Exploring China Hongqiao Group (SEHK:1378) Valuation After Strong Share Price Rally

China Hongqiao Group (SEHK:1378) stock has caught investors’ attention recently, even in the absence of a headline-grabbing event. With trading volumes holding steady, the market seems curious about what is driving recent moves.

See our latest analysis for China Hongqiao Group.

China Hongqiao Group’s share price recently hit HK$30.4, continuing a strong rally with a 28% gain over the past three months and an outstanding year-to-date share price return of 167%. Momentum is firmly on the upswing, and long-term total shareholder returns further cement the company’s growth story.

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The company’s rapid share price gains raise a key question for investors: is there still room for upside, or has the recent run fully reflected China Hongqiao’s fundamentals and future growth outlook?

Price-to-Earnings of 10.3x: Is it justified?

China Hongqiao Group’s shares last closed at HK$30.4 and appear undervalued compared to peers when judged on its price-to-earnings (P/E) ratio of 10.3x.

The P/E ratio measures how much investors are willing to pay for each unit of net earnings. It helps assess whether a company’s stock is under- or over-valued based on its profit-generating capacity. For Hongqiao Group, a lower P/E suggests the market is not fully pricing in strong earnings growth or future prospects.

This multiple stands out versus the Hong Kong Metals and Mining industry average P/E of 16.5x and the peer average of 32.8x, presenting a significant discount. Hongqiao’s P/E is also well below the estimated Fair Price-to-Earnings Ratio of 14.4x, which could signal room for upward re-rating if fundamentals hold.

Explore the SWS fair ratio for China Hongqiao Group

Result: Price-to-Earnings of 10.3x (UNDERVALUED)

However, sustained growth faces headwinds from modest annual revenue gains and potential market corrections following the recent sharp rise in share price.

Find out about the key risks to this China Hongqiao Group narrative.

Another View: What About Intrinsic Value?

To challenge the current outlook, the SWS DCF model estimates China Hongqiao Group’s intrinsic worth at HK$48.01 per share. This puts the stock about 36.7% below this value. This suggests a much wider margin for appreciation than what price-to-earnings alone indicates. Is the market overlooking hidden value, or will future growth disappoint?

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 Hongqiao Group 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 894 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 Hongqiao Group Narrative

If you want to explore the numbers yourself or take a different approach, you can quickly build your own interpretation based on the latest data, then Do it your way

A good starting point is our analysis highlighting 3 key rewards investors are optimistic about regarding China Hongqiao Group.

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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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