Furniture and Related Product Manufacturing

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T r e n d s o f Y o u r B u s i n e s s
E x c l u s i v e l y d i s t r i b u t e d b y
China, 2011
Furniture and Related Product
Manufacturing
ISIEmergingMarketsPDF cn-cpml from 218.1.16.190 on 2014-07-23 21:38:09 EDT. DownloadPDF.
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-2-
Furniture and Related Product Manufacturing
Contents Page
1. Macroeconomic Scenario - 4
2. Analysis of Investment Attractiveness - 5
- Attractiveness Indicators - 5
- Driving Forces of Attractiveness - 5
- Risk-Profitability Maps - 7
3. Analysis of Revenue - 9
- Long-term Trend. Business Cycle. Correlation - 9
- Seasonality in Reveue. Seasonal Adjusted Revenue - 10
- Revenue in sub-sectors - 11
4. Analysis of Financial Ratios - 12
- Map of financial Indicators - 12
- General Indicators - 13
- Profitability Ratios - 14
- Liquidity Ratios - 17
- Financial Leverage Ratios - 18
- Financial Cycles - 20
- Production Factors - 22
- Investment Outlays - 24
- Costs - 26
- Main Leverages - 27
- DuPonts Pyramid - 28
- List of source financials - 29
5. Key Concepts - 30
- Definitions of Indices - 30
- Definitions of Selected Concepts - 32
! This report has been compiled to the best of the authors knowledge, using information originating from verified
sources. The authors of the report take no responsibility for the consequences of any decisions and actions taken as a
result of the use of this report. This report refers to the Chinese economy, excluding Hong-Kong.
-3-
Analysed sector:
Division Furniture and Related Product Manufacturing
The following groups are included in
the division:
Household and Institutional Furniture and Kitchen Cabinet Manufacturing
Office Furniture (including Fixtures) Manufacturing
Other Furniture Related Product Manufacturing
Only the groups marked by an arrow are covered by EconTrends reports.
EconTrends for China is the unique tool for analyzing various Chinese industries. It contains description of
macroeconomic environment, analysis of investment attractiveness, detailed analysis of revenue as well as in-depth
analysis of a wide scope of financial ratios.
Profitability of a given industry is evaluated on the basis of average forecasted dynamics of gross profit in two following
years. Every industry has a granted profitability mark that ranges from 1 up to 5, which reflects its profitability versus
other industries. Higher mark indicates higher profitability. Risk of an industry in turn is measured by the standard
deviation of forecasted Profitability Index. Every industry has also an assigned risk mark that ranges from 1 up to 5,
which reflects its risk versus other industries. Higher mark means here lower risk. Each industry is at the end
characterized by the following two parameters its profitability and risk. They are used for evaluation of the short term
investment attractiveness, that reflects preferences of investors seeking to maximize their rates of return and to
minimize the risk they face.
The final Short-Term Investment Attractiveness Ranking of an analyzed industry explains its relative attractiveness
comparing to other sectors. The lower a position within the ranking the higher is attractiveness on an industry.
Changes in this position replicate either changes in profitability or in risk. Additionally like in the case or profitability
and risk measurement the final attractiveness is graded from 1 to 5, where the highest grade means the highest
attractiveness. Lower grade means worse investment-weather conditions, so either lower profitability or higher risk.
The Short-Term Investment Attractiveness Ranking is presented according to the structure of the North American
Industry Classification System (NAICS), where possible. However the used system of industry classification is not fully
compatible with the NAICS due to Chinese statistics - specific factors.
The Short-Term Investment Attractiveness Ranking developed for China under the EconTrends methodology is
based on the so called Profitability Index, that shows forecasted dynamics of gross profit. It serves as a proxy for
dynamics of dirty cash flows in enterprises from a given industry. Fundamental components of the Profitability Index
like net sales and gross income margin, are forecasted using econometric models. The behavior over time of all these
categories is illustrated using appropriate pictograms in the Map of Forces.
-4-
Macroeconomic Scenario
Period 2009 2010 2011 2012 2013
Nominal GDP Growth 108.6 117.8 117.8 109.8 110.5
Real GDP Growth 109.2 110.4 109.3 107.8 108.1
Inflation (CPI) 99.3 103.3 105.4 102.7 103.5
USD/RMB exchange rate 6.9 6.8 6.8 6.5 6.2
0
20
40
60
80
100
120
140
160
G
r
o
w
t
h
Period
Nominal GDP Growth
Forecast
0
20
40
60
80
100
120
140
G
r
o
w
t
h
Period
Inflation (CPI)
Forecast
-> expected rise of
nominal GDP growth
in 2013
-> expected rise of
real GDP growth in
2013
-> expected rise of
CPI inflation in 2013
-> expected
strenghtening of
USD/RMB exchange
rate in 2013
-5-
Analysis of Investment Attractiveness
Attractiveness Indicators
Driving Forces of Attractiveness
5
0
4
1
3
1
2
1
1
1
5
0
4
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1
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C
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A
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R
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k
5
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4
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1
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F
o
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d

A
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R
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k
0
1
2
3
4
5
Current Attractiveness
0
1
2
3
4
5
Forecasted Attractiveness
Current situation
b a a
Forecasted situation
e e e
Profitability index - Y/Y
dynamics
Map of forces for the sector
Net revenue - Y/Y dynamics
Gross margin - Y/Y
dynamics
"+"
"-"
"o"
Symbol's colour
Dynamics of profit
Positive impact on profits dynamics
Negative impact on profits dynamics
Fall of dynamics comparing to previous year
Neutral impact on profits dynamics
Symbols sign
Positive dynamics of "driving force"
Negative dynamics of "driving force"
Stabilisation of dynamics comparing to previous year
Close to zero dynamics of "driving force"
Symbols orientation
Rise of dynamics comparing to previous year
-40%
-20%
0%
20%
40%
60%
80%
100%
0%
10%
20%
30%
40%
50%
60%
70%
P
r
o
f
i
t
a
b
i
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i
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y

i
n
d
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x

-
Y
/
Y

d
y
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a
m
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N
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r
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v
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-
Y
/
Y

d
y
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a
m
i
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s
Period
Net revenue - Y/Y dynamics
Net revenue - Y/Y dynamics Profitability index - Y/Y dynamics
D Dane oczyszczone (warto Dane oczyszczone (warto
Forecast
- Profitability Index - y/y dynamics
- Net Revenue - y/y dynamics
- Gross Margin - y/y dynamics
expected rise of
dynamics in net
revenue in 2012
expected fall of
dynamics in net
revenue in 2013
expected rise of
attractiveness in the
sector
-> expected rise of
profitability
-> expected
stabilisation of risk
-6-
-40%
-20%
0%
20%
40%
60%
80%
100%
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
50%
60%
P
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y

i
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d
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x

