Stocks Take A Hit: How Will Xinyi Glass Holdings Limited (HKG:868) Fare?

Xinyi Glass Holdings Limited is a financially healthy and robust stock with a proven track record of outperformance. We all know Xinyi Glass Holdings, and having this large-cap to cushion your portfolio during a volatile period in the stock market isn’t a bad idea. Today I will give a high-level overview of the stock, and why I believe it’s still attractive.

View our latest analysis for Xinyi Glass Holdings

Xinyi Glass Holdings Limited, an investment holding company, produces and sells automobile, construction, float, and other glass products for commercial and industrial applications. Founded in 1988, and headed by CEO Ching Sai Tung, the company size now stands at 11.87k people and with the market cap of HK$38b, it falls under the mid-cap stocks category. Typically, large companies are well-established and highly resourced, meaning that stock market volatility may impact some short-term strategic decisions but unlikely to matter in the long run. Therefore, large-cap stocks are a safe bet to buy more of when the general market is selling off.

SEHK:868 Historical Debt, April 5th 2019
SEHK:868 Historical Debt, April 5th 2019

Xinyi Glass Holdings currently has HK$10.0b debt on its books which requires regular servicing. This means it needs to have sufficient cash-on-hand to meet upcoming interest expenses. With an interest coverage ratio of 31.91x, Xinyi Glass Holdings produces sufficient earnings (EBIT) to cover its interest payments. Anything above 3x is considered safe practice. Furthermore, its cash flows from operations copiously covers it debt by 51%, above the safe minimum of 20%. Not to mention, it meets the basic liquidity requirement with current assets exceeding liabilities, which further builds on its financial strength in the face of a volatile market.

SEHK:868 Income Statement, April 5th 2019
SEHK:868 Income Statement, April 5th 2019

868’s annual earnings growth rate has been positive over the last five years, with an average rate of 15%, overtaking the market growth rate of 9.9%. It has also returned an ROE of 23% recently, above the industry return of 13%. Xinyi Glass Holdings’s strong performance over time is a demonstration of its ability to grow through cycles, raising my confidence in the company as a long-term investment.

Next Steps:

Based on these three factors, 868 makes for a strong long-term investment in the face of a fickle stock market. If you’re a risk averse investor, lining your portfolio with proven companies you’re willing to buy more and more of as the price falls, is a good strategy to build your wealth over the long run. This is the beginning of your research, but before you decide to buy 868, I highly urge you to understand more about the company, in particular, in these following areas:
  1. Future Outlook: What are well-informed industry analysts predicting for 868’s future growth? Take a look at our free research report of analyst consensus for 868’s outlook.
  2. Valuation: What is 868 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 868 is currently mispriced by the market.
  3. 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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.