Journal of Physics: Conference Series
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The Application of Financial Mathematics in the Market Analysis of the
Electrical Industry
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CDMMS 2020 IOP Publishing
Journal of Physics: Conference Series 1802 (2021) 032099 doi:10.1088/1742-6596/1802/3/032099
The Application of Financial Mathematics in the Market
Analysis of the Electrical Industry
Linlin Wu1, *, Kai Liu2 and Wei Zhou3
1
College of Mathematics, Bohai University, Jinzhou, Liaoning, 121013
2
School of Business Administration, Northeastern University, Shenyang, Liaoning,
110011
3
Department of Mechanical Engineering, Liren College of Yanshan University,
Qinhuangdao, Hebei, 066004
Abstract. With the rapid development of the financial market in the economic field,
more and more financial problems need to be solved with mathematical knowledge.
This article combines the development history and current status of each electrical
appliance, from the three aspects of solvency, operating capacity and profitability. In
terms of analyzing the company's financial ratio, the company's current ratio, asset-
liability ratio, return on equity, and total return on assets of the company in the past
three years were calculated.The analysis of these indicators revealed that the assets of
Shanghai Liangxin Electric Co., Ltd. The debt ratio is extremely low, and the risk is
small. However, in comparison with competitors in the same industry, we find that the
company's profitability is at the middle and upper levels, and the overall development
trend is good in the past three years, but it is generally higher than the industry's
advanced level. Companies still need improvement.
Keywords: Solvency, Operating capacity, Profitability, Equity multiplier, Return
1. Background
China's power transmission and distribution and control equipment manufacturing market can be
subdivided into smart substation equipment market, smart grid power distribution equipment market,
smart grid power equipment market, high and low voltage switch and complete equipment market Four
markets. Through the analysis of the power transmission and distribution and control equipment
manufacturing industry, we have selected TBEA and Wolong Group, whose products mainly occupy
the smart substation market segment, and products that mainly occupy the high and low voltage switch
and complete equipment segment. The market is analyzed by six companies: Shanghai Liangxin Electric
Co., Ltd., Zhejiang Zhengtai Electric Co., Ltd., China West Electric Co., Ltd. and Siyuan Electric Co.,
Ltd.
Among these six enterprises, I selected Shanghai Liangxin Electric Co., Ltd. to analyze its financial
statements. Shanghai Liangxin Electric Co., Ltd. is a company focusing on high and low voltage
electrical appliances manufacturing. One of the leading companies, focusing on product development,
production and sales in the middle and high-end markets.
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CDMMS 2020 IOP Publishing
Journal of Physics: Conference Series 1802 (2021) 032099 doi:10.1088/1742-6596/1802/3/032099
Zhejiang Zhengtai Electric Co., Ltd. is the advanced level among these six companies, and its
financial indicators are the highest. Zhejiang Zhengtai Electric Co., Ltd. is the core holding company of
the Zhengtai Group and the largest production and sales company in China's low-voltage electrical
industry. Specializing in the R & D, production and sales of low-voltage electrical products of more
than 100 series and more than 10,000 specifications, such as power distribution appliances, control
appliances, terminal appliances, power appliances and power electronics.
China Xidian Electric Co., Ltd. is a lagging level among these six enterprises. It is a joint venture
between China Xidian Corporation (formerly "Xi'an Electric Power Machinery Manufacturing
Company"), Shaanxi Investment Group (Limited) Corporation, and China Cinda Asset Management
Corporation. And China Huarong Asset Management Co., Ltd., a joint-stock company established in
April 2008, is the most important research and development, manufacturing, and testing of high-voltage,
ultra-high-voltage and ultra-high-voltage transmission and distribution equipment in China. The base is
the current company with the highest product voltage level, the largest variety of products, and the
strongest complete engineering capability among the manufacturers of high-voltage, ultra-high-voltage
and ultra-high-voltage AC and DC power transmission and distribution equipment in China.It is also the
only company in China with primary transmission and distribution equipment. Enterprises with
complete production capacity.
TBEA, as the core backbone enterprise of China's major equipment manufacturing industry, has the
right to operate foreign economic and technological cooperation and the qualifications for the
construction of national foreign aid projects. The company has always focused on the three major areas
of "transmission and transformation, new energy, and new materials." Few transformer manufacturing
companies with independent intellectual property rights, especially the core technology of ultra-high
voltage and DC transformers have reached the international level, currently occupying 30% of the
domestic high-end transformer market, 500KV DC converters, 750kV smooth waves Reactors and other
products have a domestic monopoly position.