-
Y
/
Y

d
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a
m
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G
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M
a
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g
i
n

-
Y
/
Y

d
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a
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s
Period
Gross Margin - Y/Y dynamics
Gross Margin - Y/Y dynamics Profitability index - Y/Y dynamics
Forecast
expected rise of
dynamics in gross
margin in 2012
expected fall of
dynamics in gross
margin in 2013
-7-
Risk-Profitability Maps
-0.6
-0.4
-0.2
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4
P
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b
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Risk
Risk - Profitability Map (current situation)
All sectors
Most efficient sectors
groups belonging to selected division
Selected sector (Division): Furniture and Related Product Manufacturing
Investors' utility function
0.0
0.1
0.1
0.2
0.2
0.3
0.0 0.1 0.2 0.3 0.4 0.5 0.6
P
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Risk
Risk - Profitability Map (current situation)
Zoom
All sectors
risk - profitability
map (current
situation)
-8-
-0.6
-0.4
-0.2
0.0
0.2
0.4
0.6
0.8
0.0 0.1 0.2 0.3 0.4 0.5 0.6 0.7
P
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Risk
Risk - Profitability Map (forecasted situation)
All sectors
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.0 0.1 0.1 0.2 0.2 0.3 0.3
P
r
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f
i
t
a
b
i
l
i
t
y
Risk
Risk - Profitability Map (forecastedt situation)
Zoom
All sectors
risk - profitability
map (forecasted
situation)
-9-
Analysis of Revenue
Long-term Trend. Business Cycle. Correlation.
0
100 000
200 000
300 000
400 000
500 000
600 000
700 000
800 000
900 000
[
m
n

R
M
B
]
Period
Long-term trend in net revenue
Net revenue Long-term trend in net revenue
Forecast
2
0
0
0
2
0
0
1
2
0
0
2
2
0
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3
2
0
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4
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2
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2
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9
2
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1
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2
0
1
1
2
0
1
2
2
0
1
3
2
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1
4
2
0
1
5
Net Sales [mn RMB]
3
3

7
2
9
4
0

0
9
5
4
8

2
3
6
6
7

9
1
4
1
0
9

5
3
9
1
3
5

8
0
1
1
7
8

5
9
7
2
3
0

8
8
5
2
8
9

4
2
0
3
2
7

3
8
7
4
2
0

0
8
6
4
7
9

4
7
6
5
7
7

6
9
0
6
7
7

8
3
7
6
7
7

8
3
7
8
0
6

8
8
1
Longterm trend in net
sales [mn RMB]
2
8

4
8
8
3
3

3
1
7
4
0

8
6
1
5
2

0
8
7
6
7

7
8
2
1
0
9

1
6
0
1
4
0

4
7
3
1
7
9

4
7
4
2
2
6

1
8
4
2
7
7

5
1
7
3
3
4

2
5
2
4
0
0

9
4
8
4
7
7

0
2
2
5
6
6

0
3
0
6
7
4

6
1
6
8
0
8

5
7
2
Long run growth of nominal
GDP
105 110 115 120 125 130 135 140
Implied long run growth of the
sector [%]
11.04% 16.27% 21.50% 26.73% 31.96% 37.19% 42.42% 47.65%
Forecast of sector's long run growth
Period
Business cycle in net revenue
Negative part of business cycle Positive part of business cycle
Forecast
P
r
e
s
s
u
r
e

f
o
r

r
i
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e

o
f

p
r
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d
y
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a
m
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s
P
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e

f
o
r

f
a
l
l

o
f

p
r
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e
s

d
y
n
a
m
i
c
s
< 1 ; 0.8 ) < 0.8 ; 0.6 ) < 0.6 ; 0.4 ) < 0.4 ; 0.2 ) < 0.2 ; 0 ) < 0 ; -0.2 ) < -0.2 ; -0.4 ) < -0.4 ; -0.6 ) < -0.6 ; -0.8 ) < -0.8 ; -1 )
Degree of correlation
Rise of long-term
trend in net revenue
Expected high use of
capacity utilisation
ratio and associated
possible growth in
dynamics of prices
and employment
Lead of GS Y/Y - 0Y / 0Q - 1Y / 1Q - 2Y / 2Q - 3Y / 3Q
Value (yearly data) 28.23% -21.94% -36.92% -41.12%
Value (quarterly data) -15.88% -19.53% -12.60% 2.63%
Lag of GS Y/Y + 0Y / 0Q + 1Y / 1Q + 2Y / 2Q + 3Y / 3Q
Value (yearly data) 28.23% 27.59% 17.59% 49.88%
Value (quarterly data) -15.88% 9.33% 24.81% 38.99%
Correlation of gross revenue Y/Y growth with past GDP growth
Correlation of gross revenue Y/Y growth with future GDP growth
-10-
Seasonality in Reveue. Seasonal Adjusted Revenue
0
20
40
60
80
100
120
0
20 000
40 000
60 000
80 000
100 000
120 000
140 000
160 000
180 000
S
e
a
s
o
n
a
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i
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y
(
m
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t
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p
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e

d
e
v
i
a
t
i
o
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)
[
m
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R
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B
]
Period
Seasonality in net revenue
Net revenue Seasonality in net revenue
Forecast
0
20
40
60
80
100
120
0
20 000
40 000
60 000
80 000
100 000
120 000
140 000
160 000
S
e
a
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a
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(
m
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p
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e

d
e
v
i
a
t
i
o
n
)
[
m
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R
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B
]
Period
Seasonality (per quarter) in net revenue
Net revenue (per quarter) Seasonality (per quarter) in net revenue
1st quarter 2nd quarter 3rd quarter 4th quarter
0
20 000
40 000
60 000
80 000
100 000
120 000
140 000
160 000
180 000
[
m
n

