Intrinsic Value Zhejiang Longsheng Group Co.,Ltd (600352.SS)

• Previous Close: $15.22
• Intrinsic Value: $6.77
• Upside potential: -56%

Stock Valuation Context

Business Model And Market Position

Zhejiang Longsheng Group operates as a diversified Chinese conglomerate with a core focus on the chemical industry, producing textile chemicals, fine chemical intermediates, construction chemicals, and inorganic products. Its revenue model is built on manufacturing and selling these specialized chemical solutions globally, complemented by significant operations in auto parts manufacturing, real estate development, logistics, steel trading, and financial investments. The company serves approximately 50 countries, leveraging its integrated industrial chain and established production base in Shaoxing. This diversification across basic materials and industrial sectors provides a hedge against cyclicality in any single market. Its long operating history since 1970 underpins a stable market position as a regional industrial leader, though it operates in highly competitive segments requiring continuous innovation and cost efficiency to maintain its standing against both domestic and international chemical producers.

Revenue Profitability And Efficiency

The company reported robust revenue of CNY 15.88 billion for the period, demonstrating significant scale in its operations. Profitability is strong, with net income reaching CNY 2.03 billion, reflecting effective cost management and operational efficiency across its diversified business segments. The substantial operating cash flow of CNY 9.27 billion significantly exceeds capital expenditures, indicating highly efficient cash generation from core activities.

Earnings Power And Capital Efficiency

Diluted EPS stands at CNY 0.63, representing solid earnings power derived from its chemical and industrial operations. The company exhibits exceptional capital efficiency, as evidenced by minimal capital expenditures of CNY -135.9 million relative to its massive operating cash flow, suggesting a asset-light model for certain segments and high returns on invested capital.

Balance Sheet And Financial Health

The balance sheet shows considerable strength with cash and equivalents of CNY 18.06 billion providing a large liquidity buffer. Total debt of CNY 11.38 billion is manageable given the high cash position and strong cash flows, indicating a conservative financial structure with low leverage risk and ample capacity to fund operations and investments.

Growth Trends And Dividend Policy

The company maintains a shareholder-friendly policy, distributing a dividend of CNY 0.45 per share. The combination of strong cash generation, moderate capex requirements, and a solid dividend suggests a balanced approach to returning capital while retaining flexibility for organic growth or strategic investments in its core chemical and auto parts divisions.

Valuation And Market Expectations

With a market capitalization of approximately CNY 33.48 billion, the market values the company at a moderate earnings multiple relative to its net income. The beta of 0.595 indicates lower volatility than the broader market, reflecting investor perception of stable, defensive characteristics inherent in its basic materials and industrial operations.

Strategic Advantages And Outlook

Longsheng's key advantages include its diversified industrial portfolio, global distribution reach, and strong cash generation capabilities. The outlook remains stable, supported by its entrenched market position in chemicals and auto parts, though it faces exposure to cyclical industrial demand and commodity price fluctuations in its core markets.

Sources

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