year, and there is a huge contrast between the rate of return on capital invested before the 6.8% interest rate and the net asset yield of 27%.

There is no doubt that the company raises its leverage ratio through a high ratio of equity to debt, so as to get 27% of the net assets yield.

look at its cash flow. For two consecutive years, net cash flow and net cash flow are negative. In 2011, it was negative about 3000000000 Yuan and 800 million yuan in 2012. So sunshine city can only borrow a lot of money. Before the opening of the financing market for the housing enterprises in the capital market, the borrowing interest rate of the company was high, and the difference in 2011 was 2 billion yuan. In 2012, it was narrowed to 900 million yuan, so the net cash flow generated by the financing was slightly richer, 2011 was 3 billion yuan, and 2012 was 1 billion yuan.

it can be said that if the enterprise continues to maintain such a high capital structure and capital costs, it will not be good for enterprises, and ultimately it will be difficult for shareholders to maintain a higher rate of return.

Because any high leverage ratio is a double-edged sword. High leverage can boost corporate performance in the boom times, thereby enhancing shareholder returns, while accelerating the downturn in the industry, resulting in a sudden decline in roe.