Intrinsic Value Sichuan Hexie Shuangma Co., Ltd. (000935.SZ)

• Previous Close: $27.02
• Intrinsic Value: $7.24
• Upside potential: -73%

Stock Valuation Context

Business Model And Market Position

Sichuan Hexie Shuangma operates a dual-pronged business model, primarily functioning as a cement manufacturer while simultaneously engaging in financial activities through private equity investment management. The company's core industrial operations involve the production and distribution of Portland cement, commercial clinker, and aggregates, serving critical infrastructure projects across China including transportation networks and energy facilities. This positions the firm within the basic materials sector, supplying essential construction inputs to both public and private development initiatives. Beyond its traditional industrial base, the company has strategically diversified into asset management, creating a hybrid structure that blends industrial cash flow generation with financial services expertise. This unique combination differentiates Hexie Shuangma from pure-play cement producers, providing revenue diversification while maintaining exposure to China's construction cycle. The company's market position reflects this duality, operating as a regional cement supplier in Sichuan province while managing investment portfolios that extend beyond its industrial footprint. This strategic positioning allows the company to leverage its industrial expertise while exploring growth opportunities through its financial arm, creating a distinctive profile within China's industrial-financial landscape.

Revenue Profitability And Efficiency

The company generated CNY 1.07 billion in revenue with net income of CNY 309 million, demonstrating a robust net profit margin of approximately 29%. Operating cash flow of CNY 463 million significantly exceeded capital expenditures of CNY 58 million, indicating strong cash generation from core operations. This efficient cash conversion supports both the industrial and financial segments of the business without requiring substantial external funding for ongoing operations.

Earnings Power And Capital Efficiency

Hexie Shuangma exhibits substantial earnings power with diluted EPS of CNY 0.41, supported by healthy operating cash flow generation. The company maintains capital efficiency with moderate capital expenditure requirements relative to its cash flow, allowing for strategic allocation between industrial maintenance and financial investments. This balanced approach enables the company to sustain its dual business model while preserving financial flexibility for future opportunities.

Balance Sheet And Financial Health

The balance sheet shows CNY 330 million in cash against total debt of CNY 611 million, indicating a leveraged but manageable financial position. The company's market capitalization of approximately CNY 15.1 billion provides substantial equity cushion. The moderate debt level, combined with strong operating cash flow generation, suggests adequate financial health to service obligations while funding both industrial and investment activities.

Growth Trends And Dividend Policy

The company demonstrates shareholder returns through a dividend per share of CNY 0.34, representing a substantial payout relative to earnings. This dividend policy reflects management's confidence in sustainable cash generation from both industrial and financial operations. The dual business model provides potential growth avenues through private equity investments while maintaining stable returns from the cement manufacturing segment.

Valuation And Market Expectations

With a market capitalization of CNY 15.1 billion and a beta of 0.65, the market appears to value the company with lower volatility expectations than the broader market. The valuation reflects the hybrid nature of the business, combining industrial cash flows with financial services potential. Market expectations likely incorporate both the cyclicality of cement demand and the growth potential from investment management activities.

Strategic Advantages And Outlook

The company's strategic advantage lies in its unique hybrid model combining stable industrial operations with higher-growth financial services. This diversification provides resilience against sector-specific downturns while creating multiple growth vectors. The outlook depends on balancing cement market dynamics in China with successful execution of investment strategies, requiring careful capital allocation between the two business segments to maximize long-term shareholder value.

Sources

Company filingsStock exchange disclosures