Metallurgical Corporation of China (SEHK:1618) Earnings Jump 16%, Challenging Growth Concerns

Metallurgical Corporation of China (SEHK:1618) delivered a turnaround in its latest earnings, posting a 16% year-over-year increase that reversed the company’s previous five-year pattern of 8.1% annual declines. Net profit margin also improved, rising to 0.9% compared to last year’s 0.6%. EPS growth is now forecast at an annual rate of 6.04%, though that trails both historical performance and the wider Hong Kong market forecast of 12.4% per year. Investors are now weighing stronger margins and accelerating profit growth against key risks, especially as the outlook remains a touch slower than the industry. Sentiment is buoyed by signs of undervaluation and quality earnings.

See our full analysis for Metallurgical Corporation of China.

Now let’s see how these headline results compare against the broader narratives investors follow on Simply Wall St. Some views might get reinforced, while others could face a reality check.

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DCF Fair Value Implies Huge Upside

• The current share price of HK$2.37 trades at a steep discount to the DCF fair value of HK$9.46, an implied gap of over 300%.
• According to the prevailing market view, this valuation gap has investors weighing recent improvements in profitability against the slower forecast growth rate.
  • Although shares look cheap compared to DCF value, the 6.04% annual earnings forecast is well below the Hong Kong market average of 12.4% per year.
  • What stands out is that the company’s high quality earnings are being priced on the lower end, despite the reversal of a five-year earnings decline.
• See what the community is saying about Metallurgical Corporation of China See what the community is saying about Metallurgical Corporation of China

Earnings Quality Supports Recovery

• Metallurgical Corporation of China’s earnings are considered high quality and stand out from the typical trend for firms with low profit margins like its 0.9% figure.
• Prevailing analysis highlights that the turnaround in margin and recurring profit adds substance to this recovery.
  • For a company that averaged 8.1% annual declines over the last five years, a 16% profit jump is a significant reversal. Bullish investors may argue this could re-rate the shares if momentum holds.
  • On the other hand, skeptics might point out that a net margin of just 0.9% leaves little cushion if costs or contracts swing unexpectedly.

Peer Multiples Paint a Mixed Picture

• The company trades at a Price-To-Earnings ratio (P/E) of 10.4x, lower than the Hong Kong Construction industry average of 11.3x but above the average of its closest peers, which is 5.5x.
• Prevailing market analysis suggests investors are pricing in both state-backing stability and sector risk.
  • This P/E reflects how the market rewards the company’s proven government ties and high-quality profile but also places a modest penalty for its relatively slower projected earnings growth compared to the market and historical standards.
  • Investors focused on multiples may watch closely to see if further margin improvement translates into a re-rating versus peers or if lagging forecast growth keeps a lid on valuations.

Next Steps

Don't just look at this quarter; the real story is in the long-term trend. We've done an in-depth analysis on Metallurgical Corporation of China's growth and its valuation to see if today's price is a bargain. Add the company to your watchlist or portfolio now so you don't miss the next big move.

See What Else Is Out There

Despite its turnaround, Metallurgical Corporation of China faces a slower earnings growth outlook and thin profit margins compared to both the market and industry peers.

If you want shares with stronger and more consistent earnings expansion, check out stable growth stocks screener (2110 results) and spot companies delivering steady performance where growth is more reliable.

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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