Yalian Machinery Co., Ltd. engages in the research, development, production, service, and sale of wood-based panel production lines and supporting equipment. Its products are primarily used in the production of fiberboard, particleboard, and other wood-based panels and new material panels. The company was founded in 2005 and is based in Dunhua, China.

China

Yalian Machinery Co Ltd

Industrials

The company pays dividends on rare occasions. There have only been a few years with dividend payments in 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. 

001395.SZ reported revenue of CNY 865mn in the last 12 months, up 34% from FY23. The dynamics of cash flow, as measure by free cash flow (FCF), were rather similar. EPS grew 49% from FY23 to CNY 2.36.

The stock's performance has been mixed in the past six months, with growth following a decline. There is no clear price trend compared to its global peers from the same sector and industry (as shown above). It has underperformed this peer group by 3ppts over six months and grown 1ppts faster in the past month. This is largely true for peers from the same country and sector. With respect to the stock's valuation against its peers, its overall price performance is neutral.

The company has reported average EBITDA margins compared to its global peers in recent years. EBITDA margin amounted to 24.4% in the last 12 months, up from 22.2% in FY23. 

Historically, 001395.SZ has reported very strong net margins compared to its global peers. Specifically, in the last 12 months, this metric equalled 21.2%, a growth from 17.9% in FY23. 

Yalian Machinery Co Ltd reported a return on equity (RoE) of 24.9% in the last 12 months, down from 28.4% in FY23. 

Another important profitability metric, return on assets (RoA), amounted to 10.8% in the last 12 months, an increase from 9.3% in FY23. 

In the last 12 months, the return on capital employed (RoCE) declined to 23.7%, above the peers. 

The ratio of return on invested capital (RoIC) to the weighted average cost of capital (WACC) has been 5.5 in the past several years. This ratio implies a excellent 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.

001395.SZ has average trading liquidity. The average private investor can sell his common position in the stock 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. The stock has a small market capitalisation, which usually makes its trading liquidity erratic and unpredictable. 

No other major risks have been identified.

The risk of default is moderate. We note resilient historical revenue growth, robust profitability, solid return on capital, strong debt servicing capacity, adequate interest coverage, solid cash flow generation, and an favourable capital structure, among the positive credit factors. Among the negative credit factors and we point to weak positions in its industry, poor working capital management.

In highly turbulent market conditions, 001395.SZ is moderately volatile. In other words, the stock will fall more 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 moderate. 

In normal market circumstances, 001395.SZ is exceptionally volatile. Put differently, without outstanding market volatility or shocking company news, the stock's price will change quite unpredictably. The stock's losses on its worst days (less than 1-5% of the time) will range from moderate to notable. We would also like to highlight the notable intraday volatility of the instrument. 

Based on key historical and expected multiples, the stock is fairly valued relative to its peers. Specifically, the stock is 'cheap' on P/E, neutral on EV/EBITDA, overpriced on P/FCF. 

Yalian Machinery Co Ltd

CN¥ 47.53

3

Yalian Machinery Co Ltd

CN¥ 47.53

3

Risk factor

Profitability factor

Risk / Profitability

Risk factor

Profitability factor

CN¥ 47.53

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