Siyuan Electric is mainly engaged in the research, development, production and sales of power
whitening protection equipment, electrical equipment, and power monitoring equipment, power
automation experimental equipment, optoelectronic equipment, instruments, meters, and software. The
company's advantages are mainly reflected in management advantages and technical advantages
Attaching importance to product research and development, the company's products and research and
development have covered many products in the power transmission and distribution fields such as
power automation, high-voltage switches, reactors, neutron neutrons, relay protection, power capacitors,
and reactors.
Wolong Electric Group Co., Ltd. integrates three major product chains of motors and controls, power
transmission and transformation, and power batteries. The products cover various micro and special
motors and controls, low voltage motors and controls, high voltage motors and controls, power batteries
and power transmission and transformation equipment, etc.40 large series of more than 3,000 varieties,
leading products leading the international and domestic mainstream markets and supporting many
national key engineering projects.
2. Comparative analysis of the advanced and backward levels of the industry
According to the following table 1, Zhejiang Zhengtai Electric, Shanghai Liangxin Electric, and China
West Electric Electric Co., Ltd. will change the current ratio, quick ratio, asset-liability ratio, inventory
turnover ratio, current asset turnover ratio, non-current asset turnover ratio, sales Compare and analyze
eleven aspects of gross profit margin, net sales profit margin, return on shareholders' equity, earnings
per share, and net assets per share.
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Table 1. Comparison index with advanced and backward levels of the industry
years
2015 year 2016 year 2017 year
index
Zhengtai (Advanced) 1.82 1.35 1.61
Current ratio Liangxin Electric 2.58 3.89 4.07
China West Power (lagging) 2.06 1.99 2.15
Zhengtai (Advanced) 1.56 1.14 1.33
Quick ratio Liangxin Electric 2.03 3.43 3.51
China West Power (lagging) 1.10 1.15 1.70
Zhengtai (Advanced) 41.28% 60.52% 53.41%
Assets and liabilities Liangxin Electric 26.06% 17.87% 16.94%
China West Power (lagging) 40.75% 42.01% 39.48%
Zhengtai (Advanced) 6.39 6.27 6.23
Inventory turnover Liangxin Electric 4.80 4.91 5.21
China West Power (lagging) 2.38 2.75 2.69
Zhengtai (Advanced) 1.35 1.30 1.24
Turnover ratio of current assets Liangxin Electric 1.34 1.19 1.09
China West Power (lagging) 0.56 0.57 0.56
Zhengtai (Advanced) 3.74 1.17 1.12
Non-current asset turnover Liangxin Electric 2.68 2.32 2.30
China West Power (lagging) 1.60 1.64 1.63
Zhengtai (Advanced) 34.85% 29.91% 29.32%
Gross profit margin Liangxin Electric 36.86% 37.48% 38.62%
China West Power (lagging) 26.52% 29.37% 28.28%
Zhengtai (Advanced) 15.56% 12.98% 12.79%
Sales margin Liangxin Electric 12.35% 13.23% 14.48%
China West Power (lagging) 6.89% 8.11% 6.15%
Zhengtai (Advanced) 27.61% 20.11% 17.31%
Return on equity Liangxin Electric 14.74% 13.16% 12.97%
China West Power (lagging) 4.74% 5.76% 4.30%
Zhengtai (Advanced) 1.33 1.31 1.34
Earnings per share Liangxin Electric 1.11 0.65 0.41
China West Power (lagging) 0.18 0.22 0.18
Zhengtai (Advanced) 5.10 7.11 9.29
Net assets per share Liangxin Electric 7.90 6.00 3.22
China West Power (lagging) 3.76 3.92 3.98
2.1. Debt serviceability [1] analysis
Figure 1. Comparison of the current ratio of the industry with advanced and lagging levels
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CDMMS 2020 IOP Publishing
Journal of Physics: Conference Series 1802 (2021) 032099 doi:10.1088/1742-6596/1802/3/032099
Figure 2. Quick ratio comparison with advanced and backward levels
Figure 3. Comparison of asset-liability ratios with advanced and lagging levels in the industry
From the data of the three line charts above, in the three years from 2015 to 2017, Liangxin Electric's
current ratio and quick ratio were much higher than those of Zhejiang Chint Electric Co., Ltd. and China
West Electric Appliance Co., Ltd. The two indicators of Liangxin Electric are high mainly due to the
substantial increase in Shanghai Liangxin's current assets from 2015 to 2017 and the relatively small
increase in current liabilities, and the company's current liabilities have no short-term borrowings,
derivative financial liabilities, and within one year Due to non-current liabilities and other current
liabilities, the current liability limit is much lower than the current liability limits of Zhejiang Chint and
China West Power. Although the current liabilities of Liangxin Electric have also increased, the increase
is less than The increase in current assets and quick assets has led to a significant increase in its current
ratio and quick ratio; Zhejiang Zhengtai Co., Ltd. has a huge amount of current liabilities in the past
three years, plus it acquired seven companies in 2016 and acquired them. A large number of shares, so
it has a large current debt limit in 2015-2017, and the current ratio and quick ratio first fell and then rose,
the lowest in 2016, 2After the capital was turned around in 017, both indicators increased.Although the
current debt limit of China West Power was lower than that of Zhejiang Zhengtai, the amount was still
much larger than Liangxin Electric, so its two indicators were lower than Liangxin Electric.
