Intrinsic Value Avary Holding(Shenzhen)Co., Limited (002938.SZ)

• Previous Close: $57.07
• Intrinsic Value: $54.50
• Upside potential: -5%

Stock Valuation Context

Business Model And Market Position

Avary Holding is a prominent Chinese manufacturer specializing in the research, development, design, and production of printed circuit boards (PCBs), serving as a critical supplier within the global electronics supply chain. The company operates across multiple high-growth end markets, including communication infrastructure, consumer electronics, computers, automotive electronics, and industrial control systems. This diversified exposure positions Avary to capitalize on secular trends like 5G deployment, automotive electrification, and industrial automation. Founded in 1999 and headquartered in Shenzhen, a major technology hub, the company leverages its deep-rooted presence in China to serve both domestic and international OEMs. Its core revenue model is based on the sale of customized PCB solutions, requiring significant technological expertise and manufacturing scale. Avary's market position is strengthened by its integrated capabilities from design to mass production, enabling it to compete for complex, high-layer count boards used in advanced applications. The company operates in a highly competitive but essential sector, where reliability, technical capability, and cost efficiency are key differentiators for securing long-term contracts with major device manufacturers.

Revenue Profitability And Efficiency

For the fiscal year, Avary reported robust revenue of CNY 35.1 billion, demonstrating its significant scale within the PCB industry. The company translated this top-line performance into a net income of CNY 3.62 billion, reflecting a net margin of approximately 10.3%. Strong operational execution is evidenced by its substantial operating cash flow of CNY 7.08 billion, which comfortably covered capital expenditures of CNY 2.84 billion, indicating healthy conversion of earnings into cash.

Earnings Power And Capital Efficiency

The company's earnings power is solid, with diluted earnings per share of CNY 1.56. The significant positive free cash flow, calculated as operating cash flow minus capital expenditures, underscores efficient capital deployment. This strong cash generation provides Avary with financial flexibility to fund future growth initiatives, research and development, and shareholder returns without excessive reliance on external financing.

Balance Sheet And Financial Health

Avary maintains a conservative financial structure, characterized by a strong liquidity position. Cash and cash equivalents stood at CNY 13.5 billion, substantially exceeding total debt of CNY 3.51 billion. This low leverage ratio and high cash balance provide a considerable buffer against industry cyclicality and equip the company to navigate potential economic downturns or invest opportunistically in capacity expansion or technology upgrades.

Growth Trends And Dividend Policy

The company demonstrates a commitment to returning capital to shareholders, evidenced by a dividend per share of CNY 1.00. This payout, combined with its underlying growth trajectory driven by demand from its key end markets, presents a balanced approach of rewarding investors while retaining capital for reinvestment. The company's outlook is tied to the continued expansion of the global electronics market, particularly in its core segments.

Valuation And Market Expectations

With a market capitalization of approximately CNY 126.4 billion, the market values Avary at a price-to-earnings multiple derived from its current earnings. A beta of 0.535 suggests the stock has historically exhibited lower volatility than the broader market, which may appeal to investors seeking exposure to the technology hardware sector with a moderated risk profile relative to more speculative tech names.

Strategic Advantages And Outlook

Avary's strategic advantages include its long-standing industry experience, diversified customer base, and positioning within critical technology supply chains. The primary challenge and opportunity lie in navigating the competitive PCB landscape and adapting to rapid technological changes. Its future performance will be closely linked to global demand for communication equipment, automotive electronics, and industrial automation, sectors that are expected to see sustained long-term growth.

Sources

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