R
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B
]
Period
Net revenue
Seasonally adjusted net revenue
Net revenue Seasonally adjusted net revenue
Forecast
in Q1 negative
seasonal deviation
prevails
in Q2 positive
seasonal deviation
prevails
in Q3 positive
seasonal deviation
prevails
in Q4 positive
seasonal deviation
prevails
-11-
Revenue in sub-sectors
Period 2003 2004 2005 2006 2007 2008 2009 2010 2011
[mn RMB] 67 914 109 539 135 801 178 597 230 885 289 420 327 387 420 086 479 476
Y/Y dynamics 40.8% 61.3% 24.0% 31.5% 29.3% 25.4% 13.1% 28.3% 14.1%
[mn RMB]
Share
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
Y/Y dynamics n/a n/a n/a n/a n/a n/a n/a n/a n/a
[mn RMB]
Share
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
[mn RMB]
Share
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
S
u
b
-
s
e
c
t
o
r
Office Furniture (including Fixtures) Manufacturing
S
u
b
-
s
e
c
t
o
r
Other Furniture Related Product Manufacturing
S
e
c
t
o
r Furniture and Related Product Manufacturing
S
u
b
-
s
e
c
t
o
r
Household and Institutional Furniture and Kitchen
Cabinet Manufacturing
-12-
Analysis of Financial Ratios
Map of Financial Indicators
X
20% 20% 20% 20% 20%
2010 2011 I II III IV V
General Indicators
Number of companies 5 934.00 4 255.00 X .
Y/Y dynamics of net revenue per company [%] 20.57% 59.18% . X
Y/Y dynamics of total costs per company [%] 21.71% 68.66% X
Value added to net sales ratio [%] 28.01% 28.01% X
Profitability Ratios
Y/Y dynamics of earning before taxes [%] 52.93% 21.12% X .
Return on equity [%] 25.51% 26.07% X
Return on assets [%] 11.82% 12.20% X
Return on net sales [%] 6.70% 7.11% X
Share of profit-generating companies [%] 89.57% 90.79% X
Liquidity Ratios
Current ratio [%] n/a n/a
Quick ratio [%] n/a n/a
Receivables to liabilities ratio [%] n/a n/a
Financial Cycles
Days of coverage for current liabilities [days] n/a n/a
Days of coverage for receivables [days] 26 27 X
Days of coverage for inventory [days] 39 36 X
Days of coverage for cash & equivalent [days] n/a n/a
Financial Leverage Ratios
Debt to Equity ratio [%] n/a n/a
Equity to total assets ratio [%] 46.26% 47.27% X
Long-term liabilities to total liabilities ratio [%] n/a n/a
Debt ratio [%] 53.44% 52.31% X
Operating profit coverage [%] 302.80% 600.73% . X
Production Factors
Employment [thou person] 1117 1064 X
Employment per company [person] 188 250 . X
Y/Y dnamics of labour productivity [%] 23.85% 10.02% X .
Y/Y dynamics of fixed assets per employee [%] 6.73% 19.00% . X
Fixed assets productivity [%] 620.09% 605.92% X
Material, energy, other services intensity of production [%] 71.99% 71.99% X
Investment Outlays
Y/Y dynamics of total investment outlays [%] 52.88% 35.85% X
I nvestment outlays as share in net revenue [%] 6.06% 7.22% X
Y/Y dynamics of investment outlays per company [%] 43.66% 89.46% . X
I nvestment outlays to depretiation ratio [%] 310.91% 663.03% . X
I nvestment outlays index [%] 23.29% 34.95% X
Shares of costs in Total Cost
I ndirect taxes [%] 2.65% 3.21% . X
Cost of sales [%] 88.04% 88.42% X
Distribution costs [%] 4.01% 4.01% X
Administration expenses [%] 3.21% 3.26% . X
Depretiation [%] 2.09% 1.10% X .
The last observation means an observation from 2011
The previous observation should be understood as an observation from 2010
Previous
observation
Last
obserwation
Q U A N T I L E S
(The distribution of financial indicators over time)
-13-
General Indicators
Number of companies
Period 2000 2001 2002 2003
Value 1 498 1 625 1 767 2 046
Y/Y increase 25 127 142 279
Period 2004 2005 2006 2007
Value 3 025 3 074 3 603 4 110
Y/Y increase 979 49 529 507
Period 2008 2009 2010 2011
Value 5 386 5 576 5 934 4 255
Y/Y increase 1 276 190 358 -1 679
Net revenue per company [mn RMB]
Period 2000 2001 2002 2003
Value [mn RMB] 22.52 24.67 27.30 33.19
Y/Y dynamics [%] 15.79% 9.58% 10.64% 21.59%
Period 2004 2005 2006 2007
Value [mn RMB] 36.21 44.18 49.57 56.18
Y/Y dynamics [%] 9.09% 22.00% 12.20% 13.33%
Period 2008 2009 2010 2011
Value [mn RMB] 53.74 58.71 70.79 112.69
Y/Y dynamics [%] -4.34% 9.26% 20.57% 59.18%
Total costs per company [mn RMB]
Period 2000 2001 2002 2003
Value [mn RMB] 22.36 24.64 27.22 33.21
Y/Y dynamics [%] 16.03% 10.23% 10.46% 22.01%
Period 2004 2005 2006 2007
Value [mn RMB] 36.02 42.41 48.11 53.24
Y/Y dynamics [%] 8.44% 17.76% 13.44% 10.66%
Period 2008 2009 2010 2011
Value [mn RMB] 55.34 54.29 66.08 111.44
Y/Y dynamics [%] 3.94% -1.89% 21.71% 68.66%
0
20
40
60
80
100
120
[
m
n