In the three years from 2015 to 2017, Liangxin Electric's asset-liability ratio was significantly lower
than Zhejiang Chint and China West Power.The reason why Liangxin Electric's indicators were low was
that its total debt growth in the past three years was much lower than the total assets. The growth of the
company ’s financial leverage is also small.Zhejiang Zhengtai's asset-liability ratio has increased
significantly due to corporate acquisitions and other activities in 2016, but its total assets have also
increased significantly.At the time of its profit, The financial leverage of debt will amplify its operating
results and increase its profit margin; China Western Power's debt limit is also relatively large, but its
total asset limit is also higher than Liangxin Electric, so its asset-liability ratio is also high.
2.2. Operational Capability [2] Analysis
(1) Comparative analysis of inventory turnover
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Figure 4. Comparison of inventory turnover with advanced and lagging levels in the industry
As can be seen from the above table, Zhejiang Zhengtai has the highest inventory turnover rate,
because its operating income is particularly high and its inventory is low; Liangxin Electric's inventory
turnover rate is between Zhejiang Zhengtai and China West Power, and its inventory is small. The
growth rate of operating income is higher than that of inventory, so the inventory turnover rate is higher
than that of China West Power; China West Power's inventory has generally declined in the past three
years, and its operating income is also lower than that of Liangxin Electric, so its inventory turnover the
rate is lower.
(2) Comparative analysis of turnover ratio of current assets
Figure 5. Comparison of current asset turnover rate with the advanced and lagging level of the industry
During 2015-2017, the current asset turnover rate of Zhejiang Zhengtai and Liangxin Electric
continued to decline, but Zhejiang Zhengtai has always been higher than Liangxin Electric.This is
because although Zhejiang Zhengtai's current asset quota is greater than Liangxin Electric, its operating
income quota must also be It is much larger than Liangxin Electric, so its current asset turnover rate has
been higher than that of Liangxin Appliance; China West Power has seen a large increase in its current
assets in the past three years, resulting in a lower current asset turnover rate.
(3) Turnover rate of non-current assets
Figure 6. Comparison of non-current asset turnover ratios with advanced and lagging levels in the industry
From 2015 to 2017, the change rate of Zhejiang Chint's non-current asset turnover rate increased.In
2015, its initial value was still leading, but due to the activities of the acquisition company in 2016, its
non-current assets increased significantly, resulting in its The turnover rate of non-current assets has
dropped sharply; the non-current assets of Liangxin Electric have been higher than that of China West
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Power in the past three years, indicating that the use efficiency of Liangxin Electric's non-current assets
is higher than that of China West Power.
2.3. Profitability [3] analysis
(1) Comparative analysis of gross sales margin and net sales margin
From 2015 to 2017, Liangxin Electric's operating costs were relatively low, and its operating income
continued to rise, so its gross profit margin and net sales margin continued to rise.Zhejiang Zhengtai's
operating costs have increased significantly due to the acquisition of enterprises in the past three years.
Both the interest rate and the net sales margin have fallen, but due to the large capital base, its overall
profitability is still higher than Liangxin Electric; China Western Electric's gross sales margin and net
sales margin are lower than Liangxin Electric, indicating its profitability lower.
