Intrinsic Value Shandong Intco Recycling Resources Co., Ltd. (688087.SS)

• Previous Close: $31.98
• Intrinsic Value: $44.17
• Upside potential: +38%

Stock Valuation Context

Business Model And Market Position

Shandong Intco Recycling Resources operates within China's circular economy sector, specializing in the recycling and utilization of renewable plastics. The company generates revenue through a vertically integrated model that encompasses both recycling equipment manufacturing and the production of value-added plastic products. Its core offerings include foam reduction machinery, plastic recycled particles, and an extensive range of decorative materials such as picture frames, moldings, and skirtings for indoor and outdoor applications. Operating in the waste management industry, Intco positions itself as an environmental solutions provider that transforms plastic waste into commercially viable products. The company leverages China's growing emphasis on sustainability and waste reduction policies to capture market share. Its integrated approach—from recycling technology to finished goods—provides competitive advantages in cost control and supply chain stability within the industrial sector. This business model supports both B2B equipment sales and B2C/B2B product distribution, creating multiple revenue streams while addressing environmental challenges through resource conservation and plastic waste diversion from landfills.

Revenue Profitability And Efficiency

The company reported revenue of CNY 2.92 billion with net income of CNY 307 million, achieving a net profit margin of approximately 10.5%. Operating cash flow of CNY 298 million demonstrates solid cash generation from core operations, though capital expenditures of CNY 282 million indicate significant ongoing investments in recycling infrastructure and production capacity.

Earnings Power And Capital Efficiency

Intco delivered diluted EPS of CNY 1.65, reflecting effective earnings generation relative to its share count. The company's capital allocation appears balanced between reinvestment in the business and maintaining operational capabilities, with substantial investments in recycling equipment and production facilities supporting future growth potential in China's circular economy.

Balance Sheet And Financial Health

The company maintains a strong cash position of CNY 1.17 billion against total debt of CNY 2.41 billion. This financial structure provides liquidity for operations while leveraging debt for growth initiatives. The balance sheet supports the capital-intensive nature of recycling operations and equipment manufacturing, with adequate resources for both working capital and strategic investments.

Growth Trends And Dividend Policy

Intco demonstrates a commitment to shareholder returns with a dividend per share of CNY 0.10, representing a payout from its profitable operations. The company's growth trajectory is supported by China's increasing focus on environmental sustainability and waste management regulations, positioning it to benefit from expanding demand for recycled plastic products and recycling technologies.

Valuation And Market Expectations

With a market capitalization of approximately CNY 5.18 billion, the company trades at a P/E ratio around 16.9 based on current earnings. The beta of 0.707 suggests lower volatility than the broader market, reflecting investor perception of the company's stable position within the environmental services sector and its defensive characteristics amid economic cycles.

Strategic Advantages And Outlook

Intco's integrated recycling-to-products model provides competitive advantages through vertical integration and technological expertise in plastic recycling. The company is well-positioned to benefit from China's environmental policies promoting circular economy initiatives, though it faces challenges from raw material price volatility and competitive pressures in the recycling industry.

Sources

Company financial reportsStock exchange disclosuresMarket data providers