R
M
B
]
Period
Net revenue & total costs per company
Net revenue per company [mn RMB] Total costs per company [mn RMB]
fall of number of
companies in 2011
comparing to the
value in 2010
rise of Y/Y dynamics
of net revenue per
company in 2011
comparing to the
value in 2010
of total cost per
company in 2011
comparing to the
value in 2010
-14-
Value added to net sales ratio [%]
Period 2000 2001 2002 2003
Value [%] 28.12% 29.33% 28.89% 26.94%
Y/Y increase [%] 0.91% 1.20% -0.44% -1.95%
Period 2004 2005 2006 2007
Value [%] 25.92% 28.34% 28.06% 28.01%
Y/Y increase [%] -1.02% 2.42% -0.28% -0.04%
Period 2008 2009 2010 2011
Value [%] 28.01% 28.01% 28.01% 28.01%
Y/Y increase [%] 0.00% 0.00% 0.00% 0.00%
Profitability Ratios
Earning before taxes [mn RMB]
Period 2000 2001 2002 2003
Value [mn RMB] 1 596.00 1 772.00 1 966.00 2 890.00
Y/Y dynamics [%] 40.49% 11.03% 10.95% 47.00%
Period 2004 2005 2006 2007
Value [mn RMB] 4 893.00 6 189.00 8 603.00 10 896.00
Y/Y dynamics [%] 69.31% 26.49% 39.00% 26.65%
Period 2008 2009 2010 2011
Value [mn RMB] 13 988.00 18 412.00 28 157.00 34 104.46
Y/Y dynamics [%] 28.38% 31.63% 52.93% 21.12%
0%
10%
20%
30%
40%
50%
60%
70%
80%
0
5 000
10 000
15 000
20 000
25 000
30 000
35 000
40 000
Y
/
Y

d
y
n
a
m
i
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s

o
f

n
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t

p
r
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f
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t
[
m
n

