| Valuation method | Value, $ | Upside, % |
|---|---|---|
| Artificial intelligence (AI) | 68.78 | 2673 |
| Intrinsic value (DCF) | 2.14 | -14 |
| Graham-Dodd Method | 2.22 | -11 |
| Graham Formula | n/a |
Gansu Energy Chemical Co., Ltd., formerly known as Gansu Jingyuan Coal Industry & Electricity Power Co., Ltd., is a significant integrated energy and chemical enterprise based in Baiyin, Gansu Province, China. Operating at the core of China's energy sector, the company has built a vertically integrated business model centered on coal mining. This primary activity fuels its downstream operations, which include thermal power generation and the supply of heat and steam, creating a synergistic loop that enhances operational efficiency. Furthermore, the company has diversified into the chemical sector through the manufacture of nitrogen-based and compound fertilizers, leveraging its access to raw materials. This strategic positioning within the basic materials and energy value chain makes it a crucial player in regional energy security and agricultural supply. As a key contributor to the industrial base in Western China, Gansu Energy Chemical exemplifies the integrated energy-chemical model prevalent among state-influenced Chinese enterprises, balancing resource extraction with value-added production to serve both power grid and agricultural needs.
Gansu Energy Chemical presents a profile of a stable, integrated utility with moderate growth prospects and significant exposure to policy-driven risks. The investment case is anchored by its profitable operations, evidenced by a net income of CNY 1.21 billion on revenue of CNY 9.60 billion, and a strong liquidity position with cash and equivalents of CNY 4.80 billion. The company's low beta of 0.61 suggests lower volatility compared to the broader market, which may appeal to risk-averse investors. However, major risks loom large. The substantial capital expenditure of CNY -5.29 billion indicates heavy ongoing investment, likely pressuring free cash flow despite healthy operating cash flow of CNY 2.11 billion. The high total debt of CNY 6.40 billion is a concern, and the company's fortunes are heavily tied to Chinese energy policy, particularly the nation's long-term transition away from coal-fired power generation. The modest dividend yield provides some income, but the overarching narrative is one of a company in a sunset industry navigating a challenging regulatory transition.
Gansu Energy Chemical's competitive positioning is defined by its regional integration and the inherent advantages and constraints of its business model. Its primary competitive advantage lies in its vertical integration; by controlling the coal supply for its power plants, it mitigates fuel price volatility and secures a stable input cost structure for its power generation segment. This is particularly valuable in its regional market of Gansu Province. Furthermore, its diversification into fertilizer production adds another revenue stream that synergistically uses by-products or requires inputs from its core operations. However, the company's competitive position is severely challenged by macro-industry trends. As a predominantly coal-based operator, it faces immense pressure from China's national 'Dual Carbon' goals (carbon peak and carbon neutrality), which aim to drastically reduce the reliance on fossil fuels. This policy environment disadvantages it against competitors focused on renewable energy. Its scale is also regional rather than national, limiting its ability to compete on cost with giant state-owned enterprises like China Shenhua Energy, which benefit from massive economies of scale and superior logistics. Therefore, while its integrated model provides operational stability, its competitiveness is fundamentally constrained by its exposure to coal and its sub-scale position relative to national champions, making it highly susceptible to energy transition policies and technological shifts.