Tianli Holdings Group (HKG:117) Posted Healthy Earnings But There Are Some Other Factors To Be Aware Of

By
Simply Wall St
Published
May 10, 2022
SEHK:117
Source: Shutterstock

Tianli Holdings Group Limited (HKG:117) announced strong profits, but the stock was stagnant. Our analysis suggests that shareholders have noticed something concerning in the numbers.

See our latest analysis for Tianli Holdings Group

earnings-and-revenue-history
SEHK:117 Earnings and Revenue History May 10th 2022

An Unusual Tax Situation

Tianli Holdings Group reported a tax benefit of CN¥11m, which is well worth noting. It's always a bit noteworthy when a company is paid by the tax man, rather than paying the tax man. Of course, prima facie it's great to receive a tax benefit. And given that it lost money last year, it seems possible that the benefit is evidence that it now expects to find value in its past tax losses. However, the devil in the detail is that these kind of benefits only impact in the year they are booked, and are often one-off in nature. In the likely event the tax benefit is not repeated, we'd expect to see its statutory profit levels drop, at least in the absence of strong growth.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Tianli Holdings Group.

Our Take On Tianli Holdings Group's Profit Performance

As we have already discussed Tianli Holdings Group reported that it received a tax benefit, rather than paying tax, in the last year. As a result we don't think its profit result, which includes that tax-boost, is a good guide to its sustainable profit levels. Because of this, we think that it may be that Tianli Holdings Group's statutory profits are better than its underlying earnings power. On the bright side, the company showed enough improvement to book a profit this year, after losing money last year. At the end of the day, it's essential to consider more than just the factors above, if you want to understand the company properly. If you'd like to know more about Tianli Holdings Group as a business, it's important to be aware of any risks it's facing. Every company has risks, and we've spotted 1 warning sign for Tianli Holdings Group you should know about.

Today we've zoomed in on a single data point to better understand the nature of Tianli Holdings Group's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. Some people consider a high return on equity to be a good sign of a quality business. While it might take a little research on your behalf, you may find this free collection of companies boasting high return on equity, or this list of stocks that insiders are buying to be useful.

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