Intrinsic Value Wuxi Double Elephant Micro Fibre Material Co.,Ltd (002395.SZ)

• Previous Close: $19.83
• Intrinsic Value: $36.57
• Upside potential: +84%

Stock Valuation Context

Business Model And Market Position

Wuxi Double Elephant Micro Fibre Material Co., Ltd. operates as a specialized manufacturer of artificial and synthetic leather products within China's consumer cyclical sector. The company's core revenue model centers on producing and selling a diverse portfolio of micro fiber leather, PU synthetic leather, and PVC artificial leather products tailored for various end markets including footwear, furniture, automotive interiors, luggage, and sporting goods. This diversified product approach allows the company to mitigate cyclical risks while serving multiple industrial applications. As a subsidiary of Jiangsu Shuangxiang Group, the company benefits from established manufacturing capabilities and supply chain integration. Its market position is characterized by specialization in high-performance synthetic materials that offer alternatives to genuine leather, catering to both domestic Chinese demand and international export markets across Asia, Europe, the Americas, Africa, and Oceania. The company's focus on micro fiber technology represents a technological differentiation in synthetic material manufacturing, positioning it as a specialized supplier in the competitive artificial leather industry.

Revenue Profitability And Efficiency

The company generated revenue of CNY 2.29 billion for the fiscal year, demonstrating substantial scale in its specialized market segment. Profitability appears strong with net income of CNY 472 million, translating to a healthy net margin of approximately 20.6%. However, operating cash flow of CNY 10.4 million appears relatively low compared to net income, while capital expenditures of CNY -20.2 million suggest potential investment activity or asset disposals during the period that warrant further investigation into cash flow dynamics.

Earnings Power And Capital Efficiency

Wuxi Double Elephant exhibits significant earnings power with diluted EPS of CNY 1.76, reflecting efficient operations in its core manufacturing activities. The company maintains a disciplined approach to capital allocation, as evidenced by its ability to generate substantial profits from its asset base. The relationship between operating cash flow and capital expenditures suggests a period of potential strategic realignment or optimization of its production capacity and working capital management.

Balance Sheet And Financial Health

The company maintains a conservative financial structure with cash and equivalents of CNY 261.9 million against total debt of CNY 106.0 million, indicating a strong liquidity position and low leverage. This robust balance sheet provides financial flexibility for operational needs and potential strategic investments. The net cash position supports the company's ability to weather industry cyclicality while maintaining operational stability in the competitive synthetic materials market.

Growth Trends And Dividend Policy

The company demonstrates a shareholder-friendly approach through its dividend distribution of CNY 0.15 per share, representing a payout from its substantial earnings. The current financial performance suggests stable operations, though specific growth trends would require multi-year comparative analysis. The international export footprint across multiple continents indicates potential for geographic expansion, while the diversified product portfolio supports resilience against sector-specific demand fluctuations.

Valuation And Market Expectations

With a market capitalization of approximately CNY 4.84 billion, the company trades at a P/E ratio of around 10.3 based on current earnings, suggesting a reasonable valuation within its sector. The beta of 0.184 indicates lower volatility compared to the broader market, reflecting investor perception of stable business fundamentals. This valuation multiple may incorporate expectations for steady performance rather than aggressive growth in the synthetic materials segment.

Strategic Advantages And Outlook

The company's strategic advantages include technological specialization in micro fiber leather manufacturing, diversified product applications, and established export channels. Being part of Jiangsu Shuangxiang Group provides operational synergies and manufacturing scale. The outlook remains contingent on global demand for synthetic leather alternatives across footwear, automotive, and furniture sectors, with the company well-positioned to capitalize on environmental and cost advantages of synthetic materials over genuine leather products in various international markets.

Sources

Company financial statementsShenzhen Stock Exchange disclosures