Ning Jia of Shanghai Pumeng Asset Management presented his in-depth thesis on China Jushi (China: 600176) at Asian Investing Summit 2019.
Thesis summary:
China Jushi is the largest fiberglass manufacturer in the world. Fiberglass is an attractive segment as downstream demand grows steadily, while the combination of technological know-how, sizable initial capital outlay, and scale advantages creates high barriers to entry. The result is an oligopolistic market, with the top six players accounting for 80+% of global market share. During the past two decades, Chinese fiberglass manufacturers gradually took share as China’s comparative advantages greatly favored Chinese manufacturers. China Jushi has gradually dominated both the domestic and global markets.
Key to Jushi’s successful rise are Jushi’s cost advantage, best-in-class technology, operating efficiency, a visionary and competent leader, and a remarkable culture. From 1996 to 2017, China Jushi has compounded sales at 18% and net income at 22% annually. Gross margin has increased from 22% to 45% and net margin has increased from 12% to almost 25%. China Jushi recently traded at approximately 15x trailing earnings, slightly below the historical average. Over the next five years, China Jushi can achieve high-single-digit to low-teens sales growth and mid-to-high-teens earnings growth. Without assuming any multiple expansion, the all-in return for holding China Jushi over the next five years may be 15%-20% annually, mostly from fundamental growth.
Over the next five years, China Jushi can achieve high-single-digit to low-teens sales growth and mid-to-high-teens earnings growth. Without assuming any multiple expansion, the all-in return for holding China Jushi over the next five years may be 15%-20% annually, mostly from fundamental growth.
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About the instructor:
Ning Jia is the Chief Investment Officer of Pumeng Asset Management. Previously Ning worked for four years as an analyst covering U.S and China consumer, healthcare, financial and TMT sectors at Century Management based in Austin, Texas. Century Management was founded by Arnold Van Den Berg in 1974 and has more than 40 years of track record as an investment manager. Ning began his career as an Assurance Associate in the Financial Service Office Division focusing on hedge fund audit at Ernst and Young U.S LLP. He received his Master of Accountancy and B.B.A in Accounting both from the University of Georgia. Ning is a CFA charterholder as well as a Certified Public Accountant.
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