Yunnan Luoping Zinc&Electricity Co., Ltd. engages in mining and processing lead-zinc ores in China. The company processes zinc ingots, zinc alloys, lead concentrates, germanium concentrates, silver concentrates, cadmium ingots, ultra-fine zinc powder and by-product lead slag, copper concentrates, etc. It is also involved in hydropower generation. The company was incorporated in 2000 and is based in Luoping, China.

China

Yunnan Luoping Zinc&Electricity Co., Ltd.

Basic Materials

The company does not pay dividends at all, or it pays them sporadically. There have only been a few years with dividend payments in the past ten years. 

002114.SZ reported revenue of CNY 1 047mn in the last 12 months, down 17% from FY24. At the same time, the dynamics of cash flow, as measured by free cash flow (FCF), were drastically different. EPS grew 20% from FY24 to CNY -0.30.

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). The stock has outperformed this peer group by 14ppts over past six months and grown 3ppts slower 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 very poor EBITDA margins compared to its global peers in recent years. EBITDA margin amounted to -7.4% in the last 12 months, a decline from -2.8% in FY23. 

Historically, 002114.SZ has reported very poor net margins compared to its global peers. Specifically, in the last 12 months, this metric equalled -9.0%, a growth from -13.6% in FY23. 

In the last 12 months, the return on capital employed (RoCE) grew to -7.4%, below the peers. 

Another important profitability metric, return on assets (RoA), amounted to -4.1% in the last 12 months, an increase from -8.5% in FY23. 

Yunnan Luoping Zinc&Electricity Co., Ltd. reported a return on equity (RoE) of -9.8% in the last 12 months, up from -18.4% in FY23. 

The ratio of return on invested capital (RoIC) to the weighted average cost of capital (WACC) has been -1.0 in the past several years. This ratio implies a fragile 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.

002114.SZ has average trading liquidity. The average private investor can sell his common position in the stock almost immediately. Liquidity is usually 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. Another factor to consider is the substantial number of days with zero trading volumes, i.e., without any ability to sell a position. 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 low margin volatility, among the positive credit factors. Among the negative credit factors, we point to weak positions in its industry, slow historical revenue growth, bleak profitability, negligible return on capital, and inadequate interest coverage.

In highly turbulent market conditions, 002114.SZ is as volatile as an index. In other words, the stock will move with 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 limited. 

In normal market circumstances, 002114.SZ is volatile. Put differently, without outstanding market volatility or shocking company news, the stock's price will move much wider than the index. 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 overvalued relative to its peers. 

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Yunnan Luoping Zinc&Electricity Co., Ltd.

CN¥ 7.32

3

Yunnan Luoping Zinc&Electricity Co., Ltd.

CN¥ 7.32

3

Risk factor

Profitability factor

Risk / Profitability

Risk factor

Profitability factor

CN¥ 7.32

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