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SI

SHINECO, INC. (SISI)·Q2 2018 Earnings Summary

Executive Summary

  • Revenue grew to $14.13M (+25.9% y/y) and EPS reached $0.17 (+26.3% y/y) for Q2 2018; gross margin dipped 1.1pp to 34.1% while operating margin improved slightly to 22.9% .
  • Segment mix shift continues: Luobuma surged 327% to $3.89M, Chinese medicinal herbal products rose 4.8% to $3.66M, while other agricultural products declined 3.4% to $6.58M .
  • Sequential momentum vs prior quarter: revenue increased from $7.81M in Q1 2018 to $14.13M and EPS rose from $0.06 to $0.17, reflecting operating leverage despite higher G&A tied to new subsidiaries .
  • No formal guidance and no earnings call transcript were filed for Q2 2018; thus estimate comparisons to Wall Street consensus are unavailable at this time (S&P Global data not retrieved due to access limitation) .

What Went Well and What Went Wrong

  • What Went Well

    • Luobuma product line was a standout: “tremendous growth… grown 327% compared to the second quarter ended December 31, 2016,” driven by Xinjiang Taihe and product expansion .
    • Operating performance strengthened: operating income rose 28.2% to $3.24M; operating margin edged up to 22.9% (+0.4pp y/y) .
    • Balance sheet liquidity improved: cash reached $29.35M and working capital increased to $44.27M as of December 31, 2017 .

  • What Went Wrong

    • Gross margin compression: overall GM fell 1.1pp to 34.1%, with declines in Chinese medicinal herbal products (29.1% to 24.6%) and other agricultural products (36.4% to 29.0%) .
    • Operating expenses climbed: G&A rose 11.2% y/y to $1.03M, reflecting incorporation of new subsidiaries and increased professional fees .
    • Other agricultural products revenue dipped 3.4% y/y to $6.58M, with storage services revenue declines partly offset by yew tree sales .

Financial Results

Headline Metrics vs Prior Periods and Estimates

MetricQ2 2017 (y/y base)Q1 2018 (seq base)Q2 2018Consensus (Q2 2018)
Revenue ($USD Millions)$11.22 $7.81 $14.13 n/a
Diluted EPS ($USD)$0.14 $0.06 $0.17 n/a
Gross Margin (%)35.2% n/a34.1% n/a
Operating Margin (%)22.5% n/a22.9% n/a

Note: Wall Street consensus estimates unavailable via S&P Global at time of query; comparisons to estimates cannot be made.

Segment Breakdown (Q2 2018 vs Q2 2017)

SegmentQ2 2017 Revenue ($M)Q2 2017 GM (%)Q2 2018 Revenue ($M)Q2 2018 GM (%)
Luobuma products$0.91 51.0% $3.89 51.7%
Chinese medicinal herbal products$3.50 29.1% $3.66 24.6%
Other agricultural products$6.82 36.4% $6.58 29.0%
Total$11.22 35.2% $14.13 34.1%

Prior Quarter Segment Snapshot (Q1 2018)

SegmentQ1 2018 Revenue ($M)Gross Profit ($M)
Luobuma (Bluish dogbane)$1.05 $0.46
Chinese medicinal herbal products$3.27 $0.67
Other agricultural products$3.50 $0.96
Total$7.81 $2.09

KPIs and Financial Position

KPIPrior (Jun 30, 2017)Current (Dec 31, 2017)
Cash and Equivalents ($M)$23.15 $29.35
Working Capital ($M)$39.69 $44.27
Accounts Receivable, net ($M)$14.48 $15.07
Total Operating Expenses ($M, Q2)$1.43 $1.58

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueQ3/Q4 2018None providedNone providedMaintained (no guidance)
Gross MarginQ3/Q4 2018None providedNone providedMaintained (no guidance)
OpExQ3/Q4 2018None providedNone providedMaintained (no guidance)
Tax RateQ3/Q4 2018None providedNone providedMaintained (no guidance)

No formal quantitative guidance was disclosed in Q2 2018 materials; no Q2 2018 earnings call transcript is available to provide guidance color.

Earnings Call Themes & Trends

No Q2 2018 earnings call transcript was filed; themes are inferred from filings and press releases.

TopicPrevious Mentions (Q1 2018 10-Q and recent filings)Current Period (Q2 2018 press release)Trend
Luobuma/product performanceEmphasis on Luobuma development, ICAITR partnership; strategy to expand high value-added products Strong demand; Luobuma revenue +327% y/y; management highlights high-margin business Positive acceleration
Supply chain/production capacityExpansion of production capacity and supply sources; Xinjiang industrial park setup Xinjiang Taihe contributed materially to Luobuma sales Capacity ramp benefiting sales
R&D/technology initiativesICAITR established with Biorefinery; patent for “Steam Explosion Degumming” Not specifically updated in Q2 PR Stable; prior groundwork
Regulatory/legalLawsuit disclosure (Bonwick Capital Partners) No update in Q2 PR Neutral; watch legal overhang
Regional trendsOperations concentrated in Xinjiang/Beijing/Shandong; yew tree cultivation Yew tree sales cited; storage services weakness impacted ag segment Mixed by segment
Macro/tariffsNo specific tariff commentary found No macro commentary in Q2 PR Not discussed

Management Commentary

  • “We are proud of all that we have accomplished… pleased to report the second quarter of 2018 financial results with a 26.3% increase in net income as compared to the second quarter of 2017… tremendous growth in our Luobuma product line… grown 327%… we anticipate continued future growth in our revenues and net income.” — Yuying Zhang, Chairman & CEO .
  • Q2 narrative emphasized the strategic investment in the Apocynum Industrial Park and ICAITR strengthening long-term outlook .

Q&A Highlights

  • No Q2 2018 earnings call transcript available; no Q&A disclosures to report .

Estimates Context

  • Wall Street consensus estimates (S&P Global) could not be retrieved due to access limitation; therefore, we cannot assess beats/misses versus consensus for Q2 2018. Given the absence of formal guidance and no call, analysts may focus on the demonstrated revenue growth and segment mix changes when updating models (S&P Global data unavailable at time of query).

Key Takeaways for Investors

  • Revenue re-acceleration with sequential and y/y growth, driven by Luobuma, indicates effective capacity and product strategy execution .
  • Margin mix bears watching: overall GM compressed 1.1pp y/y due to lower margins in Chinese medicinal and agricultural segments despite strong Luobuma margins .
  • Operating leverage evident: operating income +28.2% y/y with only modest margin expansion, suggesting controllable cost structure despite G&A increases tied to new subsidiaries .
  • Liquidity strength provides flexibility: cash $29.35M and higher working capital support continued investment and operations .
  • Segment durability: Luobuma momentum and yew tree demand offset storage service softness; monitor sustainability of Xinjiang Taihe-driven contributions .
  • Lack of guidance and call transcript reduces near-term visibility; trading may anchor on reported momentum and follow-on quarter updates (Q3 2018 press release shows continued strength) .
  • Watch legal disclosures and corporate actions (e.g., equity line mechanics; share issuance corrections) for governance signals, though not directly impacting Q2 operations .