From the perspective of gross profit, the two companies are basically flat. The gross profit margin of Chenming Paper was better than that of Sun Paper in previous years. From 20 19, the operating profit/operating income ratio of Chenming Paper began to drop sharply. In the first half of 2020, it even fell to 2%, and from the published quarterly report, Sun Paper maintained the level of 1 1.3%, which was higher than the annual level of 20 19, and was basically unaffected by the epidemic.
Sales and management expenses account for almost the same proportion of the two companies. However, there is a big gap between financial expenses and operating income. From 20 19, Chenming Paper surpassed Sun Paper by more than 7%. This is related to Chenming Paper's large investment in pulp and machine-made paper two years ago, resulting in a high asset-liability ratio.
Finally, look at the advance payment/operating income: Chenming Paper is almost zero, and Sun Paper has 5% of 20 19, reaching 20% in the first quarter. This can also explain the market position of these two companies.
2. Second, look at the balance sheet comparison.
The annual report of 20 19 shows that Chenming Paper's total assets are three times that of Sun Paper, but its operating income is only 1.33 times that of Sun Paper. Chenming Paper's asset utilization rate is too low.
The biggest problem of Chenming Paper is that the asset-liability ratio is too high, which leads to the high financial expenses in the income statement. Others mainly focus on the proportion of accounts receivable, inventory and short-term loans to total assets. The biggest problem of Chenming Paper is that short-term loans account for a large proportion, and it is necessary to continuously issue new debts to repay old debts. The proportion of accounts receivable and short-term loans in Sun Paper increased sharply in the first quarter, and we can continue to pay attention to it after the follow-up semi-annual report comes out.
3. Look at the comparison of cash flow statement.
Mainly looked at the "cash/operating income received from selling goods and providing services", and both companies did well.
4. finally, look at ROE.
In 20 19, Chenming Paper's ROE was 5.57%, while Sun Paper's ROE was 16. 12%, a difference of nearly 3 times.
First, compare the total asset turnover rate: Chenming Paper's total asset turnover rate is less than half that of Sun Paper. It shows that the utilization efficiency of total assets is low.
Next, let's see why Chenming Paper's revenue is only 1.33 times that of Sun Paper, but its total assets are more than three times that of Sun Paper. Divide total assets into current assets and non-current assets. Chenming Paper's current assets are four times that of Sun Paper. Among them, monetary funds, inventory, non-current assets due within one year and other current assets are much larger than Sun Paper. Among non-current assets, long-term receivables, long-term equity investment and investment real estate, Chenming Paper is much bigger than Sun Paper. It shows that Chenming Paper's main business is not as concentrated as Sun Paper's, and it has done many sideline businesses that can't generate income. Even for the fixed assets and projects under construction around the main business, Chenming Paper is twice as large as Sun Paper, indicating that the utilization efficiency of the main business assets is inefficient.
Look at the net operating profit rate (net profit/operating income): Chenming Paper 5.77%, Sun Paper 9.65%, the difference is nearly double. Judging from the proportion of three expenses to revenue, the main reason is that the high proportion of financial expenses has dragged down the net operating profit rate. This is inseparable from Chenming Paper's high asset-liability ratio.
Summary: Chenming Paper's asset utilization ratio is much lower than Sun Paper's, its asset-liability ratio is much higher than Sun Paper's, and its financial expenses are much higher than Sun Paper's, which eventually leads to low operating profit, and the stock prices of the two companies are completely different.