A market review on the performance of Brilliance China Automotive Holdings (BCAH) claimed that the company had been earning profits recently and that their business model may be ideal in the Asian market. It used the 2019 statutory profit values and hinted that looking into the factors of such proves how analysts forecast the future profitability of firms.
According to Simply Wall Street, BCAH made a profit amounting to 5.48 billion yuan this year alone. The report then explained that the first thing to look at in assessing the company is its accrual ratio from cashflow that would tell how the values match with BCAH's profit. It was also highlighted that the ratio would also explain how much of a company's profit does not correspond to its free cash flow. Thus, the negative ratio shows favorable results for a certain company.
The report then claimed that BCAH's cashflow was at 0.25 that meant the company's values fell short of its reported profits. However, in the last 12 months, it was reported that the company had a negative free cash flow with an outflow of 3.4 billion yuan after yielding profits amounting to 5.48 billion yuan. The report then claimed that analysts felt there is a higher risk of investing with BCAH this year.
It was also revealed that BCAH suffered unusual items resulting in a loss of profits by 286 million yuan in the last year. It was also revealed that it had an easier cash conversion which hinted that the accrual ratio and the profit loss do not add up. The analyst then claimed that if there would be lesser unusual expenses for and that those mentioned would not reappear, the company would experience higher profitability by next year, all else being equal.
In other news, Nasdaq reported over the weekend that Tesla's Data Point could alter the Chinese auto industry forever. Tesla is in partnership with Brilliance China Automotive Holdings.
The report claimed that Tesla's Electronic Vehicles (EVs) are extremely durable surpassing the safety standards afforded to conventional cars. However, it was also revealed that Tesloop's Tesla maintenance costs are competitive making the maintenance cost higher than conventional cars. The report then claimed that these attributes to EVs make China's automotive industry in high-demand for future markets.
The report claimed that whenever depreciation would make the expenses increase when it comes to owning an EV, it would alter the true total cost of an EV which could be lower than in first appear thus making the vehicles economically competitive in the mass market.
The report then claimed that if these estimates would be realized in the future, Brilliance China Automotive Holdings would have to create more EVs and produce them faster. Thus, the report claimed that there would be more operational costs needed and since there would be greater demand for its services, Brilliance China Automotive Holdings would generate higher profitability in the future.
