Analyze whether Shuanghui Development’s source of profit is sustainable

Assuming it is May 1, 2018, analyze whether Shuanghui Development’s source of profit is sustainable:

Why is the profit model high profit and low turnover?

1.1? Shuanghui Development’s profit model

Through DuPont analysis, it was found that Shuanghui Development’s high ROE mainly comes from the asset turnover rate, so Shuanghui Development’s profit model is low profit and high turnover. enterprise.

1.2 Analysis of the operating income composition of Shuanghui Development:

1.2.1 According to the 2017 annual report, Shuanghui Development mainly focuses on meat products and slaughtering, and the proportion of meat products 44.92, the slaughtering industry accounts for 60.27%, the slaughtering industry and meat products are 6:4

1.3? Which one is more profitable, meat products or slaughtering?

? (1) Although the gross profit margin of meat products is high, the revenue growth rate is slow

? (2) The gross profit margin of the slaughtering industry is not high, but it has grown through small profits but quick turnover The operating income of this part

? As can be seen from the above two figures, the price of live pigs is negatively related to slaughter. If the price of pigs is high, the slaughter volume will be low. If the pig price is low, the slaughter volume will be high.

1.4? Shuanghui Development’s total assets:

(1)? The proportion of fixed assets is relatively high, accounting for 50%, and it is an asset-heavy enterprise

(2) ? Upgrading the slaughter volume does not require a large investment in fixed assets

(3)? From the overall asset structure, the overall performance is stable and there is no particularly large investment

(4)? Shuanghui's dividend ratio is high.

1.5 Summary

Operating income: expected to remain stable unless pig prices decline and the company can occasionally kill more pigs. The egg slaughtering industry may also be cyclical and is affected by pig prices.

Total assets: continue to remain stable, with no large-scale change trend

Therefore, it is a very good situation that Shuanghui Development's total asset turnover rate can maintain the current level< /p>

2. Analyze the changing trends of net profit margin, gross profit margin and the proportion of three fees

2.1 Net profit rate = net profit/total operating income = gross profit margin - proportion of three fees - income tax Ratio

According to the formula analysis of net profit margin, with 10 years of data attached, Shuanghui Development has the largest proportion of gross profit margin

2.2 Analysis of gross profit margin

? First of all, It is necessary to clarify the most important costs or raw materials, and whether the market price will change in the future

? Based on common sense, Shuanghui Development, whether it is meat products or slaughtering industry, the raw material is pigs:

? Gross profit margin = 1-operating cost/operating income = 1-cost rate

As can be seen from the above figure, there is a negative correlation between pig price and slaughter volume. The higher the pig price, the lower the slaughter volume. The lower the price, the higher the slaughter volume.

The above table tells us that the cost rate has gradually decreased since 2011 and has remained at around 80%. This also confirms that Shuanghui Development has controlled the cost rate within a certain range to minimize the domestic pig cycle. The impact of price on gross profit margin. Based on this, Shuanghui Development's gross profit margin will remain stable in the future

2.3 Analysis of the proportion of three fees

The data in the above table can tell us that among the proportion of three fees, the sales expense rate It accounts for the highest proportion, which is twice as much as administrative expenses. However, the sales expense rate remains basically stable, and there is no need to invest too much cost. Therefore, Shuanghui's sales expenses do not increase with the increase in operating income.

Summary:

1. Shuanghui Development’s gross profit margin is expected to remain stable in the next few years.

2. From the proportion of three fees, it is predicted that it will maintain stable operation in the next few years.

3. What is the debt ratio?

a. The liability structure is divided into operating liabilities and financial liabilities.

b. Operating liabilities are loads with no interest in the operating process.

c. Financial liabilities are liabilities for which interest factors must be considered, and the measurement indicator is the interest-bearing debt ratio.

d. Game debt ratio

Based on the analysis of Shuanghui Development’s profit model, it can be concluded that Shuanghui Development is a low-leverage enterprise. Combined with the ten-year data in the above table, we can see that Shuanghui Development’s average asset-liability ratio 30%, while the average interest-bearing debt ratio is 4%. The asset-liability ratio itself is not high, and the interest-bearing debt ratio is also very low, so it is financially safe. But in 2017, the interest-bearing debt ratio suddenly doubled from 2016, accounting for almost half of the asset-liability ratio. This situation requires attention.

Shuanghui Development: The average current ratio is 1.53, the standard value is 2, the quick ratio is 0.93, and the standard value is 1. These two indicators are not advantageous compared with peers, and these two values ??are different from the standard values. Both are not up to par. Compared with its peers, Shuanghui Development has no numerical advantage. Therefore, there is basically no room for Shuanghui Development to increase its leverage ratio. Therefore, it cannot increase ROE by increasing its leverage ratio.

Four Summary