Zhejiang Jiaxin Silk Corp., Ltd. manufactures and sells silk fabrics and garments, and other silk-related products. It is involved in the silkworm cocoon harvesting and drying, cocoon silk weaving, design research and development, printing and dyeing, clothing manufacturing businesses; trading of clothing; supply chain management activities; and manufacturing of hardware components. The company is based in Jiaxing, China.

China

Zhejiang Jiaxin Silk Corp., Ltd.

Consumer Cyclical

The company has a track record of regular dividend payments. It has paid dividends in each of the past ten years. Dividend per share (DPS) has grown yearly, but the dynamics are somewhat mixed. In the past 12 months, the dividend yield has been strong and significantly above its peers. At the same time, the average five-year yield has been significantly higher and exceeded most of its peers. On average, the company pays dividends annually. 

002404.SZ reported revenue of CNY 4 591mn in the last 12 months, up 1% from FY24. The dynamics of cash flow, as measure by free cash flow (FCF), were rather similar. EPS fell 0% from FY24 to CNY 0.29. Market expects EPS to reach CNY 0.45 in FY25.

The stock has been growing steadily in the past six months, adding 3% in total. The stock has outperformed its global peers from the same sector and industry (as shown above), surpassing them by 6ppts in total. At the same time, the stock's performance relative to its the peers from the same country and sector is different. It underperformed these peers by 4ppts over six months and grew 5ppts faster in the past month. With respect to the stock's valuation against its peers, its overall price performance is neutral.

The company has reported modest EBITDA margins compared to its global peers in recent years. EBITDA margin amounted to 5.5% in the last 12 months, a decline from 8.5% in FY23. 

Historically, 002404.SZ has reported modest net margins compared to its global peers. Specifically, in the last 12 months, this metric equalled 3.5%, down from 5.0% in FY23. 

In the last 12 months, the return on capital employed (RoCE) declined to 7.5%, below the peers. 

Zhejiang Jiaxin Silk Corp., Ltd. reported a return on equity (RoE) of 7.9% in the last 12 months, down from 10.8% in FY23. 

Another important profitability metric, return on assets (RoA), amounted to 4.6% in the last 12 months, a decrease from 6.2% in FY23. 

The ratio of return on invested capital (RoIC) to the weighted average cost of capital (WACC) has been 1.3 in the past several years. This ratio implies a average 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.

002404.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. 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, adequate interest coverage, and an favourable capital structure, among the positive credit factors. Among the negative credit factors and we point to weak positions in its industry, bleak profitability.

In highly turbulent market conditions, 002404.SZ is not overly volatile. In other words, the stock will fall 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 low. 

In normal market circumstances, 002404.SZ is moderately volatile. Put differently, without outstanding market volatility or shocking company news, the stock's price will move slightly wider than the index. The stock's losses on its worst days (less than 1-5% of the time) will range from low to mild. We would also like to highlight the mild intraday volatility of the instrument. 

Considering past and projected metrics, the stock is slightly 'cheaper' than its peers. In particular, the stock is reasonably priced on P/E, of fair value on EV/EBITDA, trading at neutral levels on P/FCF. 

Zhejiang Jiaxin Silk Corp., Ltd.

CN¥ 6.33

5

Zhejiang Jiaxin Silk Corp., Ltd.

CN¥ 6.33

5

Risk factor

Profitability factor

Risk / Profitability

Risk factor

Profitability factor

CN¥ 6.33

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