Intrinsic Value Jinan Shengquan Group Share Holding Co., Ltd. (605589.SS)

• Previous Close: $30.14
• Intrinsic Value: $10.66
• Upside potential: -65%

Stock Valuation Context

Business Model And Market Position

Jinan Shengquan Group is a specialized chemical manufacturer headquartered in China, operating primarily in the phenolic resin and composite materials sector. Its core revenue model is based on the research, development, and sale of a diverse portfolio of industrial materials, including resins for tire rubber, electronics, and foundry applications. The company serves a broad industrial clientele, leveraging its long-established presence since 1979 to supply essential inputs for manufacturing processes. Beyond its traditional chemical offerings, Shengquan has strategically diversified into adjacent growth markets, including health industry products like medical masks and respirators, as well as new energy solutions such as lithium titanate batteries and solar modules. This diversification, coupled with its foundational expertise in biomass materials, positions the company at the intersection of basic materials and emerging sustainable technologies. Its market position is that of a integrated domestic supplier with a multi-industry footprint, though it operates in a competitive global chemical landscape where scale and innovation are critical differentiators.

Revenue Profitability And Efficiency

The company reported robust revenue of CNY 10.02 billion for the period, demonstrating significant scale in its operations. Net income stood at CNY 867.85 million, resulting in a net profit margin of approximately 8.7%. Operating cash flow was positive at CNY 230.98 million, though it was substantially lower than net income, indicating potential working capital investments or timing differences in cash collection.

Earnings Power And Capital Efficiency

Diluted earnings per share were CNY 1.05, reflecting the company's earnings power on a per-share basis. The disparity between operating cash flow (CNY 230.98 million) and capital expenditures (CNY -263.88 million) suggests the company was in a net investment phase, with capex slightly exceeding cash generated from operations for the period.

Balance Sheet And Financial Health

The balance sheet shows a solid liquidity position with cash and equivalents of CNY 1.22 billion. Total debt was reported at CNY 1.83 billion. The company's financial health appears manageable, with a cash balance providing a buffer against its debt obligations, though the specific debt-to-equity ratio is not provided for a complete assessment.

Growth Trends And Dividend Policy

The company has demonstrated a commitment to returning capital to shareholders, evidenced by a dividend per share of CNY 0.55. This payout represents a dividend yield based on the current share price and reflects a shareholder-friendly policy alongside its investments in new energy and health product diversification for future growth.

Valuation And Market Expectations

With a market capitalization of approximately CNY 26.68 billion and a beta of 1.377, the market prices the stock with higher volatility than the broader market. The P/E ratio, implied by the market cap and net income, is approximately 30.7, suggesting market expectations for future earnings growth beyond current levels.

Strategic Advantages And Outlook

The company's strategic advantages lie in its long operating history, diversified product portfolio across traditional and emerging sectors, and integrated manufacturing capabilities. The outlook will depend on its ability to successfully commercialize its expansions into new energy and health products while maintaining competitiveness in its core resin business.

Sources

Company DescriptionPublic Financial Disclosures