The average target price of 605020.SS is 29 and suggests 28% upside potential. Usually, this means a BUY recommendation among investment firms, or a recommendation to increase one's position in this instrument in the next 12 months. The most optimistic analyst has a target price of 36.3. This translates into 63% upside potential in the best case. On the other hand, the most pessimistic analyst has a target price of 19.1. This is equivalent to 14% downside potential in the worst case. 

Zhejiang Yonghe Refrigerant Co.,Ltd. engages in the research and development, production, and sale of fluorochemical products. The company's principal products include fluorocarbon chemicals, mixed refrigerants, fluorine-containing polymer materials and related body products, hydrofluoric acid, fluorite fine powder, fluorite lump ore, etc. It also offers refrigerant gases, and refrigerant fittings and tools. The company was founded in 1998 and is headquartered in Quzhou, China.

China

Zhejiang Yonghe Refrigerant Co., Ltd.

Basic Materials

The company pays dividends from time to time. It has paid dividends in less than half 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 low and below its peers. On average, the company pays dividends annually. 

605020.SS reported revenue of CNY 4 725mn 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 23% from FY24 to CNY 0.81. Market expects EPS to reach CNY 0.69 in FY25.

The stock's performance has been mixed in the past six months, with growth following a decline. The stock has outperformed its global peers from the same sector and industry (as shown above), surpassing them by 27ppts in total. At the same time, the stock's performance relative to its the peers from the same country and sector is different. The stock outperformed these peers by 22ppts over the past six months and grew 0ppts slower 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 11.2% in the last 12 months, a decline from 12.6% in FY23. 

Historically, 605020.SS has reported average net margins compared to its global peers. Specifically, in the last 12 months, this metric equalled 6.6%, a growth from 4.2% in FY23. 

In the last 12 months, the return on capital employed (RoCE) grew to 6.2%, below the peers. The consensus estimate for FY24 for RoCE is 7.8%, again behind the peers. 

Zhejiang Yonghe Refrigerant Co., Ltd. reported a return on equity (RoE) of 8.5% in the last 12 months, up from 7.1% in FY23. The market consensus projects an RoE of 7.6% in FY24, again behind its peers. 

Another important profitability metric, return on assets (RoA), amounted to 4.0% in the last 12 months, an increase from 3.0% in FY23. The market analysts predict that RoA will be 3.0% in FY24, again weaker than its peers. 

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.

605020.SS boasts high trading liquidity. The average private investor can sell his common position in the stock almost immediately. Liquidity is usually quite stable and remains extremely favourable on the days with the lowest activity. The trading volume mostly stays the same even under highly turbulent market conditions. 

No other major risks have been identified.

The risk of default is moderate. We note 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, poor working capital management.

In highly turbulent market conditions, 605020.SS is exceptionally volatile. In other words, the stock will be among the worst-performers in times of extreme market volatility or shocking company news. Standalone, the worst-day losses (less than 1% of the time) will likely be critical. 

In normal market circumstances, 605020.SS is highly volatile. Put differently, without outstanding market volatility or shocking company news, the stock's price will change somewhat erratically. The stock's losses on its worst days (less than 1-5% of the time) will range from significant to immense. 

From both historical and forecast perspectives, the stock is slightly overpriced compared to similar stocks. In particular, the stock is reasonably priced on P/E, 'expensive' on EV/EBITD. 

Zhejiang Yonghe Refrigerant Co., Ltd.

CN¥ 22.32

3

Zhejiang Yonghe Refrigerant Co., Ltd.

CN¥ 22.32

3

Risk factor

Profitability factor

Risk / Profitability

Risk factor

Profitability factor

CN¥ 22.32

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