Great Wall Motor (SEHK:2333): Evaluating Valuation After BorgWarner Electrification Deal and Latest Earnings Update

Great Wall Motor (SEHK:2333) just revealed two important updates. The company announced an expanded partnership with BorgWarner on electrified propulsion, and also released nine-month earnings showing revenue growth, but a dip in net income.

See our latest analysis for Great Wall Motor.

Following the BorgWarner partnership news and latest earnings, Great Wall Motor’s shares have been showing plenty of action. The stock’s share price has climbed over 18% so far this year, and its 1-year total shareholder return sits even higher at nearly 20%. This reflects growing optimism about its electrification strategy despite recent profit headwinds.

If you want to see what else is driving momentum in the sector, check out the current crop of See the full list for free..

With Great Wall Motor trading at a sizable discount to analyst targets and recent gains fueled by electrification deals, is the stock still undervalued, or is the market already anticipating the next wave of growth?

Price-to-Earnings of 11x: Is it justified?

With Great Wall Motor trading at a price-to-earnings ratio of 11x, the stock appears attractively priced, especially when compared to its recent share price of HK$15.38 and the broader Asian Auto industry.

The price-to-earnings (PE) ratio compares a company’s share price to its earnings per share. It is a common metric in the auto sector to judge how much investors are willing to pay for current and future profits. A lower PE can suggest a stock is undervalued, particularly if the company is forecast to deliver earnings growth above the market average.

Great Wall Motor’s PE of 11x is notably below both its peer average of 11.7x and the Asian Auto industry average of 21.1x. Additionally, the company trades under what our models suggest is a fair PE ratio of 13.6x, implying that the market could be underestimating its earnings outlook. This significant discount may not persist if growth prospects continue to improve.

Explore the SWS fair ratio for Great Wall Motor

Result: Price-to-Earnings of 11x (UNDERVALUED)

However, slowing profit growth and recent short-term share price setbacks could challenge the undervalued thesis if momentum in electrification does not accelerate.

Find out about the key risks to this Great Wall Motor narrative.

Another View: SWS DCF Model Shows Even Deeper Discount

Looking at Great Wall Motor using the SWS DCF model provides a different perspective. The DCF approach estimates a fair value of HK$26.76 per share, which suggests that the market price is over 42% below this calculation and indicates even greater undervaluation than the earnings multiple suggests.

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Great Wall Motor for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 861 undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Great Wall Motor Narrative

If you have a different viewpoint or want to dig deeper into the numbers, you can easily craft your own narrative in just a few minutes. Do it your way.

A great starting point for your Great Wall Motor research is our analysis highlighting 3 key rewards and 2 important warning signs that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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