| Valuation method | Value, $ | Upside, % |
|---|---|---|
| Artificial intelligence (AI) | 12.58 | -39 |
| Intrinsic value (DCF) | 6.94 | -66 |
| Graham-Dodd Method | 11.77 | -42 |
| Graham Formula | 4.16 | -80 |
Lihuayi Weiyuan Chemical Co., Ltd. is a prominent Chinese specialty chemicals manufacturer headquartered in Dongying, Shandong Province. Founded in 2010 and listed on the Shanghai Stock Exchange, the company specializes in producing and distributing polymer materials and fine chemicals essential to various industrial sectors. Its core product portfolio includes phenol, acetone, bisphenol A, polycarbonate, isopropanol, and industrial gases such as liquid oxygen, argon, and nitrogen. Operating within China's massive basic materials sector, Lihuayi Weiyuan serves downstream industries including plastics, construction, automotive, and electronics manufacturing. The company's strategic location in Dongying, a major petrochemical hub, provides advantages in raw material access and logistics efficiency. As China continues to prioritize domestic chemical production and reduce import dependency, Lihuayi Weiyuan stands to benefit from national industrial policies supporting specialty chemical manufacturers. The company's diversified product range and integrated production capabilities position it as a significant player in China's evolving chemical industry landscape.
Lihuayi Weiyuan Chemical presents a mixed investment profile with several concerning financial metrics. While the company operates in a strategically important sector within China's industrial ecosystem, its financial performance raises significant red flags. The extremely low net income margin of approximately 0.6% on CNY 9.52 billion revenue suggests severe profitability challenges, potentially indicating intense competition, pricing pressure, or operational inefficiencies. The negative free cash flow (operating cash flow minus capital expenditures) of approximately CNY -551 million indicates the company is consuming cash despite generating operating profits. The high debt level of CNY 2.89 billion against cash reserves of CNY 844 million creates liquidity concerns, particularly in a capital-intensive industry. The modest beta of 0.778 suggests lower volatility than the broader market, but the fundamental profitability issues and cash flow challenges outweigh this stability benefit. Investors should approach with caution until the company demonstrates improved operational efficiency and sustainable profitability.
Lihuayi Weiyuan Chemical operates in China's highly competitive specialty chemicals market, where scale, technological capability, and cost efficiency determine competitive positioning. The company's competitive advantage appears limited given its razor-thin profit margins and cash flow challenges. While its product portfolio including phenol, acetone, and bisphenol A serves essential industrial applications, the company likely faces intense competition from both domestic giants and international chemical producers. Its location in Dongying, a major petrochemical cluster, provides some logistical advantages and potential synergies with upstream suppliers, but this hasn't translated into strong financial performance. The company's modest market capitalization of CNY 8.19 billion suggests it operates as a mid-tier player rather than an industry leader. The negative free cash flow and high capital expenditures indicate the company may be investing heavily to maintain competitiveness or expand capacity, but current returns on these investments appear inadequate. In China's chemical sector, where environmental regulations are tightening and consolidation is ongoing, smaller players like Lihuayi Weiyuan face pressure to either achieve scale or develop specialized technological advantages. The company's current financial metrics suggest it hasn't successfully differentiated itself in either cost leadership or product specialization, leaving it vulnerable in a competitive market characterized by price sensitivity and cyclical demand patterns.