(2) Comparative analysis of return on shareholders' equity
In the past three years, Zhejiang Zhengtai's return on shareholders' equity has been far ahead.Even
though it declined in 2016 due to corporate acquisition activities, it has always been at a relatively high
level.This is due to its large equity multiplier and total return on assets. The higher the return on
shareholders 'equity; the equity multiplier of Liangxin Electric is smaller and continues to decline, but
the return on shareholders' equity is still higher than that of China West Power, indicating that China
West Power has a lower ability to create returns for shareholders.
(3) Comparative analysis of earnings per share and net assets per share
In the past three years from 2015 to 2017, Zhejiang Zhengtai's earnings per share have been higher
than Liangxin Electric, which may be caused by its merger and acquisition activities and high corporate
profit margins; China Xidian's earnings per share have been lower than Liangxin Electric, Indicating
that its profitability is weak, and the price of corporate stocks may decline.
In the past three years, Zhejiang Chint's net assets per share have risen sharply, while Liangxin's net
assets per share have fallen sharply, forming a stark contrast.This may be caused by the substantial
increase in shareholders' equity at the end of the period of Zhejiang Chint, while Liangxin ’s equity has
increased significantly; China West Power has a relatively stable change, but its net assets per share has
been low.Although it was higher than Liangxin Power in 2017, after Liangxin Electric increased its
share capital, the accumulated profits of the company will still be higher than China West Power.
3. Comparison with major competitors
Zhejiang Zhengtai Electric Co., Ltd. is a joint-stock limited company jointly established by Zhengtai
Group Co., Ltd. (hereinafter referred to as the Zhengtai Group) and the implementation law, approved
by Zhejiang Securities Commission Zhejiang Securities Commission [1997] No. 96. , The company
specializes in the distribution of electrical appliances, control appliances, terminal appliances, power
appliances and power electronics, including more than 100 series, more than 10,000 specifications of
low-voltage electrical products research and development, production and sales. The company's general
business scope includes: low-voltage electrical appliances and yuan Devices, cutting and welding
equipment, electronic components, power products, power fittings, power rectifiers research and
development, design, manufacturing, processing, installation, commissioning, sales and related
technical services, operating import and export business. At present, the company's main production
using a combination of inventory and order production, due to the large volume, wide range and variety
of low-voltage electrical products, the company's sales mainly use the dealer model, and a small number
of products are led by the company.
We selected Zhejiang Zhengtai Electric Co., Ltd. as our main competitor for financial comparison
analysis with Liangxin Electric.
3.1. Comparative analysis of solvency
Since Zhejiang Zhengtai Electric is an advanced level in the industry, some indicators such as current
ratio, quick ratio, current asset turnover ratio, and return on equity have been compared in detail in the
previous stage.
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Table 2. Comparison of cash ratio and equity ratio with Zhejiang Zhengtai
years
2015 year 2016 year 2017 year
index
Zhengtai (Advanced) 0.37 0.30 0.52
Cash ratio
Liangxin Electric 0.74 0.58 0.37
Zhengtai (Advanced) 70.31% 151.56% 114.65%
Equity ratio
Liangxin Electric 35.25% 21.76% 20.39%
(1) Comparative analysis of cash ratios
Figure 7. Comparison of cash ratio with Zhejiang Zhengtai
Liangxin Electric's cash ratio continued to decline significantly from 2015 to 2017, while Zhejiang
Chint quickly rose after a slight decline in 2016. In 2017, Zhejiang Chint's currency funds increased
significantly, and current liabilities increased less, resulting in a rapid recovery of the cash ratio. The
cash ratio has decreased year by year, showing that Zhejiang Chint has a better real-time cashing ability.
(2) Comparative analysis of property rights ratio
Figure 8. Capital structure of Zhejiang Zhengtai and Shanghai Liangxin
It can be seen from the data in the chart above that Zhejiang Chint's property rights ratio was low in
2015, the property right ratio soared to 151.56% in 2016, and the property right ratio fell back to normal
levels in 2017, but the Shanghai Liangxin property right ratio has shown a downward trend year by year.
It can be seen in the pie chart that in 2016, Zhejiang Chint's 2016 capital structure, the total debt
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accounted for the highest proportion, up to 30%, the owner's equity accounted for the smallest, reaching
20%, which is related to Zhejiang Chint's major asset reorganization in 2016, assets and liabilities The
average increase is huge, the equity ratio is too high, forming a high-risk, high-return financial structure,
but when the company's return on assets is greater than the cost of debt, debt management is conducive
to increasing the rate of return on capital and obtaining additional profits.At this time, the equity ratio It
can be appropriately higher. Shanghai Liangxin's 2016 capital structure accounted for a very small
proportion of liabilities, only 9%, which is related to almost no borrowing by the company. The owner's
equity is as high as 41%, and the equity ratio is too low, forming a low-risk, low-reward The financial
structure indicates that the greater the proportion of the company's own capital in the total assets, the
stronger its long-term debt repayment ability.
