Stock Analysis & Valuation Zhejiang Yonghe Refrigerant Co., Ltd. (605020.SS)

• Previous Close: $28.54
• Sector Valuation Confidence Level: Moderate

Valuation method	Value, $	Upside, %
Artificial intelligence (AI)	19.80	-31
Intrinsic value (DCF)	20.28	-29
Graham-Dodd Method	5.58	-80
Graham Formula	8.91	-69

Strategic Investment Analysis

Company Overview

Zhejiang Yonghe Refrigerant Co., Ltd. is a leading Chinese fluorochemical specialist established in 1998 and headquartered in Quzhou. The company operates across the entire fluorochemical value chain, engaging in research, development, production, and sales of diverse fluorochemical products. Yonghe's comprehensive portfolio includes fluorocarbon chemicals, mixed refrigerants, fluorine-containing polymer materials, hydrofluoric acid, and fluorite minerals (both fine powder and lump ore). As a vertically integrated player in the basic materials sector, the company serves critical industries including refrigeration, air conditioning, polymers, and industrial chemicals. With China's dominance in global fluorochemical production and increasing environmental regulations driving demand for next-generation refrigerants, Yonghe occupies a strategic position in the supply chain. The company's 25+ years of industry experience and Shanghai Stock Exchange listing (605020.SS) demonstrate its established market presence and commitment to the evolving refrigerant and fluorochemical markets, particularly as global transitions toward environmentally friendly alternatives accelerate.

Investment Summary

Zhejiang Yonghe presents a mixed investment profile with both attractive fundamentals and notable risks. The company demonstrates profitability with CNY 251 million net income on CNY 4.6 billion revenue, though margins appear compressed. Positive operating cash flow of CNY 583 million is overshadowed by substantial capital expenditures (CNY -956 million), indicating aggressive expansion or capacity upgrades. The company carries significant debt (CNY 2.58 billion) relative to cash reserves (CNY 132 million), creating financial leverage concerns. A beta of 0.618 suggests lower volatility than the broader market, potentially appealing to risk-averse investors. The dividend yield appears modest at CNY 0.25 per share. Investment attractiveness hinges on China's fluorochemical industry dynamics, regulatory developments affecting refrigerant demand, and the company's ability to manage its debt load while funding growth initiatives in a capital-intensive sector.

Competitive Analysis

Zhejiang Yonghe's competitive positioning is defined by its vertical integration within the fluorochemical value chain, spanning from fluorite mining to specialized refrigerant production. This integrated model provides cost control and supply chain security advantages over competitors focused on specific segments. The company's comprehensive product portfolio, including fluorocarbon chemicals, polymers, and refrigerants, allows it to serve diverse customer needs and capture multiple revenue streams within the fluorochemical ecosystem. However, Yonghe operates in a highly competitive Chinese chemical sector dominated by larger players with greater scale and resources. The company's moderate market capitalization (CNY 12.6 billion) suggests it is a mid-tier player rather than an industry leader. Competitive advantages likely include regional expertise, established customer relationships, and technical capabilities in refrigerant formulations. Challenges include competing against state-owned enterprises with preferential resource access and multinational corporations with superior R&D budgets. The company's significant capital expenditures indicate ongoing investments to maintain technological competitiveness, particularly as environmental regulations drive demand for next-generation refrigerants with lower global warming potential. Yonghe's future positioning will depend on its ability to innovate while managing the capital intensity of chemical manufacturing and navigating China's evolving environmental policies.

Major Competitors

• Zhejiang Juhua Co., Ltd. (600160.SS): Juhua is a major Chinese fluorochemical producer with significantly larger scale and comprehensive product range including refrigerants, fluorine polymers, and basic chemicals. Its strengths include extensive production facilities, strong R&D capabilities, and established market presence. However, as a larger state-influenced enterprise, it may lack the agility of smaller competitors like Yonghe. Juhua's broader chemical diversification provides stability but may reduce focus on specialized refrigerant markets where Yonghe competes.
• Shandong Dongyue Chemical Co., Ltd. (002643.SZ): Dongyue is one of China's leading fluorochemical producers with strong positions in refrigerants and fluorine polymers. The company benefits from substantial production capacity and technological capabilities in environmentally friendly refrigerants. Its weaknesses include exposure to cyclical chemical markets and intense domestic competition. Compared to Yonghe, Dongyue has greater scale and international presence but may face similar challenges with environmental compliance costs and raw material price volatility.
• Zhejiang Sanmei Chemical Industry Co., Ltd. (603379.SS): Sanmei Chemical specializes in fluorine chemicals and pesticides, with overlapping refrigerant businesses with Yonghe. Its strengths include technical expertise and product diversification across fluorine applications. However, the company's smaller scale and focus on multiple chemical segments may limit its competitive intensity in refrigerants specifically. Sanmei represents regional competition to Yonghe within Zhejiang province, where both companies benefit from proximity to China's chemical industry clusters.
• Honeywell International Inc. (HON): Honeywell is a global technology leader with strong positions in next-generation refrigerants through its Solstice portfolio. Strengths include extensive R&D capabilities, global distribution, and strong intellectual property in low-global-warming-potential refrigerants. Weaknesses include higher cost structures compared to Chinese producers and regulatory challenges in different markets. Honeywell competes with Yonghe in premium refrigerant segments but operates in different market tiers with distinct customer bases and technological approaches.
• Anhui Annada Titanium Industry Co., Ltd. (002136.SZ): While primarily a titanium producer, Annada has fluorochemical operations that create competitive overlap with Yonghe. Its strengths include diversified mineral processing expertise and established chemical manufacturing capabilities. Weaknesses include less specialized focus on fluorochemicals compared to dedicated players like Yonghe. The company represents competition in specific fluorine chemical segments but lacks Yonghe's comprehensive refrigerant specialization.