Is Anhui Conch Cement Company Limited (HKG:914) A Financially Strong Company?
Investors looking for stocks with high market liquidity and little debt on the balance sheet should consider Anhui Conch Cement Company Limited (HKG:914). With a market valuation of HK$191b, 914 is a safe haven in times of market uncertainty due to its strong balance sheet. These companies are resilient in times of low liquidity and are not as strongly impacted by interest rate hikes as companies with lots of debt. Assessing the most recent data for 914, I will take you through the key ratios to measure financial health, in particular, its solvency and liquidity.
View our latest analysis for Anhui Conch Cement
Does 914 produce enough cash relative to debt?
914’s debt levels have fallen from CN¥17b to CN¥11b over the last 12 months – this includes long-term debt. With this debt repayment, the current cash and short-term investment levels stands at CN¥31b , ready to deploy into the business. Moreover, 914 has generated CN¥29b in operating cash flow in the last twelve months, leading to an operating cash to total debt ratio of 275%, meaning that 914’s current level of operating cash is high enough to cover debt. This ratio can also be a sign of operational efficiency as an alternative to return on assets. In 914’s case, it is able to generate 2.75x cash from its debt capital.
Can 914 pay its short-term liabilities?
With current liabilities at CN¥24b, it appears that the company has maintained a safe level of current assets to meet its obligations, with the current ratio last standing at 2.57x. For Basic Materials companies, this ratio is within a sensible range as there’s enough of a cash buffer without holding too much capital in low return investments.
Can 914 service its debt comfortably?
What is considered a high debt-to-equity ratio differs depending on the industry, because some industries tend to utilize more debt financing than others. A ratio below 40% for large-cap stocks is considered as financially healthy, as a rule of thumb. With a debt-to-equity ratio of 9.9%, 914’s debt level is relatively low. 914 is not taking on too much debt commitment, which can be restrictive and risky for equity-holders.
Next Steps:
914’s high cash coverage and low debt levels indicate its ability to utilise its borrowings efficiently in order to generate ample cash flow. Furthermore, the company exhibits an ability to meet its near-term obligations, which isn’t a big surprise for a large-cap. This is only a rough assessment of financial health, and I’m sure 914 has company-specific issues impacting its capital structure decisions. I suggest you continue to research Anhui Conch Cement to get a better picture of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for 914’s future growth? Take a look at our free research report of analyst consensus for 914’s outlook.
Valuation: What is 914 worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether 914 is currently mispriced by the market.
Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
