SINOPEC Engineering (Group) Co., Ltd. (HKG:2386): Commentary On Fundamentals

Building up an investment case requires looking at a stock holistically. Today I’ve chosen to put the spotlight on SINOPEC Engineering (Group) Co., Ltd. (HKG:2386) due to its excellent fundamentals in more than one area. 2386 is a company that has been able to sustain great financial health, trading at an attractive share price. In the following section, I expand a bit more on these key aspects. If you’re interested in understanding beyond my high-level commentary, take a look at the report on SINOPEC Engineering (Group) here.

Excellent balance sheet and good value

2386 is financially robust, with ample cash on hand and short-term investments to meet upcoming liabilities. This implies that 2386 manages its cash and cost levels well, which is a crucial insight into the health of the company. 2386 seems to have put its debt to good use, generating operating cash levels of 6.93x total debt in the most recent year. This is also a good indication as to whether debt is properly covered by the company’s cash flows. 2386’s share price is trading at below its true value, meaning that the market sentiment for the stock is currently bearish. According to my intrinsic value of the stock, which is driven by analyst consensus forecast of 2386’s earnings, investors now have the opportunity to buy into the stock to reap capital gains. Compared to the rest of the construction industry, 2386 is also trading below its peers of similar sizes in terms of their assets. This supports the theory that 2386 is potentially underpriced.

SEHK:2386 Intrinsic Value Export December 24th 18
SEHK:2386 Intrinsic Value Export December 24th 18

Next Steps:

For SINOPEC Engineering (Group), I’ve put together three key aspects you should further research:

  1. Future Outlook: What are well-informed industry analysts predicting for 2386’s future growth? Take a look at our free research report of analyst consensus for 2386’s outlook.
  2. Historical Performance: What has 2386’s returns been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
  3. Other Attractive Alternatives : Are there other well-rounded stocks you could be holding instead of 2386? Explore our interactive list of stocks with large potential to get an idea of what else is out there you may be missing!

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.