Valuation Analysis Report on Jianghua Microelectronics (603078)

From the perspective of price-to-earnings ratio, I will systematically assess whether the current valuation fully reflects fundamental improvements from three dimensions: cash flow improvement, profitability, and valuation level.

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Year	Operating Cash Flow (RMB millions)	YoY Change	Quality Assessment
2020	-11.11	-	Negative, Under Pressure
2021	-49.31	-344%	Continuously Deteriorating
2022	+122.45	Turned Positive	Significantly Improved
2023	+145.60	+19%	Continuously Improving
2024	+106.26	-27%	Inflection Point Appeared

Year	Free Cash Flow (RMB millions)	FCF Margin	Status
2020	-288.01	-51.1%	Severely Negative
2021	-279.07	-35.2%	Continuously Under Pressure
2022	-93.65	-10.0%	Significantly Narrowed
2023	+47.02	+4.6%	Turned Positive for the First Time
2024	-68.81	-6.3%	Turned Negative Again

• Sustainability of Improvement is Doubtful
  : Although operating cash flow improved significantly between 2022-2023, it declined in 2024; free cash flow only turned positive briefly in 2023 before turning negative again [0].
• Cash Flow Quality
  : The ratio of operating cash flow to net profit was 1.16x, 1.38x, and 1.30x in 2022-2024 respectively, indicating acceptable earnings quality, but this advantage failed to translate into sustained free cash flow [0].
• Capex Fluctuations
  : Capex increased 77.6% year-on-year in 2024 (from RMB 986 million to RMB 1.751 billion), which was the direct cause of the negative FCF [0].

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Period	Revenue (RMB millions)	YoY Growth Rate
2020→2021	563.79→792.14	+40.5%
2021→2022	792.14→939.16	+18.6%
2022→2023	939.16→1029.91	+9.7%
2023→2024	1029.91→1099.24	+6.7%

Revenue growth has shown a continuous downward trend, dropping from 40.5% in 2021 to 6.7% in 2024 [0].

• Net profit in 2024 was RMB 81.43 million, a
  22.6% decrease
  compared to RMB 105.25 million in 2023 [0]
• ROE was only
  4.75%
  , which is at a low level [0]
• Net profit margin dropped from 10.2% in 2023 to 7.67% in 2024 [0]

Although operating cash flow outperformed net profit (ratio of approximately 1.3x), the downward trend of net profit itself indicates that the company’s core profitability has not substantially improved.

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Metric	Value	Industry Comparison	Assessment
P/E (TTM)	82.36x	Semiconductor Materials Industry: ~30-50x	Significantly High
P/B	3.87x	Industry: ~2-3x	High
EV/OCF	37.92x	Industry: ~15-25x	High
P/S	6.32x	Industry: ~3-5x	High

Based on historical data analysis, the historical average P/E of Jianghua Microelectronics is approximately

, and the current valuation of 82.36x represents an approximately over the historical average [0].

• The stock price has risen
  27.25%
  since 2024, while net profit fell by approximately 23% during the same period [0]
• Valuation expansion mainly comes from market speculation on the expectation of domestic substitution in the semiconductor wet chemicals industry

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1. Insufficient Sustainability of Cash Flow Improvement
   • Free cash flow only turned positive in 2023, and turned negative again in 2024
   • Operating cash flow dropped by 27% in 2024
   • The current valuation is based on the assumption of “sustained cash flow improvement”, but this assumption has not yet been verified

2. Divergence Between Profitability and Valuation
   • Net profit has continued to decline (-22.6% YoY in 2024), while the valuation has hit a historical high
   • An 82x P/E corresponds to an EPS of approximately RMB 0.24, indicating that the market expects substantial profit growth in the future
   • However, revenue growth has dropped to single digits, and there is insufficient evidence of profitability improvement

3. Valuation Level Has Deviated Significantly from the Reasonable Range
   • Current P/E 82x vs historical average 45x, 83% premium
   • In comparison, peer comparable companies typically have a P/E in the 30-50x range
   • EV/OCF of 37.9x is also at a relatively high level

4. Technical Signals Indicate Overbought Risk
   • KDJ Indicator: K=74.2, D=65.8, J=90.9, indicating short-term overbought [0]
   • The stock price is in a sideways consolidation range ($18.23-$19.72), with no clear trend [0]
   • Beta=-0.35, negatively correlated with the broader market, with strong independent trend [0]

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Dimension	Assessment	Risk Warning
Valuation Risk	High	82x P/E lacks fundamental support
Cash Flow Risk	Medium-High	Sustainability of improvement is in doubt
Profit Risk	High	Net profit continues to decline
Industry Outlook	Medium	The logic of domestic substitution for semiconductor wet chemicals is valid, but competition is intensifying

: The current valuation to fully reflect the actual situation of cash flow improvement, and instead has excessively overdrawn future growth expectations. It is recommended to monitor the cash flow performance in the 2025 Q1 report. If operating cash flow continues the 2024 downward trend, the current valuation faces significant pullback risk.

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[0] Jinling AI Financial Database - Jianghua Microelectronics (603078.SS) Company Overview, Financial Analysis, Technical Analysis, Cash Flow Data (January 2026)