Jiangxi Selon Industrial Co., Ltd. researches, develops, produces, markets, and sells fine chemicals in China. It offers AC foaming agents, thionyl chloride, chlor-alkali, and other chemical products, as well as industrial sodium hydroxide, liquid chlorine, synthetic hydrochloric acid, and aqueous ammonia. The company also exports its products to approximately 30 countries in Southeast Asia, Central Asia, Europe, Latin America, and Africa. Jiangxi Selon Industrial Co., Ltd. was founded in 2003 and is based in Leping, China.

China

Jiangxi Selon Industrial Co., Ltd.

Basic Materials

The company tries to pay dividends regularly but only sometimes does so. It has paid dividends in roughly half 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 low and below its peers. 

002748.SZ reported revenue of CNY 2 024mn in the last 12 months, up 2% from FY24. At the same time, the dynamics of cash flow, as measured by free cash flow (FCF), were drastically different. EPS grew 130% from FY24 to CNY 0.25.

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 39ppts over past six months and grown 12ppts 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 positive. Usually, this means that a fairly valued or slightly undervalued stock has become more 'expensive', indicating that the market, in general, may have gained short-term confidence in the stock.

The company has reported modest EBITDA margins compared to its global peers in recent years. EBITDA margin amounted to 4.1% in the last 12 months, a decline from 8.8% in FY23. 

Historically, 002748.SZ has reported modest net margins compared to its global peers. Specifically, in the last 12 months, this metric equalled 3.0%, a growth from 0.7% in FY23. 

Jiangxi Selon Industrial Co., Ltd. reported a return on equity (RoE) of 4.4% in the last 12 months, up from 1.1% in FY23. 

Another important profitability metric, return on assets (RoA), amounted to 2.7% in the last 12 months, an increase from 0.7% in FY23. 

In the last 12 months, the return on capital employed (RoCE) grew to 4.2%, below the peers. 

The ratio of return on invested capital (RoIC) to the weighted average cost of capital (WACC) has been 1.4 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.

002748.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 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, we point to weak positions in its industry, slow historical revenue growth, bleak profitability, negligible return on capital, and poor working capital management.

In highly turbulent market conditions, 002748.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, 002748.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 substantial. 

Based on key historical and expected multiples, the stock is slightly overvalued relative to its peers. In particular, the stock is overpriced on P/E, 'expensive' on EV/EBITD. 

Jiangxi Selon Industrial Co., Ltd.

CN¥ 9.25

3

Jiangxi Selon Industrial Co., Ltd.

CN¥ 9.25

3

Risk factor

Profitability factor

Risk / Profitability

Risk factor

Profitability factor

CN¥ 9.25

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