Intrinsic Value Zhejiang Hangmin Co.,Ltd (600987.SS)

• Previous Close: $7.63
• Intrinsic Value: $4.48
• Upside potential: -41%

Stock Valuation Context

Business Model And Market Position

Zhejiang Hangmin Co., Ltd. operates as a vertically integrated textile manufacturer specializing in printing and dyeing activities within China's consumer cyclical sector. Its core revenue model is derived from producing and selling a diverse portfolio of fabrics, including corduroy, cotton, stretch cotton, shirting, and linen, alongside non-woven and printed fabrics. The company enhances its operational scope through ancillary thermoelectric, logistics, and sewage treatment services, creating a more resilient and self-sufficient industrial ecosystem. Its market position is bolstered by a significant export footprint, with products distributed to key international regions including Southeast Asia, the Middle East, North America, and the European Union, indicating a competitive presence in global textile supply chains. Founded in 1998 and based in the industrial hub of Hangzhou, the company leverages its long-standing expertise and integrated operations to serve both domestic and international apparel markets, positioning itself as a established player in a competitive and fragmented industry.

Revenue Profitability And Efficiency

The company reported robust revenue of CNY 11.47 billion for the period. Profitability was solid, with net income reaching CNY 719.7 million, translating to a net margin of approximately 6.3%. Strong operating cash flow of CNY 1.28 billion significantly exceeded capital expenditures, indicating healthy cash generation from core operations.

Earnings Power And Capital Efficiency

Diluted earnings per share stood at CNY 0.69, reflecting the firm's earnings power. Capital efficiency appears strong, as evidenced by operating cash flow that is more than seven times the level of capital expenditures (CNY -178.9 million), suggesting prudent investment and high returns on invested capital.

Balance Sheet And Financial Health

The balance sheet is exceptionally strong, characterized by a substantial cash position of CNY 3.39 billion and minimal total debt of just CNY 40.6 million. This results in a significant net cash position, indicating very low financial leverage and ample liquidity to navigate market cycles.

Growth Trends And Dividend Policy

The company demonstrates a shareholder-friendly capital allocation policy, distributing a dividend of CNY 0.30 per share. This payout, against earnings of CNY 0.69 per share, represents a payout ratio of approximately 43%, balancing income return to shareholders with retained earnings for future growth.

Valuation And Market Expectations

With a market capitalization of approximately CNY 7.46 billion, the stock trades at a price-to-earnings ratio of roughly 10.4x based on trailing earnings. A beta of 0.23 suggests the market perceives the stock as significantly less volatile than the broader market.

Strategic Advantages And Outlook

Key strategic advantages include vertical integration, a diverse product portfolio, and a strong international export network. Its fortress balance sheet provides a significant buffer against industry downturns and opportunities for strategic investments or market share gains.

Sources

Company Annual ReportShanghai Stock Exchange Filings