Changchun Engley Automobile Industry Co.,Ltd. designs, develops, manufactures, and sells automotive parts. The company's products include metallic parts, such as cross car beams, bumps, thresholds, battery lower shells and other body stamping parts; and non-metallic products that comprise front end modules, underbody coves spare, tire warehouses, EV battery upper shell, battery trays and wheel guards, etc. It also produces automotive parts moulds; and after-sales services. The company was founded in 2006 and is based in Changchun, China.

China

Changchun Engley Automobile Industry Co.,Ltd.

Consumer Cyclical

The company pays dividends irregularly. 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 low and below its peers. The company distributes nearly all its profit as dividends (payout ratio above 90%, a negative factor). It will not be easy to sustain such an extreme payout ratio. It may also indicate a company's lack of profitable growth opportunities, which suggests doubtful prospects. 

601279.SS reported revenue of CNY 4 510mn in the last 12 months, down 3% from FY24. At the same time, the dynamics of cash flow, as measured by free cash flow (FCF), were drastically different. 

Over the last six months, the stock performance has varied, with an increase following a drop. When measured against its worldwide peers from the same industry (as shown above), the stock has been weaker, underperforming by 11ppts. There is a distinction between the stock's performance and that of its peers from the same country and industry. Over six months its performance trailed that of this peer group by 18ppts and accelerated its growth by 0ppts in the recent month. Given the stock's valuation versus its peers, its total price movement is neither favourable nor unfavourable.

The company has reported modest EBITDA margins compared to its global peers in recent years. EBITDA margin amounted to 2.6% in the last 12 months, a decline from 11.6% in FY23. 

Historically, 601279.SS has reported weak net margins compared to its global peers. Specifically, in the last 12 months, this metric equalled -0.2%, down from 1.9% in FY23. 

Changchun Engley Automobile Industry Co.,Ltd. reported a return on equity (RoE) of -0.2% in the last 12 months, down from 2.6% in FY23. 

Another important profitability metric, return on assets (RoA), amounted to -0.1% in the last 12 months, a decrease from 1.2% in FY23. 

In the last 12 months, the return on capital employed (RoCE) declined to -0.2%, below the peers. 

The ratio of return on invested capital (RoIC) to the weighted average cost of capital (WACC) has been 0.2 in the past several years. This ratio implies a weak 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.

601279.SS has above average trading liquidity. The average private investor can sell his common position in the stock almost immediately. Liquidity is usually quite stable and remains favourable on the days with the lowest activity. The trading volume mostly stays the same even under highly turbulent market conditions. 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, 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, and negligible return on capital.

In highly turbulent market conditions, 601279.SS 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, 601279.SS 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. 

From both historical and forecast perspectives, the stock is overpriced compared to similar stocks. In particular, the stock is 'expensive' on EV/EBITDA, trading at neutral levels on P/FC. 

Changchun Engley Automobile Industry Co.,Ltd.

CN¥ 3.71

4

Changchun Engley Automobile Industry Co.,Ltd.

CN¥ 3.71

4

Risk factor

Profitability factor

Risk / Profitability

Risk factor

Profitability factor

CN¥ 3.71

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