Intrinsic Value Sunrise Manufacture Group Co., Ltd. (605138.SS)

• Previous Close: $7.43
• Intrinsic Value: $2.70
• Upside potential: -64%

Stock Valuation Context

Business Model And Market Position

Sunrise Manufacture Group Co., Ltd. is a vertically integrated textile and apparel manufacturer operating primarily in the consumer cyclical sector. The company's core revenue model is derived from the production and sale of yarns, knitted and woven fabrics, and finished garments, serving both domestic Chinese and international markets. Its operations span the entire supply chain, from cotton planting and spinning to dyeing, finishing, printing, embroidery, and garment assembly, providing a comprehensive one-stop solution for clients. This integrated approach allows for greater cost control and quality assurance across its product lines. The company has strategically expanded its manufacturing footprint beyond China into key Southeast Asian production hubs like Vietnam and Cambodia, leveraging lower labor costs and mitigating geopolitical trade risks. Its recent diversification into photovoltaic energy production represents a nascent but potentially strategic hedge against the cyclicality of its core apparel business, though textiles remain the dominant revenue driver. The company operates in a highly competitive, fragmented global market for garment manufacturing, where scale, efficiency, and reliable execution are critical differentiators for securing large-volume orders from international brands.

Revenue Profitability And Efficiency

The company reported revenue of CNY 3.67 billion for the period. However, net income was significantly lower at CNY 46.6 million, indicating thin net profit margins of approximately 1.3%. This suggests the company operates in a highly competitive, low-margin segment of the apparel manufacturing industry, where cost control is paramount for profitability.

Earnings Power And Capital Efficiency

Diluted earnings per share stood at CNY 0.08, reflecting modest earnings power relative to its revenue base. The company generated a strong operating cash flow of CNY 606.7 million, which comfortably covered capital expenditures of CNY 471.7 million, indicating it can fund its investments internally from core operations.

Balance Sheet And Financial Health

The balance sheet shows a cash position of CNY 405.9 million against a substantial total debt of CNY 2.20 billion. This significant debt load, which is over five times its cash holdings, indicates a leveraged financial structure that could heighten risk during industry downturns or periods of rising interest rates.

Growth Trends And Dividend Policy

The company has demonstrated a commitment to returning capital to shareholders, paying a dividend of CNY 0.055 per share. This payout, which represents a large portion of its earnings, suggests a shareholder-friendly policy, though it must be balanced against the need to manage its considerable debt burden and fund future growth or efficiency initiatives.

Valuation And Market Expectations

With a market capitalization of approximately CNY 4.29 billion, the market values the company at a significant premium to its annual revenue. The beta of 0.511 indicates the stock is less volatile than the broader market, which may reflect its stable, albeit low-margin, business model and its status as a essential manufacturer.

Strategic Advantages And Outlook

The company's key strategic advantages are its full vertical integration and geographic diversification into Southeast Asia. These factors provide cost and supply chain resilience. The outlook is tied to global apparel demand, cost management, and the successful execution of its new photovoltaic energy venture, which could provide a new growth vector.

Sources

Company Financial ReportsPublic Market Data