Intrinsic Value Sichuan Chengfei Integration Technology Corp.Ltd (002190.SZ)

• Previous Close: $36.12
• Intrinsic Value: $6.90
• Upside potential: -81%

Stock Valuation Context

Business Model And Market Position

Sichuan Chengfei Integration Technology Corp. Ltd. operates as a specialized manufacturer within China's automotive and aerospace supply chain. The company's core business involves the design, development, and production of high-precision tooling molds, stamping dies, and fabricated components for automotive and aviation applications. As a subsidiary of the state-owned Aviation Industry Corporation of China (AVIC), it benefits from a stable industrial ecosystem and strategic government-backed contracts. This affiliation provides a significant competitive moat in securing long-term projects, particularly in the technologically demanding aviation sector. The company serves both commercial automotive clients and defense-related aerospace programs, creating a diversified revenue base. Its market position is characterized by deep engineering expertise in metal forming and precision manufacturing, catering to industries where quality and reliability are paramount. This dual-sector focus allows it to leverage advanced manufacturing techniques across different applications, though it remains heavily dependent on the Chinese domestic market and its parent company's procurement needs.

Revenue Profitability And Efficiency

For the fiscal year, the company reported revenue of approximately CNY 2.37 billion. However, it recorded a net loss of CNY 75.1 million, resulting in a diluted EPS of -CNY 0.21. The negative profitability indicates significant margin pressures, likely from rising input costs or competitive pricing. Operating cash flow was positive at CNY 118.7 million, which, while modest, suggests the core operations are generating cash despite the bottom-line loss.

Earnings Power And Capital Efficiency

The company's earnings power is currently constrained, as evidenced by the net loss. The positive operating cash flow of CNY 118.7 million, which exceeded capital expenditures of CNY 107.3 million, indicates a basic ability to self-fund its investments. This suggests that the loss may be influenced by non-cash charges or high depreciation from its capital-intensive manufacturing operations, rather than a fundamental collapse in cash generation from its business activities.

Balance Sheet And Financial Health

The balance sheet shows a cash position of CNY 132.9 million against total debt of CNY 403.3 million. This indicates a leveraged position, though the debt level is manageable relative to the company's scale. The financial health appears stable in the short term, supported by its affiliation with a major state-owned enterprise, which likely provides access to favorable financing and reduces liquidity risk.

Growth Trends And Dividend Policy

Despite the reported loss, the company maintained a nominal dividend payment of CNY 0.01 per share, signaling a commitment to shareholder returns. The growth trajectory is challenged by the current lack of profitability. Future growth is likely tied to the expansion of China's automotive and aerospace sectors and the company's ability to improve operational efficiency to return to profitability.

Valuation And Market Expectations

With a market capitalization of approximately CNY 14.4 billion, the market valuation appears to factor in the company's strategic position within the AVIC group and its long-term potential in aerospace, rather than its current weak earnings. A beta of 0.862 suggests the stock is less volatile than the broader market, which may reflect its state-owned enterprise backing and perceived stability.

Strategic Advantages And Outlook

The primary strategic advantage is its vertical integration and status as an AVIC subsidiary, providing a stable order book from the defense and aviation sectors. The outlook hinges on improving operational margins and leveraging its technical capabilities to capitalize on China's push for aerospace independence. Success will depend on navigating cost pressures and demonstrating a clear path back to sustainable profitability.

Sources

Company FilingsShenzhen Stock Exchange