CSSC (Hong Kong) Shipping (SEHK:3877): Reassessing Valuation After Auditor Change from Grant Thornton to Baker Tilly

CSSC (Hong Kong) Shipping (SEHK:3877) just switched auditors after Grant Thornton resigned over a disagreement on 2025 audit fees, with Baker Tilly stepping in. This move naturally sharpens investor focus on governance and reporting.

See our latest analysis for CSSC (Hong Kong) Shipping.

Despite the auditor switch grabbing headlines, the stock has quietly built positive momentum, with a 16.8% year to date share price return and a punchy 39.4% one year total shareholder return that suggests investors still see upside rather than rising risk.

If this kind of governance driven story has you reassessing your watchlist, it might be worth exploring fast growing stocks with high insider ownership for other under the radar opportunities catching insider interest.

With earnings still growing, the share price trading below analyst targets, and a sizeable intrinsic value discount, the key question now is clear: is CSSC Shipping genuinely undervalued or are markets already pricing in its future growth?

Price to Earnings of 6.9x: Is it justified?

On a price-to-earnings basis, CSSC (Hong Kong) Shipping looks undervalued at its last close of HK$2.09, with the market assigning it a notably low earnings multiple relative to peers.

The price to earnings ratio compares what investors pay today for each unit of current earnings and is a common yardstick for asset heavy, cash generating finance and leasing businesses like CSSC Shipping. A lower multiple can signal either a bargain on steady earnings or investor skepticism about the durability of profits.

In this case, CSSC Shipping trades on a price to earnings ratio of 6.9x, which is below the estimated fair price to earnings level of 8.7x that our framework suggests the market could ultimately converge toward if fundamentals hold up. That gap, combined with the company trading at 28% below our estimate of its fair value of HK$2.9 based on the SWS DCF model, points to investors pricing its earnings stream more conservatively than both its recent track record and fair ratio imply.

Compared with the peer set, the valuation gap widens further, as the stock sits below the peer average price to earnings ratio of 10.1x and well under the broader Asian diversified financials average of 16.4x, underscoring how sharply the market discounts its earnings relative to sector norms.

Explore the SWS fair ratio for CSSC (Hong Kong) Shipping

Result: Price to Earnings of 6.9x (UNDERVALUED)

However, investors should watch for weaker shipping demand or tighter funding conditions, as these could compress lease margins and justify a structurally lower earnings multiple.

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

Another angle on value

Our SWS DCF model supports the low 6.9x earnings multiple and points to fair value around HK$2.9, which is roughly 28% above the current HK$2.09 share price. If both earnings and cash flow views suggest the stock is undervalued, the question is whether the market is mispricing risk or simply looking further ahead.

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 CSSC (Hong Kong) Shipping 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 927 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 CSSC (Hong Kong) Shipping Narrative

If you would rather stress test these assumptions yourself and interpret the numbers differently, you can build a fully tailored view in minutes: Do it your way.

A great starting point for your CSSC (Hong Kong) Shipping 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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