The average target price of 000885.SZ is 19 and suggests 35% upside potential. Usually, this means a BUY recommendation among investment firms, or a recommendation to increase one's position in this instrument in the next 12 months. The most optimistic analyst has a target price of 18.9. This translates into 35% upside potential in the best case. On the other hand, the most pessimistic analyst has a target price of 18.9. This suggests 35% upside potential. Even the most pessimistic analyst believes there will be stock growth. 

City Development Environment Co., Ltd. produces and sells cement clinker and cement products in China. It also engages in the investment, construction, operation, and management of environmental and public utility and municipal projects, as well as expressways. The company was founded in 1998 and is based in Zhengzhou, China.

China

City Development Environment CO.,Ltd.

Industrials

The company pays dividends most of the time. It has paid dividends in almost every one of the past ten years. Dividend per share (DPS) has grown yearly, but the dynamics are unclear. In the past 12 months, the dividend yield has been moderate and on par with its peers. On average, the company pays dividends annually. 

000885.SZ reported revenue of CNY 6 769mn in the last 12 months, up 3% from FY24. At the same time, the dynamics of cash flow, as measured by free cash flow (FCF), were drastically different. EPS grew 4% from FY24 to CNY 1.86. Market expects EPS to reach CNY 1.61 in FY25.

Over the last six months, the stock performance has varied, with an increase following a drop. The stock's price trend wasn't definitive when matched against its global counterparts from the same sector and industry (as depicted above). Over the past six months the stock has exceeded the performance of this peer group by 5ppts and its growth decelerated by 5ppts in the past month. This is equally valid for peers from the same country and industry. Given the stock's valuation versus its peers, its total price movement is neither favourable nor unfavourable.

The company has reported strong EBITDA margins compared to its global peers in recent years. EBITDA margin amounted to 36.7% in the last 12 months, a decline from 43.4% in FY23. 

Historically, 000885.SZ has reported very strong net margins compared to its global peers. Specifically, in the last 12 months, this metric equalled 17.6%, a growth from 16.5% in FY23. 

City Development Environment CO.,Ltd. reported a return on equity (RoE) of 14.7% in the last 12 months, down from 15.3% in FY23. The market consensus projects an RoE of 12.1% in FY24, again ahead of its peers. 

In the last 12 months, the return on capital employed (RoCE) declined to 5.1%, below the peers. The consensus estimate for FY24 for RoCE is 5.9%, again behind the peers. 

Another important profitability metric, return on assets (RoA), amounted to 4.0% in the last 12 months, an increase from 3.9% in FY23. The market analysts predict that RoA will be 2.8% in FY24, again weaker than its peers. 

The ratio of return on invested capital (RoIC) to the weighted average cost of capital (WACC) has been 1.6 in the past several years. This ratio implies a good shareholder value creation. 

The institutional, legal, and compliance risks associated with the company's country are close to minimal. In combination with rigorous business standards, shareholder rights are well protected.

000885.SZ boasts high trading liquidity. The average private investor can sell his common position in the stock almost immediately. Liquidity is usually quite stable and remains extremely favourable on the days with the lowest activity. However, please consider that under highly turbulent market conditions, the trading volume tends to decrease significantly. 

No other major risks have been identified.

The risk of default is moderate. We note robust profitability, among the positive credit factors. Among the negative credit factors, we point to weak positions in its industry, excessive margin volatility, poor working capital management, weak debt servicing capacity, and an unfavourable capital structure.

In highly turbulent market conditions, 000885.SZ is not volatile. In other words, the stock will fall far less than the index in times of extreme market volatility or shocking company news. Standalone, the worst-day losses (less than 1% of the time) will likely be very low. 

In normal market circumstances, 000885.SZ is not overly volatile. Put differently, without outstanding market volatility or shocking company news, the stock's price will remain relatively stable. The stock's losses on its worst days (less than 1-5% of the time) will range from very low to negligible. We would also like to highlight the negligible intraday volatility of the instrument. 

From both historical and forecast perspectives, the stock is moderately underpriced compared to similar stocks. Specifically, the stock is 'cheap' on P/E, undervalued on EV/EBITDA, overpriced on P/FCF. 

City Development Environment CO.,Ltd.

CN¥ 13.8

6

City Development Environment CO.,Ltd.

CN¥ 13.8

6

Risk factor

Profitability factor

Risk / Profitability

Risk factor

Profitability factor

CN¥ 13.8

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