Intrinsic Value Fujian Longxi Bearing (Group) Co., Ltd (600592.SS)

• Previous Close: $23.82
• Intrinsic Value: $7.84
• Upside potential: -67%

Stock Valuation Context

Business Model And Market Position

Fujian Longxi Bearing operates as a specialized manufacturer of precision bearings and mechanical components, serving diverse industrial sectors across China and international markets. The company's core revenue model centers on designing, producing, and selling spherical plain bearings, tapered roller bearings, and custom rolling components for demanding applications. Its product portfolio includes deep groove ball bearings, agricultural machinery bearings, non-standard specialized bearings, loader gears, fine machine gears, and sophisticated linear guide systems. These components are critical for heavy machinery, aerospace, hydropower projects, metallurgical equipment, and port machinery, positioning the company as an essential supplier to industrial and infrastructure development sectors. Fujian Longxi has established a strong market position through technical expertise in manufacturing complex bearing solutions and long-standing customer relationships built over decades of operation since its 1958 founding. The company competes by offering specialized, high-performance components that require precision engineering and reliable quality standards, catering to both domestic Chinese industrial growth and selective international export markets.

Revenue Profitability And Efficiency

The company generated CNY 1.78 billion in revenue with net income of CNY 125.3 million, reflecting a net margin of approximately 7.1%. Operating cash flow of CNY 345.3 million significantly exceeded net income, indicating strong cash conversion efficiency. Capital expenditures of CNY 57.8 million suggest moderate reinvestment requirements relative to the company's operational scale and cash generation capabilities.

Earnings Power And Capital Efficiency

Diluted EPS of CNY 0.31 demonstrates moderate earnings power relative to the company's market capitalization. The substantial operating cash flow generation compared to net income suggests quality earnings with minimal non-cash adjustments. The company maintains reasonable capital efficiency with controlled capital expenditure requirements supporting its industrial manufacturing operations.

Balance Sheet And Financial Health

The balance sheet shows solid liquidity with CNY 423.5 million in cash and equivalents against total debt of CNY 256.3 million, indicating a conservative financial structure. The net cash position provides financial flexibility for operational needs and potential strategic investments. The moderate debt level suggests prudent financial management within the capital-intensive manufacturing sector.

Growth Trends And Dividend Policy

The company maintains a shareholder return policy with a dividend per share of CNY 0.10, representing a payout ratio of approximately 32% based on current EPS. This balanced approach supports both investor returns and retained earnings for business development. The dividend policy reflects management's confidence in sustainable cash generation and commitment to shareholder value.

Valuation And Market Expectations

With a market capitalization of CNY 11.68 billion, the company trades at approximately 9.3 times revenue and 93 times earnings, suggesting market expectations for future growth and margin expansion. The beta of 0.648 indicates lower volatility than the broader market, typical for established industrial manufacturers with stable business models.

Strategic Advantages And Outlook

The company benefits from deep technical expertise in bearing manufacturing and long-term customer relationships across multiple industrial sectors. Its diverse product applications across aerospace, heavy machinery, and infrastructure provide resilience against sector-specific downturns. The outlook remains tied to Chinese industrial production trends and export market opportunities for precision components.

Sources

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