Intrinsic Value ZMJ Group Company Limited (601717.SS)

• Previous Close: $24.72
• Intrinsic Value: $8.35
• Upside potential: -66%

Stock Valuation Context

Business Model And Market Position

ZMJ Group operates as a specialized industrial equipment manufacturer with dual revenue streams from coal mining machinery and automotive components, serving China's critical energy and transportation sectors. The company leverages its established manufacturing capabilities to produce comprehensive coal mining and excavating equipment essential for resource extraction, while simultaneously supplying auto parts to the consumer cyclical market. This diversified approach mitigates sector-specific volatility while maintaining focus on industrial manufacturing excellence. With headquarters in Zhengzhou and operations dating back to 1958, ZMJ has developed deep industry expertise and long-standing customer relationships. The company occupies a strategic position within China's industrial supply chain, supporting both traditional energy infrastructure and automotive production through its specialized engineering and manufacturing capabilities.

Revenue Profitability And Efficiency

ZMJ generated CNY 37.05 billion in revenue with net income of CNY 3.93 billion, reflecting a healthy net margin of approximately 10.6%. The company demonstrated solid operational efficiency with operating cash flow of CNY 3.94 billion, significantly exceeding capital expenditures of CNY 1.97 billion, indicating strong cash generation from core operations relative to investment requirements.

Earnings Power And Capital Efficiency

The company delivered robust earnings power with diluted EPS of CNY 2.21, supported by efficient capital deployment. Operating cash flow coverage of capital expenditures at approximately 2.0x demonstrates prudent capital allocation and the ability to fund investments internally while maintaining financial flexibility for strategic initiatives.

Balance Sheet And Financial Health

ZMJ maintains a conservative financial structure with cash and equivalents of CNY 4.02 billion against total debt of CNY 5.09 billion, indicating moderate leverage. The company's liquidity position appears adequate, with cash resources providing operational flexibility and supporting ongoing business requirements in both mining equipment and auto parts segments.

Growth Trends And Dividend Policy

The company demonstrates shareholder returns through a dividend per share of CNY 1.12, representing a payout ratio of approximately 50% based on reported EPS. This balanced approach supports income-oriented investors while retaining sufficient earnings for reinvestment in business development and technological advancement across both operating segments.

Valuation And Market Expectations

With a market capitalization of CNY 39.47 billion, the company trades at a P/E multiple of approximately 10x based on current earnings. The beta of 0.565 suggests lower volatility relative to the broader market, reflecting the industrial nature of its business and stable demand patterns in its core markets.

Strategic Advantages And Outlook

ZMJ benefits from its long-established presence in industrial manufacturing and diversified exposure to both energy infrastructure and automotive sectors. The company's expertise in coal mining equipment positions it to benefit from China's ongoing energy requirements, while its auto parts segment provides exposure to consumer cyclical demand, creating a balanced operational profile.

Sources

Company financial reportsStock exchange disclosuresMarket data providers