CBPO – What their joint venture partner is saying

CBPO’s Shandong Taibang subsidiary is 82.76% owned by CBPO (image).  I believe that the rest is partially or wholly owned by the “Shandong Institute of biological products” (山东省生物制品研究所).  The Institute’s website seems to say that their joint venture with CBPO has projected revenues of $900M annually (Renminbi) and projected income of $17.24M annually.  This works out to an income margin of 1.91%Gurufocus.com shows that CBPO’s net income margin for YE2013 was 26.85%.  The discrepancy seems large.

what-JV-partner-is-saying

(*EDIT 5/8/2015: Changed the net income margin number from 2014 to 2013.)

Possible explanations

  1. CBPO has multiple subsidiaries.  Perhaps its joint venture with the Institute has very low profit margins while other CBPO subsidiaries have very high margins.
  2. Different people have different definitions of “profit”.
  3. CBPO may be keeping one set of books for US GAAP accounting and another set of books for its joint venture accounting.  The minority shareholders may be used to an accounting system other than US GAAP; their contract might also have definitions of profit that vary from US GAAP.  However, differences in accounting systems likely would not explain the large discrepancy.
  4. The Institute is not actually a minority shareholder in Shandong Taibang.  However, I would point out that the domain registration records for ctbb.com.cn, chinabiologic.com/net, and the Institute all share a common email address.  As well, the contact webpage on the Institute’s website contact lists a ctbb.com.cn email address (office@ctbb.com.cn).
  5. My translation of the text is incorrect.
  6. The numbers on the Institute’s website (or CBPO’s SEC filings) are incorrect.
  7. The projected numbers on the Institute’s website are outdated.  This is not a great explanation because the title seems to refer to the year 2013.  (However, the page’s copyright states 2009.  CBPO’s net income margin was in the low single digits that year.)

Translation issues

I would encourage you to get your own translation of the text.  Because I am illiterate when it comes to Chinese, I asked others for help.  One of them said that the Chinese was very weird, as if somebody has written everything in English and translated it to Chinese.  For example, nobody would say “9亿” because they would say “9亿” instead.  “” is a classifier for people or objects in general.  A Chinese speaker would not use it when referring to numbers.  I could not figure out why the writer’s Chinese is weird.

To visit the right webpage, look at the URL in the image at the very beginning of this post.

Number crunching

I assume a Renminbi:USD exchange rate of 6.15:1.

900M revenue –> $146M USD
17.24M profit –> $2.8M USD

In YE2013, CBPO had:

$203.4M revenue.
$54.6M after-tax income.
82.76% ownership of Shandong Taibang.

The Institute’s website could be referring to the revenue of the entire joint venture rather than the Institute’s minority share of the joint venture.

*Disclosure:  Short CBPO.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s