Great Wall Motor (SEHK:2333): Evaluating Valuation as South Africa Expansion Gains Local Government Backing

Chinese automakers are making real headway in South Africa, recently surpassing some long-established Western and Japanese rivals thanks to attractive pricing and loaded features. Great Wall Motor (SEHK:2333) stands out as local government incentives now encourage even more investment, with a focus on hybrid and electric vehicles.

See our latest analysis for Great Wall Motor.

Great Wall Motor’s push into South Africa is grabbing headlines, but it comes amid momentum that has been building for some time. Despite a recent slide this month, the stock’s share price has climbed 13.8% over the past 90 days and is up 16.5% for the year to date. Total shareholder returns are even more impressive, with a one-year gain of 18.8% and a remarkable 114% over the last three years. This is evidence that investor confidence has been steadily growing as the company expands its international footprint and navigates a dynamic automotive market.

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With Great Wall Motor’s recent gains and future-friendly expansion in South Africa, investors now face a key question: Does the current share price reflect all the upside, or is there still untapped value for those looking to buy in?

Price-to-Earnings of 9.9x: Is it justified?

Great Wall Motor trades at a price-to-earnings (P/E) ratio of 9.9x, which is noticeably below both its peer average (12.1x) and the industry benchmark. At HK$15.14 per share, this suggests the stock may be undervalued relative to its earnings.

The P/E ratio is a widely used measure comparing a company's share price to its annual earnings per share. For automakers like Great Wall Motor, it helps investors assess how much the market is willing to pay right now for future profits. In this case, the below-average P/E indicates investors may be underestimating Great Wall Motor’s profit potential or are cautious about future risks.

When compared to the Asian Auto industry average of 21.2x, Great Wall Motor’s P/E multiple appears even more attractive. In addition, it trades below the estimated Fair Price-to-Earnings Ratio of 12.8x, suggesting there could be room for valuation to move higher if the company delivers on expected growth.

Explore the SWS fair ratio for Great Wall Motor

Result: Price-to-Earnings of 9.9x (UNDERVALUED)

However, slower revenue and net income growth, or heightened market competition, could challenge the undervalued case for Great Wall Motor in the months ahead.

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

Another View: What Does the SWS DCF Model Say?

Looking from a different angle, our DCF model values Great Wall Motor at HK$26.54 per share, which is 42.9% above its current market price. This approach suggests even more room for upside than the P/E ratio indicates. However, it raises the question of whether DCF assumptions are too optimistic or if the market has overlooked something fundamental.

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 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’d rather shape your own perspective or dig deeper into the numbers, you can piece together your own outlook 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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