Intrinsic Value China National Chemical Engineering Co., Ltd (601117.SS)

• Previous Close: $8.90
• Intrinsic Value: $7.53
• Upside potential: -15%

Stock Valuation Context

Business Model And Market Position

China National Chemical Engineering Co., Ltd. operates as a premier industrial engineering and construction conglomerate, specializing in the general contracting of complex projects across chemical, petrochemical, pharmaceutical, power, and coal industries. Its comprehensive service portfolio encompasses the entire project lifecycle, from initial consulting, prospecting, and design to full-scale construction, project management, and environmental treatment solutions. The company also engages in technology R&D, equipment installation, and maintains import/export operations, underpinning its integrated service model. As a subsidiary of the state-owned China National Chemical Engineering Group, it holds a formidable position within China's domestic infrastructure and industrial development sector, leveraging its state-backed affiliation to secure large-scale, technically demanding contracts. This established market presence is further reinforced by its diverse project execution capabilities and long-standing industry expertise, positioning it as a key contractor for national strategic industrial investments and overseas expansion initiatives under China's Belt and Road framework.

Revenue Profitability And Efficiency

The company reported robust revenue of CNY 185.8 billion for the period, demonstrating its significant scale in project execution. Net income stood at CNY 5.7 billion, resulting in a net profit margin of approximately 3.1%, which is indicative of the competitive and capital-intensive nature of the contracting industry. Operating cash flow was positive at CNY 8.7 billion, showcasing an ability to generate cash from core operations.

Earnings Power And Capital Efficiency

Diluted earnings per share were CNY 0.93, reflecting the company's earnings power on a per-share basis. The substantial operating cash flow of CNY 8.7 billion, which significantly exceeded net income, highlights strong cash conversion efficiency. Capital expenditures of CNY -3.0 billion indicate ongoing investments to maintain and potentially expand its operational capabilities.

Balance Sheet And Financial Health

The balance sheet exhibits considerable strength with a high cash and equivalents position of CNY 50.1 billion. Total debt is reported at CNY 12.0 billion, resulting in a conservative net cash position and indicating low financial leverage. This robust liquidity profile provides significant financial flexibility for project bidding and execution.

Growth Trends And Dividend Policy

The company has demonstrated a commitment to returning capital to shareholders, evidenced by a dividend per share of CNY 0.186. This payout represents a dividend yield based on the current market capitalization, aligning with a balanced capital allocation strategy that supports both growth investments and shareholder returns.

Valuation And Market Expectations

With a market capitalization of approximately CNY 45.5 billion, the stock trades at a price-to-earnings ratio derived from its current earnings. A beta of 0.858 suggests the stock has historically been less volatile than the broader market, which may reflect its stable, project-based business model and state-affiliated ownership structure.

Strategic Advantages And Outlook

The company's strategic advantages are rooted in its state affiliation, which facilitates access to major domestic infrastructure projects, and its extensive expertise in complex industrial engineering. Its outlook is tied to continued domestic industrial investment and potential international contract wins, though it remains subject to cyclical demand in its core end markets and global economic conditions.

Sources

Company Annual ReportPublic Financial Disclosures