Taking Stock of China Hongqiao Group (SEHK:1378) After Its Inclusion in the Hang Seng China Enterprises Index

China Hongqiao Group Added to a Key Benchmark

China Hongqiao Group (SEHK:1378) just joined the Hang Seng China Enterprises Index. This shift can pull in institutional money and passive index tracking capital, subtly reshaping the stock’s demand dynamics.

See our latest analysis for China Hongqiao Group.

The inclusion comes after a powerful run, with the latest share price at HK$31.7 and a year to date share price return of 178.56%, backed by a 1 year total shareholder return of 193.30% that signals strong, still building momentum.

If this kind of benchmark driven move has caught your attention, it is also worth exploring fast growing stocks with high insider ownership for other fast growing names where insiders have meaningful skin in the game.

With the stock now trading near HK$31.7, a roughly 30% discount to our intrinsic value estimate and still below analyst targets, is this a rare value entry point, or is the market already baking in future growth?

Price to Earnings of 11.1x: Is it justified?

On valuation, China Hongqiao’s last close at HK$31.7 equates to a price to earnings ratio of 11.1x, a level that screens as undervalued against both peers and its own fundamentals.

The price to earnings multiple compares what investors pay for each unit of current earnings, a particularly important yardstick for a mature, cash generative industrial like Hongqiao. With earnings having grown 15.3% per year over the past five years and surging 40.9% in the last twelve months, a modest 11.1x suggests the market is reluctant to fully price in that profitability record.

Versus the Hong Kong Metals and Mining industry average of 17.1x and a fair price to earnings ratio estimate of 15.2x, the current 11.1x multiple looks materially lower, hinting at room for the valuation to move closer to what recent earnings quality and return on equity of 24.1% might justify.

Explore the SWS fair ratio for China Hongqiao Group

Result: Price to Earnings of 11.1x (UNDERVALUED)

However, rising input costs or a sharp aluminum price downturn could compress margins and quickly erase the apparent valuation gap that investors see today.

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

Another View: What Does Our DCF Say?

While the 11.1x earnings multiple points to value, our DCF model goes further, suggesting fair value closer to HK$45.44, around 30% above the current HK$31.7. If both signals line up as undervalued, the real risk may be missing further upside rather than downside.

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 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 China Hongqiao Group Narrative

If you would rather analyze the numbers yourself and follow your own thesis, you can assemble a custom view in minutes: Do it your way.

A good starting point is our analysis highlighting 4 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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