3.2. Comparative analysis of operating capabilities
Table 3. Comparison of operating capacity indicators with Zhejiang Chint
years
2015 year 2016 year 2017 year
index
Turnover rate of fixed Zhengtai (Advanced) 6.77 1.70 1.58
assets Liangxin Electric 5.92 4.96 5.94
Zhengtai (Advanced) 0.99 0.62 0.59
Total asset turnover
Liangxin Electric 0.89 0.78 0.74
In 2015, Zhejiang Zhengtai's fixed asset turnover rate was higher than that of Liangxin Electric.Later,
due to the company's large-scale fixed asset investment and expansion of its operating scale, the
company's fixed asset turnover rate plummeted in 2016 in the short term, resulting in an unusually low
fixed asset turnover rate. In 2017, fixed assets continued to increase, operating income increased, and
the turnover rate of fixed assets declined slightly, and the change was relatively mild. Compared with
Shanghai Liangxin, the fixed asset turnover rate changed relatively smoothly in three years, and the use
efficiency of fixed assets was higher, but fixed assets were also missed. The opportunity to bring more
revenue to the company; from 2015 to 2017, the total asset turnover of Zhejiang Chint and Shanghai
Liangxin showed a downward trend, but the change was small. On the whole, Zhejiang Chint's asset
operation capacity was higher than that of Shanghai Liangxin. Higher asset utilization.
3.3. Comparative analysis of profitability
Table 4. Comparison of profitability indicators between Shanghai Liangxin and Zhejiang Chint
years
2015 year 2016 year 2017 year
index
Zhengtai (Advanced) 18.18% 14.27% 14.45%
rate or selling
Liangxin Electric 13.78% 13.94% 15.14%
Zhengtai (Advanced) 15.39% 7.99% 7.54%
Roa
Liangxin Electric 11.02% 10.38% 10.72%
Zhengtai (Advanced) 1.79 2.52 2.30
Equity Multiplier
Liangxin Electric 1.34 1.27 1.21
From the data in the table above, it can be clearly seen that the sales profit margins of Zhejiang Chint
and Shanghai Liangxin showed an upward trend in 2015-2017.The sales profit margin of Zhejiang Chint
in 2016 fluctuated slightly, while the sales profit margin of Shanghai Liangxin increased steadily year
by year. In the past three years, Zhejiang Zhengtai's cost (sales, finance, and management) accounted
for a large proportion, which caused the company's sales profit margin to decline to a certain extent. In
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Journal of Physics: Conference Series 1802 (2021) 032099 doi:10.1088/1742-6596/1802/3/032099
general, Zhejiang Zhengtai's ability to obtain profits through sales was lower than Shanghai Liangxin
and Zhejiang Zhengtai Product cost control should be strengthened to improve sustainable profitability.
In 2015, Zhejiang Chint's total return on assets was higher than that of Shanghai Liangxin.In 2016-
2017, Zhejiang Chint made a large-scale asset investment and completed major asset reorganizations,
which led to a huge increase in the company's total assets.The total return on assets since 2015- It
plummeted in 2016, and the return on total assets in 2017 did not change much. From 2015 to 2017,
Shanghai Liangxin's return on total assets tended to rise overall, and it declined slightly in 2016. Overall,
Shanghai Liangxin's return on total assets was slightly higher than that of Zhejiang. Chint; but Zhejiang
Chint's three-year equity multiplier is on the rise.In 2016, Zhejiang Chint's equity multiplier increased
rapidly due to the huge increase in total assets and owner's equity, and it declined slightly in 2017;
Shanghai Liangxin's three-year equity multiplier The year-on-year decline is small, and the overall
equity multiplier of Zhejiang Chint is much higher than that of Shanghai Liangxin. On the whole,
because of the equity multiplier of Zhejiang Chint, it is much higher than that of Shanghai Liangxin.
The effect makes Zhejiang Zhengtai's return on total equity slightly lower than that of Shanghai Liangxin
when the return on total assets is slightly lower than that of Shanghai Liangxin.
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