Sinopec Shanghai Petrochemical Company Limited (HKG:338), which is in the chemicals business, and is based in China, received a lot of attention from a substantial price movement on the SEHK over the last few months, increasing to HK$4.84 at one point, and dropping to the lows of HK$3.37. This high level of volatility gives investors the opportunity to enter into the stock, and potentially buy at an artificially low price. A question to answer is whether Sinopec Shanghai Petrochemical’s current trading price of HK$3.66 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Sinopec Shanghai Petrochemical’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
What is Sinopec Shanghai Petrochemical worth?Good news, investors! Sinopec Shanghai Petrochemical is still a bargain right now. My valuation model shows that the intrinsic value for the stock is HK$4.8, but it is currently trading at HK$3.66 on the share market, meaning that there is still an opportunity to buy now. However, given that Sinopec Shanghai Petrochemical’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.
What does the future of Sinopec Shanghai Petrochemical look like?Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company’s future expectations. Though in the case of Sinopec Shanghai Petrochemical, it is expected to deliver a negative earnings growth of -18%, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.
What this means for you:
Are you a shareholder? Although 338 is currently undervalued, the negative outlook does bring on some uncertainty, which equates to higher risk. I recommend you think about whether you want to increase your portfolio exposure to 338, or whether diversifying into another stock may be a better move for your total risk and return.
Are you a potential investor? If you’ve been keeping tabs on 338 for some time, but hesitant on making the leap, I recommend you research further into the stock. Given its current undervaluation, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Sinopec Shanghai Petrochemical. You can find everything you need to know about Sinopec Shanghai Petrochemical in the latest infographic research report. If you are no longer interested in Sinopec Shanghai Petrochemical, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.