Connie's Stock Investment Value Analysis

A-share market has been a highly-volatile,strongly-speculative,bellwether-distinctive market,since its birth in 1990.Market players make their profit by price volatility.The reasons why the market chose such a method to earn money are as the followings:firstly,the transparency of the collection of macro-control policies.Market players find it difficult to understand the consistency of policy instrument.There are less communication between policy maker and market players.Even worse,there are more misunderstandings and guideline illusion.For example,the stock market plummeting of 2015 was caused by the enormous and sudden policy change of leveraged money which is supported by financial regulation committee in late 2014,therefore magnetized huge amount of money into stock market,pushing stock market index a long time rally until the first half of 2015.Basically,policy-driven activities are more inclined to be excessive and thus cause administrative intervention.Those problems are the main interferences that cast influence on denominator of the DDM(dividend discount model)fraction.So it seems natural for market players to choose relatively efficacious mechanism of price game.Secondly,there are no class-action lawsuit system and damage compensation system in China.Market players are more vulnerable and difficult to safeguard their interest.Meanwhile,because of lack of system constraints the listed companies' law violation cost is small;it is common for them to seek profit by infringing the rights of the market player.These problems severely prevent market investors from thoroughly appraising the value of the firm.So,virtually,the activity cast impact on the numerator of DDM fraction.Based on the reality of price game,in order to make profit in A-share market,investors should know the vital factors:economy marginality,policy marginality,the marginal shift of investors' trading psychological conception.The purpose of this thesis is to show how to analyze and pre-estimate the numerator of DDM,pre-estimate the profit by fundamental analysis through a top to bottom approach(from industry analysis to company analysis),then to show how to select a rational and reasonable means to appraise a company's valuation.The thesis first analyzes the core competitiveness of Kangni mechanical&electrical Co.,ltd.Then analyzes the railway transportation industry,and analyzes the financial report of Kangni.The thesis estimates the revenues and net profit of Kangni by segregating its revenue resources.Meanwhile,the thesis has a check of its valuation since its IPO.Finally,the thesis makes its conclusion that Kangni is worth investing,and gives it a "buy" rate,target price is 16.80 Yuan,representing 35x of net profit per share,FY2017.Taking the valuation result evaluated by DDM valuation method whose calculating steps are listed in appendix into consideration,the intrinsic value of Kangni varies from 9.73 yuan to 16.60 yuan.