Intrinsic Value Zhongshan Broad-Ocean Motor Co., Ltd. (002249.SZ)

• Previous Close: $10.60
• Intrinsic Value: $3.99
• Upside potential: -62%

Stock Valuation Context

Business Model And Market Position

Zhongshan Broad-Ocean Motor operates as a specialized manufacturer in China's automotive and electrical sectors, focusing primarily on motor and drive control system technologies. The company generates revenue through a diversified portfolio that includes building and household electrical motors, new energy vehicle (NEV) powertrain systems, and vehicle rotating electrical appliances. Its strategic expansion into hydrogen fuel cell systems and components represents a forward-looking approach to clean energy transportation solutions, positioning the company at the intersection of traditional automotive parts and emerging green technologies. Under the established Dayang Electric brand, Broad-Ocean serves both domestic and international markets, exporting products to 40 countries across five continents, which demonstrates its global reach and competitive manufacturing capabilities. This international footprint provides revenue diversification while leveraging China's manufacturing scale. The company operates in the competitive auto parts sector but distinguishes itself through vertical integration in motor production and technological specialization in NEV components, catering to the growing demand for energy-efficient and electric vehicle solutions in China and abroad.

Revenue Profitability And Efficiency

For FY 2024, Broad-Ocean Motor reported revenue of CNY 12.11 billion with net income of CNY 887.5 million, translating to a net margin of approximately 7.3%. The company demonstrated strong cash generation with operating cash flow of CNY 2.47 billion, significantly exceeding capital expenditures of CNY 438 million. This indicates efficient operations and healthy conversion of earnings into cash, supporting ongoing business investments and financial flexibility.

Earnings Power And Capital Efficiency

The company delivered diluted earnings per share of CNY 0.37, reflecting its earnings capacity relative to its substantial shareholder base. With capital expenditures representing only about 18% of operating cash flow, Broad-Ocean maintains disciplined investment spending while generating substantial free cash flow. This capital efficiency supports both growth initiatives and shareholder returns without excessive leverage or external financing requirements.

Balance Sheet And Financial Health

Broad-Ocean maintains a robust balance sheet with cash and equivalents of CNY 3.53 billion against total debt of only CNY 288 million, resulting in a net cash position. This conservative financial structure provides significant liquidity buffers and financial stability. The minimal debt load reduces interest expense pressure and enhances the company's ability to weather economic cycles while pursuing strategic opportunities.

Growth Trends And Dividend Policy

The company has established a shareholder return policy, distributing a dividend per share of CNY 0.19 for FY 2024. This represents a payout ratio of approximately 51% of diluted EPS, balancing capital retention for growth with direct shareholder returns. The dividend policy complements the company's growth trajectory in the expanding NEV and energy efficiency markets, particularly in China's evolving automotive sector.

Valuation And Market Expectations

With a market capitalization of approximately CNY 22.9 billion, the company trades at a price-to-earnings ratio of around 25.8 times FY 2024 earnings. The beta of 0.6 suggests lower volatility relative to the broader market, potentially reflecting the company's established market position and diversified product portfolio. This valuation incorporates expectations for continued growth in China's automotive and clean energy sectors.

Strategic Advantages And Outlook

Broad-Ocean's strategic advantages include its technological specialization in motor systems, established manufacturing scale, and early-mover positioning in NEV components. The company's expansion into hydrogen fuel cell technology represents a strategic bet on alternative energy transportation. Looking forward, execution in the competitive NEV market and international expansion will be critical drivers, alongside managing raw material cost pressures and technological evolution in the automotive supply chain.

Sources

Company Annual ReportShenzhen Stock Exchange filingsBloomberg