Hunan Oil Pump Co., Ltd. engages in the manufacture and sale of oil pumps in China and internationally. The company's products primarily include diesel/gasoline engine oil pumps, mechanical and electric control variable displacement pumps, fuel pumps, gearbox, hydraulic, cooling water pumps, integrated module products, hardened reducers, and precision gears, as well as non-ferrous and ferrous castings. Hunan Oil Pump Co., Ltd. was founded in 1949 and is based in Hengdong, China.

China

Hunan Oil Pump Co., Ltd.

Consumer Cyclical

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 barely been above zero and was substantially below that of its peers. On average, the company pays dividends annually. 

603319.SS reported revenue of CNY 2 036mn in the last 12 months, up 3% from FY24. At the same time, the dynamics of cash flow, as measured by free cash flow (FCF), were drastically different. EPS grew 3% from FY24 to CNY 0.82. Market expects EPS to reach CNY 1.25 in FY25.

Over the last six months, the stock performance has varied, with an increase following a drop. The stock's price trend wasn't definitive when matched against its global counterparts from the same sector and industry (as depicted above). Over the past six months the stock has exceeded the performance of this peer group by 51ppts and its growth accelerated by 12ppts in the past month. This is equally valid for peers from the same country and industry. Given the stock's valuation versus its peers, its total price movement is mildly favourable.

The company has reported average EBITDA margins compared to its global peers in recent years. EBITDA margin amounted to 12.2% in the last 12 months, a decline from 18.8% in FY23. 

Historically, 603319.SS has reported good net margins compared to its global peers. Specifically, in the last 12 months, this metric equalled 8.6%, down from 11.2% in FY23. 

Hunan Oil Pump Co., Ltd. reported a return on equity (RoE) of 8.5% in the last 12 months, down from 13.2% in FY23. The market consensus projects an RoE of 14.5% in FY24, this time above its peers. 

In the last 12 months, the return on capital employed (RoCE) declined to 7.0%, below the peers. The consensus estimate for FY24 for RoCE is 14.7%, however, this time ahead of the peers. 

Another important profitability metric, return on assets (RoA), amounted to 5.0% in the last 12 months, a decrease from 7.5% in FY23. The market analysts predict that RoA will be 8.3% in FY24, more robust than its peers in this period. 

The ratio of return on invested capital (RoIC) to the weighted average cost of capital (WACC) has been 1.8 in the past several years. This ratio implies a good 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.

603319.SS boasts high trading liquidity. The average private investor can sell his common position in the stock 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. 

No other major risks have been identified.

The risk of default is moderate. We note strong debt servicing capacity, adequate interest coverage, 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, and poor working capital management.

In highly turbulent market conditions, 603319.SS is volatile. In other words, the stock will fall much 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 large. 

In normal market circumstances, 603319.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 significant to substantial. We would also like to highlight the substantial intraday volatility of the instrument. 

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

Hunan Oil Pump Co., Ltd.

CN¥ 36.98

4

Hunan Oil Pump Co., Ltd.

CN¥ 36.98

4

Risk factor

Profitability factor

Risk / Profitability

Risk factor

Profitability factor

CN¥ 36.98

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