Stock Analysis & Valuation Luoyang Jianlong Micro-nano New Material Co., Ltd (688357.SS)

• Previous Close: $34.62
• Sector Valuation Confidence Level: Moderate

Valuation method	Value, $	Upside, %
Artificial intelligence (AI)	62.23	80
Intrinsic value (DCF)	15.51	-55
Graham-Dodd Method	12.13	-65
Graham Formula		n/a

Strategic Investment Analysis

Company Overview

Luoyang Jianlong Micro-nano New Material Co., Ltd is a specialized Chinese manufacturer of molecular sieves and advanced adsorption materials, serving critical industrial sectors since its founding in 1998. Headquartered in Luoyang, China, the company produces a diverse portfolio including oxygen molecular sieves for medical applications, industrial oxygen and hydrogen molecular sieves, and gas drying/purification components. These materials are essential for medical care, clean energy, industrial gases, environmental governance, and energy/chemical industries. As a Shanghai Stock Exchange-listed entity, Jianlong operates at the intersection of basic materials and specialty chemicals, leveraging its technical expertise to address growing demand for purification and separation technologies in China's evolving industrial landscape. The company's integrated approach encompasses both material production and technical services, positioning it as a key supplier in China's push toward cleaner industrial processes and healthcare advancements. With molecular sieves playing increasingly vital roles in oxygen concentrators, hydrogen purification, and industrial gas separation, Jianlong's specialized focus places it at the forefront of materials science applications supporting environmental sustainability and technological innovation.

Investment Summary

Luoyang Jianlong presents a specialized investment case with moderate financial performance but notable risks. The company generated CNY 778.7 million in revenue with CNY 74.8 million net income, translating to a diluted EPS of CNY 0.68 and a dividend yield supported by a CNY 0.30 per share distribution. While the company maintains a low beta of 0.176 suggesting defensive characteristics, concerning factors include negative free cash flow (operating cash flow of CNY 118.9 million minus capital expenditures of CNY 134.1 million) and significant debt levels (CNY 694.4 million) relative to cash reserves (CNY 244.2 million). The niche market focus provides some insulation from broader economic cycles, but limited scale and cash flow challenges raise questions about long-term competitiveness in China's rapidly evolving materials sector. Investors should weigh the company's specialized technological positioning against its financial constraints and the competitive pressures from larger chemical manufacturers.

Competitive Analysis

Luoyang Jianlong competes in the highly specialized molecular sieve market, where its competitive advantage stems from nearly 25 years of focused expertise in micro-nano materials manufacturing. The company's positioning is defined by its specialization in medical-grade oxygen molecular sieves and hydrogen purification materials, serving niche applications within China's healthcare and clean energy sectors. Unlike broader chemical companies, Jianlong's targeted approach allows for deep technical knowledge in specific adsorption technologies, potentially providing superior product performance in medical oxygen concentrators and industrial gas purification systems. However, the company faces significant competitive challenges from scale disadvantages. Larger chemical manufacturers benefit from economies of scale in raw material procurement, R&D investment capacity, and global distribution networks that Jianlong cannot match with its current CNY 778.7 million revenue base. The competitive landscape is further complicated by the capital-intensive nature of materials science, where Jianlong's negative free cash flow and substantial debt burden limit its ability to invest in next-generation technologies. While the company's long-standing presence and technical specialization provide some defensive moat in specific application areas, its limited financial resources create vulnerability to both domestic competitors with greater scale and international players with advanced technological capabilities. The company's future competitiveness will depend on its ability to leverage its specialized expertise while addressing financial constraints that hamper growth and innovation capacity.

Major Competitors

• Wanhua Chemical Group Co., Ltd (600309.SS): Wanhua Chemical is China's leading MDI producer with massive scale and extensive R&D capabilities. Its strengths include diversified chemical portfolio and global presence, but it lacks Jianlong's specialized focus on molecular sieves. While Wanhua has broader technological resources, Jianlong may maintain advantages in specific molecular sieve applications where specialized knowledge outweighs scale benefits.
• Luxi Chemical Group Co., Ltd (000830.SZ): Luxi Chemical is a major fertilizer and chemical producer with significant industrial gas operations. Its strengths include integrated production capabilities and established market position, but its molecular sieve business is less specialized than Jianlong's. Luxi's larger scale provides cost advantages, while Jianlong competes through deeper application-specific expertise in medical and purification sectors.
• BASF SE (BAS.DE): BASF is the world's largest chemical company with extensive catalyst and adsorbent technologies. Its strengths include global R&D infrastructure and technological leadership, but it faces higher cost structures in China. Jianlong competes through localized production and potentially lower costs for domestic customers, though it cannot match BASF's technological breadth or innovation capacity.
• Honeywell International Inc. (HON): Honeywell's UOP division is a global leader in adsorption technologies and molecular sieves for refining and petrochemical applications. Its strengths include advanced technology and global service network, but it focuses primarily on large-scale industrial applications. Jianlong competes in medical and specialized industrial segments where localized support and cost considerations may provide competitive advantages.
• W.R. Grace & Co. (WRB): Grace is a specialty chemical company with significant expertise in catalysts and materials technologies, including molecular sieves. Its strengths include strong intellectual property portfolio and global technical service, but its focus is primarily on refining and chemical process industries. Jianlong maintains position in medical oxygen and hydrogen purification applications where Grace has less concentrated presence.