R
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B
]
Period
Earning before taxes [mn RMB]
Earning before taxes [mn RMB] Y/Y dynamics of net profit
Return on equity [%]
Period 2000 2001 2002 2003
Value [%] 10.98% 10.56% 10.42% 12.26%
Y/Y increase [%] 1.61% -0.42% -0.14% 1.84%
Period 2004 2005 2006 2007
Value [%] 15.18% 15.21% 16.85% 16.59%
Y/Y increase [%] 2.92% 0.02% 1.64% -0.26%
Period 2008 2009 2010 2011
Value [%] 17.50% 19.88% 25.51% 26.07%
Y/Y increase [%] 0.91% 2.38% 5.64% 0.56%
stabilisation of value
added to net sales
ratio in 2011
comparing to the
value in 2010
fall of Y/Y dynamics
of earning before
taxes in 2011
comparing to the
value in 2010
rise of return on
equity in 2011
comparing to the
value in 2010
-15-
0%
5%
10%
15%
20%
25%
30%
Period
Return on assets [%]
Period 2000 2001 2002 2003
Value [%] 4.67% 4.66% 4.65% 5.43%
Y/Y increase [%] 0.99% -0.01% -0.01% 0.78%
Period 2004 2005 2006 2007
Value [%] 6.45% 6.40% 7.31% 7.32%
Y/Y increase [%] 1.02% -0.05% 0.91% 0.01%
Period 2008 2009 2010 2011
Value [%] 7.78% 9.05% 11.82% 12.20%
Y/Y increase [%] 0.46% 1.28% 2.76% 0.38%
0%
2%
4%
6%
8%
10%
12%
14%
Period
rise of return on
assets in 2011
comparing to the
value in 2010
rise of return on net
sales in 2011
comparing to the
value in 2010
Return on net sales [%]
Period 2000 2001 2002 2003
Value [%] 4.73% 4.42% 4.08% 4.26%
Y/Y increase [%] 0.77% -0.31% -0.34% 0.18%
Period 2004 2005 2006 2007
Value [%] 4.47% 4.56% 4.82% 4.72%
Y/Y increase [%] 0.21% 0.09% 0.26% -0.10%
Period 2008 2009 2010 2011
Value [%] 4.83% 5.62% 6.70% 7.11%
Y/Y increase [%] 0.11% 0.79% 1.08% 0.41%
-16-
0%
1%
2%
3%
4%
5%
6%
7%
8%
Period
Share of profit-generating companies [%]
Period 2000 2001 2002 2003
Value [%] 81.98% 81.23% 82.97% 84.56%
Y/Y increase [%] 1.53% -0.75% 1.73% 1.59%
Period 2004 2005 2006 2007
Value [%] 79.80% 83.28% 85.32% 85.33%
Y/Y increase [%] -4.75% 3.48% 2.04% 0.01%
Period 2008 2009 2010 2011
Value [%] 81.77% 85.35% 89.57% 90.79%
Y/Y increase [%] -3.56% 3.58% 4.22% 1.22%
74%
76%
78%
80%
82%
84%
86%
88%
90%
92%
Period
rise of share of
profit-generating
companies in 2011
comparing to the
value in 2010
-17-
Liquidity Ratios
Current ratio [%]
Period 2000 2001 2002 2003
Value [%] n/a n/a n/a n/a
Y/Y increase [%] n/a n/a n/a n/a
Period 2004 2005 2006 2007
Period 2008 2009 2010 2011
0%
20%
40%
60%
80%
100%
120%
Period
Current ratio [%]
Current ratio [%]
Quick ratio [%]
Period 2000 2001 2002 2003
Period 2004 2005 2006 2007
Period 2008 2009 2010 2011
0%
20%
40%
60%
80%
100%
120%
Period
Quick ratio [%]
Quick ratio [%]
No data available
No data available
-18-
Receivables to liabilities ratio [%]
Period 2000 2001 2002 2003
Period 2004 2005 2006 2007
Period 2008 2009 2010 2011
0%
20%
40%
60%
80%
100%
120%
Period
Financial Leverage Ratios
Debt to Equity ratio [%]
Long-term liabilities [%] 2000 2001 2002 2003
Equity to total assets ratio [%]
Value [%] 43.71% 44.42% 44.73% 43.92%
Y/Y increase [%] 2.59% 0.71% 0.31% -0.81%
Value [%] 41.48% 42.61% 44.01% 44.24%
Y/Y increase [%] -2.44% 1.13% 1.40% 0.23%
Value [%] 44.61% 46.39% 46.26% 47.27%
Y/Y increase [%] 0.37% 1.78% -0.14% 1.01%
No data available
No data available
rise of equity to total
assets ratio in 2011
comparing to the
value in 2010
-19-
Long-term liabilities to total liabilities ratio [%]
Debt ratio [%]
Value [%] 56.28% 55.58% 55.27% 56.08%
Y/Y increase [%] -2.59% -0.70% -0.31% 0.81%
Value [%] 58.52% 57.39% 55.99% 55.76%
Y/Y increase [%] 2.44% -1.13% -1.40% -0.23%
Value [%] 55.39% 53.22% 53.44% 52.31%
Y/Y increase [%] -0.37% -2.17% 0.22% -1.13%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2009 2010 2011
Period
Capital structure [%]
Equity [%] Short-term liabilities [%] Long-term liabilities [%]
No data available
fall of debt ratio in
2011 comparing to
the value in 2010
liabilities dominate
in the capital
structure
Capital structure [%]
Equity [%] 46.39% 46.26% 47.27%
Short-term liabilities [%] n/a n/a n/a
Long-term liabilities [%] n/a n/a n/a
Period 2009 2010 2011
-20-
Operating profit coverage [%]
Value [%] 1131.47% 1028.52% 958.83% 949.11%
Y/Y increase [%] -98.33% -102.95% -69.69% -9.72%
Value [%] 898.14% 566.13% 602.33% 445.18%
Y/Y increase [%] -50.97% -332.01% 36.20% -157.15%
Value [%] 1043.40% 301.87% 302.80% 600.73%
Y/Y increase [%] 598.21% -741.52% 0.93% 297.93%
0%
200%
400%
600%
800%
1000%
1200%
Period
Financial Cycles
Days of coverage for cash & equivalent [days]
Period 2000 2001 2002 2003
Value [days] n/a n/a n/a n/a
Y/Y increase [days] n/a n/a n/a n/a
Period 2004 2005 2006 2007
Period 2008 2009 2010 2011
0
0
0
1
1
1
1
[
d
a
y
s
]
Period
No data available
rise of operating
profit coverage in
2011 comparing to
the value in 2010
-21-
Days of coverage for current liabilities [days]
Period 2000 2001 2002 2003
Period 2004 2005 2006 2007
Period 2008 2009 2010 2011
0
0
0
1
1
1
1
[
d
a
y
s
]
Period
Days of coverage for receivables [days]
Period 2000 2001 2002 2003
Value [days] 44 41 39 38
Y/Y increase [days] -2 -3 -3 -1
