| Valuation method | Value, $ | Upside, % |
|---|---|---|
| Artificial intelligence (AI) | 7.28 | -40 |
| Intrinsic value (DCF) | 2.46 | -80 |
| Graham-Dodd Method | n/a | |
| Graham Formula | 0.05 | -100 |
Hengyi Petrochemical Co., Ltd. is a prominent integrated petrochemical enterprise headquartered in Hangzhou, China, with operations spanning China and international markets. Founded in 1989 and listed on the Shenzhen Stock Exchange, Hengyi has evolved from its origins as Shi Ji Guang Hua Technology into a comprehensive producer of petroleum products, basic petrochemicals, and chemical fibers. The company's diverse product portfolio includes essential fuels like gasoline, diesel, and kerosene, key intermediates such as paraxylene (PX), purified terephthalic acid (PTA), and caprolactam (CPL), and downstream polyester products including various yarns and fibers. These materials are critical inputs for the textile, garment, home textile, and industrial sectors, positioning Hengyi as a vital link in China's massive manufacturing supply chain. Operating in the Basic Materials sector within the Specialty Chemicals industry, the company leverages vertical integration to capture value across the production chain, from crude oil refining to high-value-added chemical fibers. With a market capitalization of approximately CNY 21.8 billion, Hengyi plays a significant role in meeting the demand for essential materials that drive consumer and industrial applications globally.
Hengyi Petrochemical presents a mixed investment profile characterized by significant scale but challenging profitability metrics. The company generated substantial revenue of CNY 125.5 billion for the period, demonstrating its market presence and operational volume. However, net income of only CNY 234 million translates to a very thin net margin of approximately 0.19%, highlighting intense competitive pressures and potential margin compression in the petrochemical sector. The company maintains reasonable liquidity with CNY 13.1 billion in cash, but carries substantial debt of CNY 58.5 billion, resulting in a leveraged balance sheet. Positive operating cash flow of CNY 6 billion and a modest dividend yield provide some investor appeal, while the beta of 0.77 suggests lower volatility than the broader market. The primary investment concerns center on the company's ability to improve profitability amid cyclical industry conditions and manage its significant debt load effectively.
Hengyi Petrochemical operates in a highly competitive and capital-intensive industry where scale, integration, and cost efficiency are critical competitive advantages. The company's strategic positioning is defined by its vertical integration across the petrochemical value chain, from refining to chemical intermediates and downstream fibers. This integrated model provides some insulation against margin fluctuations in specific product segments and allows for operational synergies. However, Hengyi faces intense competition from both state-owned enterprises with preferential access to crude oil and larger, more diversified private competitors with greater economies of scale. The company's relatively modest market capitalization of CNY 21.8 billion compared to industry leaders suggests it operates as a mid-tier player rather than a market dominator. Its specialization in PTA, PX, and polyester fibers creates focused expertise but also concentration risk compared to more diversified chemical giants. Geographic concentration in China exposes Hengyi to domestic economic cycles and regulatory policies, though international operations provide some diversification. The competitive landscape is further complicated by global overcapacity in certain petrochemical segments, particularly PTA and polyester, which pressures pricing and profitability. Hengyi's challenge is to leverage its integrated structure to maintain cost competitiveness while navigating the cyclical nature of the chemicals industry and evolving environmental regulations that impact production costs and capital requirements.