 2016-03-14 |
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Xinzhou (3171), a packaging distributor, has been working to improve its operations over the past two years. By the end of last year, the company had cleared bad debts and excess inventory in China, selected high-quality clients, and increased high-margin orders. Although revenue slightly declined in 2015, profitability improved. According to analysts, the EPS for last year was approximately 1.6-1.7 NT dollars, a record high. With new major optoelectronics clients in China expected to increase orders after March, analysts predict a slight increase in overall revenue for Q1 compared to the same period last year (3.88 billion NT dollars), and the company is expected to enter an expansion phase in Q2.
Xinzhou, a subsidiary of the Yan-Chiu Group, operates under the brand "Bao Dash," offering one-stop services through its packaging and logistics integration. Its revenue structure is currently approximately 74% from Taiwan, 23% from China, and 3% from cloud services. Besides providing packaging products, Xinzhou also offers design, packaging process improvement, logistics, and waste recycling services to enhance product value. Its cloud services mainly involve setting up online platforms and will soon transition to online sales support.
Over the past two years, Xinzhou has adjusted its operations by eliminating bad debts in China and focusing on high-quality clients (focusing on key clients and reducing orders from smaller clients). As a result, while revenue slightly decreased (2015 revenue was 17.34 billion NT dollars, a 2.53% decrease), the gross margin improved to over 20%. Analysts noted that last year's EPS of 1.6-1.7 NT dollars was a record high, indicating successful operational adjustments.
Since Q4 of last year, operations in China have turned profitable, and Xinzhou has continued to develop new clients in the Chinese market. The company has received trial orders from several large optoelectronics clients, handling materials, die-cutting, lamination, and secondary processing. While revenue growth in January and February was not significant, new client orders are expected to increase starting in March. Analysts forecast stable growth in China operations, with Q1 revenue expected to be slightly higher than last year (3.88 billion NT dollars), and Q2 is anticipated to mark the beginning of an expansion phase.
Operations in Taiwan are stable, focusing on tape, plastic bags, and molds. With over half of products being custom-made, the gross margin is relatively high, around 25%, exceeding industry averages. Currently, revenue from Taiwan and China is split approximately 80/20. With a full push to expand business in China this year, Xinzhou aims to improve the revenue ratio to 60/40 and achieve double-digit growth for the year. |
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