Period 2004 2005 2006 2007
Value [days] 37 42 39 32
Y/Y increase [days] -1 5 -3 -7
Period 2008 2009 2010 2011
Value [days] 30 28 26 27
Y/Y increase [days] -2 -2 -2 1
0
5
10
15
20
25
30
35
40
45
50
[
d
a
y
s
]
Period
No data available
rise of days of
coverage
receivables in 2011
comparing to the
value in 2010
-22-
Days of coverage for inventory [days]
Period 2000 2001 2002 2003
Value [days] 81 76 70 67
Period 2004 2005 2006 2007
Value [days] 67 59 56 52
Y/Y increase [days] 0 -8 -2 -4
Period 2008 2009 2010 2011
Value [days] 49 42 39 36
0
10
20
30
40
50
60
70
80
90
[
d
a
y
s
]
Period
Production Factors
Employment [thou person]
Period 2000 2001 2002 2003
Value [thou person] 270 298 340 434
Y/Y increase [thou person] 16 28 41 94
Period 2004 2005 2006 2007
Value [thou person] 649 713 838 913
Y/Y increase [thou person] 216 63 125 75
Period 2008 2009 2010 2011
Value [thou person] 1 044 986 1 117 1 064
Y/Y increase [thou person] 131 -58 132 -53
Employment per company [person]
Period 2000 2001 2002 2003
Value [person] 181 184 192 212
Y/Y increase [person] 8 3 9 20
Period 2004 2005 2006 2007
Value [person] 215 232 233 222
Y/Y increase [person] 3 17 1 -10
Period 2008 2009 2010 2011
Value [person] 194 177 188 250
Y/Y increase [person] -28 -17 12 62
fall of days of
coverage for
inventory in 2011
comparing to the
value in 2010
fall of employment
in 2011 comparing
to the value in 2010
rise of average
employment per
company in 2011
comparing to the
value in 2010
-23-
Labour productivity [thou RMB/person]
Period 2000 2001 2002 2003
Value [thou RMB/person] 128.49 141.00 151.21 175.58
Y/Y dynamics [%] 13.32% 9.74% 7.24% 16.11%
Period 2004 2005 2006 2007
Y/Y dynamics [%] 15.18% -1.40% 15.52% 14.49%
Period 2008 2009 2010 2011
Y/Y dynamics [%] 12.15% 9.07% 23.85% 10.02%
0
50
100
150
200
250
300
350
400
450
500
Period
Fixed assets per employee [mn RMB/person]
Period 2000 2001 2002 2003
Value [mn RMB/person] 44.49 43.28 43.60 43.13
Y/Y dynamics [%] 6.49% -2.72% 0.75% -1.08%
Period 2004 2005 2006 2007
Y/Y dynamics [%] -8.66% 8.76% 12.24% 14.55%
Period 2008 2009 2010 2011
Y/Y dynamics [%] 0.09% 12.81% 6.73% 19.00%
0
10
20
30
40
50
60
70
80
90
Period
of labour
productivity in 2011
comparing to the
value in 2010
of fixed assets per
employee in 2011
comparing to the
value in 2010
-24-
Fixed assets productivity [%]
Period 2000 2001 2002 2003
Value [%] 297.61% 321.53% 348.00% 405.12%
Y/Y increase [%] 17.81% 23.92% 26.47% 57.12%
Period 2004 2005 2006 2007
Value [%] 494.52% 483.93% 504.21% 509.65%
Y/Y increase [%] 89.41% -10.59% 20.27% 5.45%
Period 2008 2009 2010 2011
Value [%] 536.58% 550.77% 620.09% 605.92%
Y/Y increase [%] 26.93% 14.19% 69.32% -14.18%
0%
100%
200%
300%
400%
500%
600%
700%
Period
Material, energy, other services intensity of production [%]
Period 2000 2001 2002 2003
Value [%] 71.88% 70.67% 71.11% 73.06%
Y/Y increase [%] -0.91% -1.20% 0.44% 1.95%
Period 2004 2005 2006 2007
Value [%] 74.08% 71.66% 71.94% 71.99%
Y/Y increase [%] 1.02% -2.42% 0.28% 0.04%
Period 2008 2009 2010 2011
Value [%] 71.99% 71.99% 71.99% 71.99%
Y/Y increase [%] 0.00% 0.00% 0.00% 0.00%
Investment Outlays
Total investment outlays [mn RMB]
Period 2000 2001 2002 2003
Value [mn RMB] 1 905.00 1 723.00 2 839.00 5 452.00
Y/Y dynamics [%] 62.13% -9.55% 64.77% 92.04%
Period 2004 2005 2006 2007
Value [mn RMB] 8 713.00 6 429.00 7 739.00 12 093.00
Y/Y dynamics [%] 59.81% -26.21% 20.38% 56.26%
Period 2008 2009 2010 2011
Value [mn RMB] 10 845.85 16 662.00 25 473.00 34 606.00
Y/Y dynamics [%] -10.31% 53.63% 52.88% 35.85%
fall of fixed assets
productivity in 2011
comparing to the
value in 2010
stabilisation of
material, energy,
other services
intensity of
production in 2011
comparing to the
value in 2010
of total investment
outlays in 2011
comparing to the
value in 2010
-25-
Investment outlays as share in net revenue [%]
Period 2000 2001 2002 2003
Value [%] 5.65% 4.30% 5.89% 8.03%
Y/Y increase [%] 1.55% -1.35% 1.59% 2.14%
Period 2004 2005 2006 2007
Value [%] 7.95% 4.73% 4.33% 5.24%
Y/Y increase [%] -0.07% -3.22% -0.40% 0.90%
Period 2008 2009 2010 2011
Value [%] 3.75% 5.09% 6.06% 7.22%
Y/Y increase [%] -1.49% 1.34% 0.97% 1.15%
Investment outlays per company [mn RMB]
Period 2000 2001 2002 2003
Value [mn RMB] 1.27 1.06 1.61 2.66
Y/Y dynamics [%] 59.42% -16.62% 51.53% 65.85%
Period 2004 2005 2006 2007
Value [mn RMB] 2.88 2.09 2.15 2.94
Y/Y dynamics [%] 8.09% -27.39% 2.70% 36.98%
Period 2008 2009 2010 2011
Value [mn RMB] 2.01 2.99 4.29 8.13
Y/Y dynamics [%] -31.56% 48.39% 43.66% 89.46%
Investment outlays index [%]
Period 2000 2001 2002 2003
Value [%] 11.58% 6.82% 12.84% 20.86%
Y/Y increase [%] 4.06% -4.76% 6.02% 8.02%
Period 2004 2005 2006 2007
Value [%] 26.85% 14.17% 12.51% 17.10%
Y/Y increase [%] 5.99% -12.68% -1.66% 4.59%
Period 2008 2009 2010 2011
Value [%] 4.57% 19.20% 23.29% 34.95%
Y/Y increase [%] -12.52% 14.63% 4.09% 11.66%
0%
5%
10%
15%
20%
25%
30%
35%
40%
0
5 000
10 000
15 000
20 000
25 000
30 000
35 000
40 000
I
n
v
e
s
t
m
e
n
t

