| Valuation method | Value, HK$ | Upside, % |
|---|---|---|
| Artificial intelligence (AI) | 27.80 | 26 |
| Intrinsic value (DCF) | 7.33 | -67 |
| Graham-Dodd Method | 9.50 | -57 |
| Graham Formula | 23.90 | 8 |
ZMJ Group Company Limited (0564.HK) is a leading Chinese manufacturer of comprehensive coal mining and excavating equipment with a legacy dating back to 1958. Headquartered in Zhengzhou, China, the company operates through two primary segments: Manufacture of Coal Mining Machinery and Manufacture of Auto Parts. As a key player in the agricultural machinery sector within the consumer cyclical industry, ZMJ Group provides essential equipment for China's massive coal mining industry, which remains crucial for the country's energy infrastructure. The company's extensive product portfolio includes hydraulic roof supports, coal mining machines, and excavating equipment that serve both domestic and international mining operations. With China's continued reliance on coal energy and ongoing modernization of mining operations, ZMJ Group occupies a strategic position in the supply chain for mining equipment and machinery. The company's long-standing industry presence and technical expertise make it a significant contributor to China's industrial equipment manufacturing sector.
ZMJ Group presents a mixed investment case with several attractive fundamentals offset by sector-specific risks. The company demonstrates solid financial health with HKD 39.3 billion in revenue, HKD 3.9 billion net income, and strong operating cash flow of HKD 3.9 billion. The dividend yield appears reasonable with HKD 1.22 per share, and the beta of 0.565 suggests lower volatility than the broader market. However, significant risks include heavy exposure to the coal industry, which faces long-term structural challenges from the global transition to renewable energy. The company's fortunes are tied to China's coal production policies and mining investment cycles, creating cyclical revenue patterns. While current financial metrics are strong, investors must weigh the company's solid operational performance against the secular decline of the coal industry and potential regulatory changes in China's energy sector.
ZMJ Group's competitive positioning is anchored in its deep integration within China's coal mining ecosystem and its long-standing relationships with major state-owned mining companies. The company benefits from localization advantages, understanding specific geological conditions and mining requirements unique to Chinese coal fields. This domestic expertise creates barriers to entry for foreign competitors while providing ZMJ with preferential access to the world's largest coal market. The company's competitive advantage stems from its comprehensive product range that covers the entire mining equipment spectrum, from hydraulic supports to excavation machinery. However, ZMJ faces intensifying competition from both domestic manufacturers scaling up their capabilities and international players bringing advanced automation and digital mining technologies. The company's auto parts segment provides some diversification but remains secondary to its mining equipment business. ZMJ's future competitiveness will depend on its ability to innovate in automation, develop more environmentally sustainable mining solutions, and potentially expand into adjacent mining equipment categories beyond coal. The company's scale and established customer relationships provide a solid foundation, but it must navigate the challenging transition as the global mining industry evolves toward more technologically advanced and environmentally conscious operations.