China Galaxy Securities (SEHK:6881): Valuation Insights Following Dividend Payout and Major Governance Changes

China Galaxy Securities (SEHK:6881) has drawn investor attention with its announcement of a sizable interim cash dividend for the first half of 2025, as well as key governance changes approved at its recent EGM.

See our latest analysis for China Galaxy Securities.

China Galaxy Securities’ latest moves land amid an impressive run for shareholders, with a 63.75% year-to-date share price return and a 57.70% total shareholder return over the past year. While momentum has cooled in the short term, the long-term total returns, including a remarkable 258% over three years, highlight considerable growth potential. Recent governance changes and the interim dividend also boost confidence in the company’s outlook.

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With long-term returns grabbing headlines and a fresh dividend payout ahead, one key question remains for investors: is China Galaxy Securities undervalued at current levels, or has the market already priced in its future growth potential?

Price-to-Earnings of 8.4x: Is it justified?

China Galaxy Securities trades at a price-to-earnings (P/E) ratio of 8.4x, significantly lower than both its industry peers and sector average. Compared to the last close price of HK$10.84, this suggests the market is pricing in a discount versus similar companies.

The P/E ratio measures how much investors are willing to pay for each dollar of earnings. For capital markets firms like China Galaxy Securities, this multiple can give insight into whether profit growth and future prospects are valued highly or viewed with skepticism. A low multiple might mean investors are cautious about the company’s future growth, or it could signal an undervalued opportunity.

In this case, the company’s P/E is far below the Hong Kong Capital Markets industry average (22.4x) and the peer average (19.1x). This substantial gap indicates the market is not pricing in significant earnings growth or is underestimating its potential. Moreover, the estimated fair price-to-earnings ratio is 13.9x, suggesting considerable room for upside as market sentiment shifts.

Explore the SWS fair ratio for China Galaxy Securities

Result: Price-to-Earnings of 8.4x (UNDERVALUED)

However, slowing revenue growth and recent share price volatility could challenge the optimistic outlook. These factors may warrant a cautious approach from investors.

Find out about the key risks to this China Galaxy Securities narrative.

Another View: What Does Our DCF Model Say?

Looking at things from a different angle, our SWS DCF model estimates China Galaxy Securities’ fair value to be HK$13.07 per share, which is 17.1% above the current market price. This result further supports the argument that the stock could be undervalued at the moment. However, the question remains whether the market will eventually recognize this opportunity or if there are risks preventing it from doing so.

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 China Galaxy Securities 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 874 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 China Galaxy Securities Narrative

Prefer to dig into the numbers yourself or craft your own perspective? In just a few minutes, you can develop your own unique take. Do it your way.

A great starting point for your China Galaxy Securities research is our analysis highlighting 4 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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