o
u
t
l
a
y
s

i
n
d
e
x

[
%
]
N
e
t

p
r
o
f
i
t

[
m
n

R
M
B
]
Period
Net profit [mn RMB]
Net profit [mn RMB] Investment outlays index [%]
rise of investment
outlays as share in
net revenue in 2011
comparing to the
value in 2010
of investment
outlays per
company in 2011
comparing to the
value in 2010
rise of investment
outlays index in
2011 comparing to
the value in 2010
-26-
Investment outlays to depretiation ratio [%]
Period 2000 2001 2002 2003
Value [%] 372.07% 204.39% 302.99% 352.20%
Y/Y increase [%] 18.75% -45.07% 48.24% 16.24%
Period 2004 2005 2006 2007
Value [%] 472.51% 305.71% 286.95% 346.31%
Y/Y increase [%] 34.16% -35.30% -6.14% 20.69%
Period 2008 2009 2010 2011
Value [%] 132.07% 340.81% 310.91% 663.03%
Y/Y increase [%] -61.86% 158.04% -8.77% 113.25%
Costs
Costs structure [%]
I ndirect taxes [%] 2.62% 2.65% 3.21%
Cost of sales [%] 88.09% 88.04% 88.42%
Distribution costs [%] 4.29% 4.01% 4.01%
Administration expenses [%] 3.38% 3.21% 3.26%
Depretiation [%] 1.61% 2.09% 1.10%
Period 2009 2010 2011
0%
20%
40%
60%
80%
100%
2009 2010 2011
Period
Costs structure [%]
Indirect taxes [%] Cost of sales [%] Distribution costs [%]
Administration expenses [%] Depretiation [%]
3.21%
88.42%
4.01%
3.26%
1.10%
Costs structure [%] (2011)
Indirect taxes [%] Cost of sales [%] Distribution costs [%] Administration expenses [%] Depretiation [%]
cost of sales
dominates in the
cost structure
rise of investment
outlays to
depretiation ratio in
2011 comparing to
the value in 2010
-27-
Main leverages
Period 2000 2001 2002 2003
Total leverage (DTL) 0.88 0.90 0.91 0.93
Financial leverage (DFL) 0.59 0.61 0.64 0.67
Operatinal leverage (DOL) 1.47 1.48 1.43 1.38
Period 2004 2005 2006 2007
Period 2008 2009 2010 2011
Main Leverages
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
Period
Main leverages
DTL DFL DOL
Leverage Name of leverage Definition of leverage
DFL Degree of financial leverage = (EBT / EBT) / (EBITDA / EBITDA)
DOL Degree of operational leverage = (EBITDA / EBITDA) / (NS / NS)
DTL Degree of total leverage = DFL * DOL
EBITDA
NS
EBT Earnings before taxes
Key:
Earnings before interest, taxes, depreciation and amortisation
Net sales
strong degree of
total leverage
moderate degree of
financial leverage
strong degree of
operational leverage
-
2
8
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-29-
List of Source Financials
Financial indicator \ Year 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Gross Sales DB DB DB DB DB DB DB DB DB DB DB DB
Value Added Tax e e e e e DB DB e e e e DB
Sales Tax e e e e e DB DB e e e e DB
Indirect Taxes e e e e e DB DB e e e e DB
Net Sales e e e e e DB DB e e e e DB
Value Added of Industry DB DB DB DB e DB DB DB e e e e
Material, Energy and Other
Services Cost
e e e e e DB DB e e e e e
Depretiation e e e e e e e e e e e e
Distribution Cost e e e e e DB DB e e e e DB
Administration Expenses e e e e e DB DB e e e e DB
Cost of Sales e e e e e DB DB e e e e DB
Total Costs e e e e e e e e e e e e
Earning Before Taxes DB DB DB DB DB DB DB DB DB DB DB DB
Earning Before Interest and Taxes e e e e e e e e e e e e
Earning Before Interest, Taxes
adn Depretiation
e e e e e DB DB e e e e DB
Inventories DB e DB DB DB DB DB DB DB DB DB DB
Receivables e e e e e DB DB e DB e e DB
Current Assets DB DB DB DB DB DB DB DB DB DB DB e
Net Fixed Assets DB DB DB DB DB DB DB DB DB DB DB e
Total Assets DB DB DB DB DB DB DB DB DB DB DB DB
Short-term Liabilities n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a
Long-term Liabilities n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a
Liabilities DB DB DB DB DB DB DB DB DB DB DB DB
Equity DB DB DB DB DB DB DB DB DB DB DB DB
Investment Outlays e e e e e DB DB DB e DB DB DB
Employment DB DB DB DB DB DB DB DB DB DB DB DB
No. of Companies loss-generating DB DB DB DB DB DB DB DB DB DB DB DB
No. of Companies profit-
generating
DB DB DB DB DB DB DB DB DB DB DB DB
No. of Companies DB DB DB DB DB DB DB DB DB DB DB DB
DB - data from the CEIC Database
e - estimated value
n/a - value unavailable
Title
-30-
Key Concepts
Definitions of Indices
Number of companies Number of reporting companies V
Net revenue [mn RMB] Revenue generated by core activity V
Earning before taxes [mn RMB] Earning before taxes V
Net revenue per company [mn RMB]
Revenue generated by core activity
-----------------------------------------
Number of companies
V
---
V
Total costs [mn RMB] Total cost associated with core activity V
Total cost per company [mn RMB]
Total costs
--------------------------
Number of companies
V
---
V
Value added to net sales ratio [%]
Value added
---------------
Net sales
V
---
V
Return on Sales [%]
Earning before taxes
------------------------
Net revenue
V
-----
V
Return on Equity [%]
------------------------
Equity
V
-----
AV2
Return on Assets [%]
------------------------
Total assets
V
-----
AV2
Number of profit-generating companies
---------------------------------------------
Number of companies
V
-----
V
Current ratio [%]
Current assets
------------------------
Short-term liabilities
V
---
V
Quick ratio [%]
Current assets - Inventory
-------------------------------
V
---
V
Current receivables
------------------------
V
---
V
Days of coverage for Cash & equivalent [days]
(Current receivables + Inventories - Short-term liabilities) * 360
---------------------------------------------------------------------------
Net revenue
V
-----
V
Short-term liabilities * 360
-------------------------------
Net revenue
V
-----
V
Days of coverage receivables [days]
Current receivables * 360
------------------------------
Net revenue
V
-----
V
Inventories * 360
---------------------
Net revenue
V
-----
V
Debt to Equity ratio [%]
Long-term liabilities
-----------------------
Equity
V
---
V
Equity to total assets ratio [%]
Equity
--------------
Total assets
V
---
V
Long-term liabilities to total liabilities ratio [%]
Long-term liabilities
-----------------------
Total assets
V
---
V
Debt ratio [%]
Total liabilities
-----------------
Total assets
V
---
V
Total liabilities
-------------------------------------------------------------------
Earning before interest, taxes, depretiation & amortisation
V
-----
V
V - Value for a given year
AV2 - Average of values over the two last years
Definition of index
P
r
o
f
i
t
a
b
i
l
i
t
y

r
a
t
i
o
s
L
i
q
u
i
d
i
t
y

r
a
t
i
o
s
G
e
n
e
r
a
l

i
n
d
i
c
e
s
F
i
n
a
n
c
i
a
l

c
y
c
l
e
s
F
i
n
a
n
c
i
a
l

l
e
v
e
r
a
g
e

r
a
t
i
o
s
-31-
Employment [person] Number of employees V
Average employment per company [person]
Number of employees
--------------------------
Number of companies
V
---
V
Labour productivity [mn RMB/person]
Net revenue
---------------
Employment
V
-----
AV2
Net fixed assets
------------------
Employment
V
---
V
Material, energy, other services intensity of production [%]
Material, energy, other services cost
------------------------------------------
Net revenue
V
---
V
Net revenue
------------------
Net fixed assets
V
-----
AV2
Total investment outlays [mn RMB] Investment outlays V
Investment outlays as share in net revenue [%]
Investment outlays
----------------------
Net revenue
V
---
V
Investment outlays per company [mn RMB]
Investment outlays
--------------------------
Numebr of companies
V
---
V
Investment outlays to amortisation & depretiation ratio [%]
Investment outlays
----------------------
Depreciation
V
---
V
Investment outlays - Depretiation
---------------------------------------
Net fixed assets
V
---
V
Share of indirect taxes in total costs [%]
Indirect taxes
----------------
Total costs
V
---
V
Share of cost of sales in total costs [%]
Cost of sales
---------------
Total costs
V
---
V
Share of distribution cost in total cost [%]
Distribution cost
-------------------
Total costs
V
---
V
Share of administration expenses in total costs [%]
Administration expenses
----------------------------
Total costs
V
---
V
Share of depretiation in total costs [%]
Depretiation
---------------
Total costs
V
---
V
Definition of index
P
r
o
d
u
c
t
i
o
n

