Jianan Yunzhi Research Report: The stock price is moderately underestimated, but the increase in the next year is limited

In the future, there may be a slight decline and a high correlation with the price of BTC

to sum up

Although Jianan Yunzhi reported lower-than-expected growth in the first three quarters of 2019, the growth rate of the entire industry was also declining due to the Bitcoin bear market. However, the company's free cash flow and revenue both declined significantly, along with higher cost of sales. There may be a slight decline in the future.


1. Mining machine business: We expect the core business will continue to grow well and occupy more market share. The company will use the cash obtained from the listing to strengthen R & D and further accelerate the launch of new products.

2. Expectation of Bitcoin price increase: The total supply of Bitcoin is limited to 21 million pieces. Every time 210,000 bitcoins are newly mined, miners receive half of the block reward for mining, and the bitcoin halving is every four years An event that happened once. "Half" means that the number of bitcoins produced per block is halved, and the supply of bitcoin is slowed down. The market price is directly proportional to the quantity demanded and inversely proportional to the supply quantity. The market expects that halving Bitcoin will directly cause the price of Bitcoin to rise, and the demand for mining machines will be more intense.


Net cash flow loss-During the year ended December 31, 2018, Jianan Yunzhi ’s operating activities had a negative cash flow of 12.7 million yuan (US $ 1.8 million), which During the month, it suffered another net loss of 236.3 million yuan (US $ 33.1 million). Jianan Yunzhi may not be able to maintain or increase profitability in the long term. The inability to generate positive cash flow from operating activities will greatly affect financing costs.

Discounted cash flow analysis (DCF)

Based on the weighted average capital cost of 4.355%, operating income growth rate of 10%, and long-term growth rate of 3.5%, we estimate the intrinsic value of Jianan Yunzhi as $ 2.11.

Comparative analysis of similar companies (Comps)

After analyzing the basic situation, we conclude that, assuming a 25% percentile of P / E and P / TBV to convert the stock price, we estimate that the intrinsic value of Jianan Yunzhi is $ 2.315.

Total value calculation

We weighted the two analysis methods by 60% (DCF) and 40% (Comps), respectively, and the final target price was $ 2.21. We studied the hidden value based on the 25th percentile price-earnings ratio and P / TBV multiples. The implied stock price in P / TBV multiples is $ 1.87, and the median in P / E multiples is $ 2.76. Our target price of $ 2.21 is almost exactly between these two numbers.


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