| Valuation method | Value, $ | Upside, % |
|---|---|---|
| Artificial intelligence (AI) | 18.87 | 84 |
| Intrinsic value (DCF) | 5.51 | -46 |
| Graham-Dodd Method | n/a | |
| Graham Formula | 1.76 | -83 |
Hubei Kailong Chemical Group Co., Ltd. is a specialized chemical company with a strong foothold in China's industrial explosives sector. Founded in 1967 and headquartered in Jingmen, Hubei province, the company has evolved into a comprehensive chemical enterprise serving critical infrastructure and mining industries. Kailong's core business encompasses the production and sale of civil explosive materials, nano-calcium carbonate, nitro compound fertilizers, ammonium nitrate, and paper plastic packaging products. The company vertically integrates its operations by also providing engineering blasting services, creating a complete value chain from raw material production to end-use application. Operating in China's basic materials sector, Kailong plays a vital role in supporting the country's construction, mining, and agricultural industries. With nearly six decades of industry experience, the company has established itself as a reliable supplier in China's specialized chemicals market, leveraging its technical expertise and regional presence to serve domestic infrastructure development needs. The company's diversified product portfolio within the explosives and chemical sectors provides stability across economic cycles while maintaining focus on industrial applications.
Hubei Kailong Chemical presents a mixed investment profile with several notable considerations. The company demonstrates reasonable profitability with net income of CNY 148 million on revenue of CNY 3.69 billion, translating to a net margin of approximately 4%. However, the relatively low beta of 0.496 suggests limited correlation with broader market movements, which may appeal to risk-averse investors but could limit upside potential during market rallies. The dividend yield appears modest at CNY 0.10 per share. Key concerns include the substantial total debt of CNY 1.57 billion against cash reserves of CNY 651 million, indicating potential liquidity constraints. The company's niche focus on explosive materials exposes it to regulatory risks and dependence on China's infrastructure and mining sectors. Positive operating cash flow of CNY 402 million provides some financial stability, but investors should monitor debt levels and sector-specific regulatory developments closely.
Hubei Kailong Chemical Group operates in a highly specialized segment of China's chemical industry with significant regulatory barriers to entry, which provides some competitive insulation. The company's competitive positioning is strengthened by its vertical integration, combining explosive material production with engineering blasting services. This integrated model allows Kailong to capture value across the supply chain and maintain customer relationships through comprehensive service offerings. The company's nearly 60-year history in the industry has established operational expertise and regulatory compliance capabilities that newer entrants would struggle to match quickly. However, Kailong faces intense competition from larger state-owned chemical enterprises that benefit from scale advantages and stronger government relationships. The company's regional focus in Hubei province provides local market knowledge but may limit national expansion opportunities against competitors with broader geographic reach. Kailong's diversification into nano-calcium carbonate and fertilizers provides some revenue stability but may dilute focus from its core explosives business where it likely has stronger competitive advantages. The regulatory environment for explosive materials creates high compliance costs that favor established players like Kailong but also limits market growth and innovation. The company's moderate scale compared to industry leaders may constrain R&D investment and pricing power in competitive bidding situations.