Intrinsic Value Zhejiang Xinhua Chemical Co.,Ltd (603867.SS)

• Previous Close: $28.81
• Intrinsic Value: $12.35
• Upside potential: -57%

Stock Valuation Context

Business Model And Market Position

Zhejiang Xinhua Chemical Co., Ltd. operates as a specialized chemical manufacturer within China's basic materials sector, generating revenue through the production and trade of a diverse portfolio of chemical products. Its core offerings include fatty amines, organic solvents, flavors, hydrogen peroxide organic amine series, and custom chemicals, serving both domestic and international markets. The company has established a niche in aroma chemicals, such as turpentine oil derivatives and sandal series, alongside flame retardants and peroxide series, positioning itself as a versatile supplier in the fine chemicals segment. Founded in 1967 and based in Jiande, China, Xinhua Chemical leverages its long-standing operational history to maintain stable customer relationships and a competitive position in the chemical manufacturing industry, focusing on quality and customization to differentiate itself in a crowded market.

Revenue Profitability And Efficiency

For FY 2024, the company reported revenue of CNY 2.97 billion with a net income of CNY 226.9 million, reflecting a net margin of approximately 7.7%. Operating cash flow was robust at CNY 311.3 million, indicating effective cash generation from core operations, while capital expenditures of CNY -224.7 million suggest ongoing investments in maintaining and expanding production capabilities.

Earnings Power And Capital Efficiency

Diluted EPS stood at CNY 1.17, demonstrating solid earnings power relative to its share count. The company's operating cash flow of CNY 311.3 million significantly exceeded net income, highlighting strong quality of earnings and efficient conversion of profits into cash, which supports reinvestment and financial stability.

Balance Sheet And Financial Health

The balance sheet shows a conservative financial structure with cash and equivalents of CNY 756.5 million against total debt of CNY 770.3 million, indicating a near-balanced liquidity position. The low debt level relative to equity and cash flow suggests manageable leverage and a healthy financial footing for future obligations.

Growth Trends And Dividend Policy

The company has demonstrated a commitment to shareholder returns with a dividend per share of CNY 0.45, offering a yield based on current metrics. Growth appears steady, supported by its diverse chemical product range and market presence, though specific historical growth rates are not provided in the data.

Valuation And Market Expectations

With a market capitalization of approximately CNY 6.05 billion and a beta of 0.26, the stock is perceived as less volatile than the broader market. The current valuation multiples, derived from earnings and cash flow, suggest market expectations of stable, low-growth performance aligned with its defensive sector positioning.

Strategic Advantages And Outlook

Xinhua Chemical's strategic advantages include its long-established operational history, diverse product portfolio, and focus on specialty chemicals, which provide resilience against market cycles. The outlook remains stable, supported by consistent demand for chemical products in industrial applications, though it faces industry-wide challenges such as raw material cost fluctuations and regulatory pressures.

Sources

Company description and financial data providedShanghai Stock Exchange filings