f
a
c
t
o
r
s
I
n
v
e
s
t
m
e
n
t

o
u
t
l
a
y
s
C
o
s
t
s
V - Value for a given year
AV2 - Average of values over the two last years
-32-
Definitions of Selected Concepts
EconTrends for China are based to large extent on the structure of the North American Industry
Classification System (NAICS), where possible. Analyses made for respective industry sections,
divisions groups and classes are more less consistent with this classification. However the used
system of industry classification is not fully compatible with the NAICS due to Chinese statistics -
specific factors.
Seasonal adjustment is an econometric procedure consisting in elimination of seasonal deviations that
impair the effectiveness of econometric modeling. This statistical procedure is based on appropriate,
specialized econometric tools (the Tramo/Seats method). The software applied performs seasonal
adjustment according to the Chinese calendar (e.g. public and religious holidays, etc.), to set off the
impact of differences in the number of working days in particular quarters. Forecasts of financial
parameters in the given sectors are derived based on forecasts of deseasonalised trend. The accuracy
of the seasonal adjustment procedure is additionally supported by verification of key statistical tests,
inclusion of incidental factors and drastic leaps in production volume, as well as testing the model.
cative one, where seasonal deviations are calculated as the percentage deviations fromthe long term
trend (in that case a deviation of 103 means a deviation of 3% fromthe value of the trend, and e.g.
98 a deviation of -2%).
Seasonal deviations are obtained by using the Tramo/Seats econometric procedure. A seasonal
deviation shows the average deviation of the value of revenue at a given quarter fromthe long term
trend. Seasonal variation informs us about an additional changeability associated with a particular
season of the year, which is a result of temporarily increased or decreased revenue. Skilful
assessment of seasonal deviation may be one of the advantages of a firm, which will be able to assess
the level of revenue in a given quarter, that in turn will result in better production planning. However,
a bad assessment of seasonal changes may be a source of additional risk. The graph of seasonal
deviation for the period shows deviation from the long termtrend in a given quarter (quarterly values
are arranged chronologically in years i.e. January '98, '99 etc.), which allows for precise forecasting of
deviation in the analyzed quarter. In the above materials we can see two methods of presenting
seasonality. The first is the additive one, when the revenues are decomposed as a sum of long term
trend and nominal value seasonal deviations. The second way of presenting seasonality is the multipli-
Forecasting models used in EconTrends have a hierarchical structure. The first layer consists of
models that transmit behavior of macroeconomic variables like nominal GDP growth, increases in prices
to the behaviors of financial parameters like net sales and gross margin in all analyzed economic
sections. Gross margin should be understood as the share of gross profit (net sales - cost of sales) in
net sales. The next layer of models translates the behavior of the above parameters in economic
sections into the divisions within them. The last layer links the groups with the classes that are
contained in them. The econometric models that are used in respective layers have a linear structure
and belong to a well known group of ADL (Autoregressive Distributed Lags) models. The long term
relation between GDP growth and growth of sales in a given sector (called implied long term growth) is
also developed on the ground of these models.
Risk-profitability maps show the location of sectors depending on the value of profitability and risk
they achieve. Sectors singled out by being encircled by a red ring are most useful efficient for
investors, due to the relatively highest return at the lowest variability of profit (relatively high value of
the Sharps index). On the basis of the coordinate values of efficient sectors, the preferences of
investors on the market are shown by a grey dotted line visible on the graphs this is a level line of
the linear function of utility for investors (Investors Utility Function). The level line shows preferences
of the majority of investors with regard to achieved profitability at a given risk. Sectors, which are
placed above the linear function of usefulness are preferred by investors due to the possibility of
achieving a high profitability, at a particular level of risk. Sectors lying below the level line are not as
attractive for investors, due to the relatively high variability in profit as against their profitability.
Seasonal adjustment
Seasonal deviations
Forecasting models
Risk-profitability maps
-33-
! This report has been compiled to the best of the authors knowledge, using information originating from verified
sources. The authors of the report take no responsibility for the consequences of any decisions and actions taken as a
result of the use of this report. This report refers to the Chinese economy, excluding Hong-Kong.
The long-term trend indicates so-called potential level of production for a given sector i.e. a level at
which there is no significant tension for a rise/fall in price dynamics and employment within the sector.
DuPont Pyramid is a very useful tool to decompose Return on Equity (ROE) into various ratios like:
Return on Sales (ROS), Total Assets Turnover (TAT) and Financial Leverage. It enables easy drawing
of conclusions about the efficiency of an analyzed company in various areas of its activity.
The forces map shows decompositions of the profitability index into particular driving forces. The idea
of the strengths map is to show the effect of particular variables on the dynamics of profit both in
current and forecasted situation.
In the section financial ratios analysis presented numbers are calculated either on basis of original
financials or they are derived through estimation some of them. Financial ratios in which at least one
component is estimated are written in italic.
Y/Y Increase, Y/Y Dynamics. Increases are calculated as absolute differences with respect to the
preceding year (Y/Y). Dynamics are calculated as relative [%] differences with respect to the
preceding year (Y/Y).
Forecasts presented in EconTrends for China relate to a period of two years ahead in relation to the
end of the time period for which statistical data are available.
The business cycle shows fluctuations of business activity for a given sector around a long-termtrend
representing the potential level of production for the sector. Positive values of the business cycle
indicate a possibility of price dynamics increase pressure, increase of employment or rebound in
investments, since the capacity utilization ratio remains high. Negative values of the business cycle
indicate a possibility of price dynamics decrease pressure, decrease of employment or deterioration in
investment activity, since the capacity utilization ratio is relatively weak.
The forces map
Y/Y Increase, Y/Y Dynamics
Forecasts
The business cycle
The long-term trend
DuPont Pyramid

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