KGJI KINGOLD JEWELRY, INC.
Sector financial performance:
This company, primarily a designer and manufacturer of gold jewelry in China and also investor of gold, has been grouped into gold jewelry manufacturers sector in personal items industry.
It seems that, based on the typical company data, the demand for gold jewelry products in China has re-bounced back in the past two years as indicated by the large increase in sales volume (average 35% annual growth in 2016 and 2017). It seems that the strong demand for gold products has been the driver behind the increase in sales since the increase in sales volume has been accompanied by the increased selling price (average 10% annual growth in 2016 and 2017).
It seems that, due to significantly increased demand, the increase in materials costs (gold price) has been not only able to be smoothly transferred to the selling price of jewelry but also at a slower pace in growth than selling price. And this has helped companies in this sector to improve their margins.
The typical companies’ gross margin went up to 10% from 7%. Companies’ cash flow thus significantly increased in 2016 but decreased in 2017 due to increased debt and interest payment.
The typical average stock price/cash flow ratio is about 4.
It seems that the demand for gold jewelry products of this company has been significantly bouncing back in 2017 and 2016 as indicated by average 35% annual increase in sales volume during the same period. Accompanied with creasing volume, the selling price increased as well.
The 2017 compared with the 2016
Revenue increased by about 41% primarily due to increase of 37% in sales volume and increase of 6.6% in price.
The 2016 compared with the 2015
Revenue increased by about 42% primarily due to increase of 33% in sales volume and increase of 15% in price.
The fiscal 2015 compared with 2014
Revenue decreased by about 10% primarily due to decrease of 6% in sales volume and decrease of 6% in price.
Its gross margin has increased from about 7% to about 10% in 2017 primarily to faster increase in selling price than in price of materials. With a flat SG&A as percentage of sales (about 1%), its operating margin increased to above 9% in 2017.
This stock currently has a stock price/cash flow ratio of 4. We think that its stock is being relatively slightly overvalued considering uncertainty in its huge investment in gold.
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