Assessing Sinotruk (SEHK:3808) Valuation After New Supply Agreement Proposal With Weichai

Sinotruk (Hong Kong) (SEHK:3808) has announced an extraordinary general meeting set for late December to vote on whether to approve a new supply agreement with Weichai. This move could influence the company’s supply chain plans for the coming year.

See our latest analysis for Sinotruk (Hong Kong).

Sinotruk (Hong Kong)’s stock has enjoyed strong upward momentum lately, with a 20% share price return over the last three months and a 32.8% total shareholder return in the past year. As confidence in its growth outlook builds, investors have responded positively to both recent results and corporate moves such as the new Weichai agreement.

If Sinotruk’s momentum has you rethinking your portfolio, it might be the perfect moment to discover See the full list for free.

Given this backdrop of strong momentum and a new supply agreement on the table, the key question now is whether Sinotruk (Hong Kong)’s share price still offers value, or if the market has already factored in the next chapter of growth.

Price-to-Earnings of 11.3x: Is it justified?

Sinotruk (Hong Kong) trades at a price-to-earnings (P/E) ratio of 11.3x, which signals the shares are priced more optimistically than the peer average but may still suggest value for investors when compared to other heavy-duty truck makers.

The price-to-earnings ratio measures how much investors are willing to pay for each dollar of the company's earnings. For a capital goods manufacturer like Sinotruk (Hong Kong), this multiple reflects market confidence in sustainable earnings from truck sales, spare parts, and ongoing business expansion. A lower P/E compared to peers could indicate the market has not fully recognized Sinotruk's earnings power or expects lower growth ahead.

Currently, Sinotruk's P/E of 11.3x is below the peer average of 15.7x, the Hong Kong Machinery industry average of 12.3x, and the estimated fair P/E ratio of 12.7x. This discount positions Sinotruk as attractively priced on a relative basis and may offer room for the multiple to move closer to the fair ratio if performance expectations hold up.

Explore the SWS fair ratio for Sinotruk (Hong Kong)

Result: Price-to-Earnings of 11.3x (UNDERVALUED)

However, risks remain, including the share price trading above analyst targets and the potential for slower revenue growth to impact future returns.

Find out about the key risks to this Sinotruk (Hong Kong) narrative.

Another View: What Does the SWS DCF Model Say?

While Sinotruk (Hong Kong)'s low price-to-earnings ratio suggests it looks undervalued relative to peers, our SWS DCF model takes a different approach by projecting the company’s future cash flows. According to this model, the shares are actually trading well below their estimated fair value. Could the market be missing something here, or are there risks the model overlooks?

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 Sinotruk (Hong Kong) 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 914 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 Sinotruk (Hong Kong) Narrative

If you would rather form your own perspective or question these results, it only takes a few minutes to build your own view and narrative. Do it your way

A great starting point for your Sinotruk (Hong Kong) research is our analysis highlighting 3 key rewards and 1 important warning sign 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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