At HK$51.30, Is Anhui Conch Cement Company Limited (HKG:914) Worth Looking At Closely?

Let's talk about the popular Anhui Conch Cement Company Limited (HKG:914). The company's shares received a lot of attention from a substantial price movement on the SEHK over the last few months, increasing to HK$54.95 at one point, and dropping to the lows of HK$46.85. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Anhui Conch Cement's current trading price of HK$51.30 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Anhui Conch Cement’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

View our latest analysis for Anhui Conch Cement

What's the opportunity in Anhui Conch Cement?

The share price seems sensible at the moment according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Anhui Conch Cement’s ratio of 6.6x is trading slightly above its industry peers’ ratio of 6.21x, which means if you buy Anhui Conch Cement today, you’d be paying a relatively sensible price for it. And if you believe that Anhui Conch Cement should be trading at this level in the long run, then there should only be a fairly immaterial downside vs other industry peers. Furthermore, it seems like Anhui Conch Cement’s share price is quite stable, which means there may be less chances to buy low in the future now that it’s priced similarly to industry peers. This is because the stock is less volatile than the wider market given its low beta.

Can we expect growth from Anhui Conch Cement?

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. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. However, with a negative profit growth of -1.3% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Anhui Conch Cement. This certainty tips the risk-return scale towards higher risk.

What this means for you:

Are you a shareholder? 914 seems priced close to industry peers right now, but given the uncertainty from negative returns in the future, this could be the right time to de-risk your portfolio. Is your current exposure to the stock beneficial for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on 914, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on 914 for a while, now may not be the most advantageous time to buy, given it is trading around industry price multiples. This means there’s less benefit from mispricing. In addition to this, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help gel your views on 914 should the price fluctuate below the industry PE ratio.

So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. Case in point: We've spotted 2 warning signs for Anhui Conch Cement you should be mindful of and 1 of these is concerning.

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This article by Simply Wall St is general in nature. 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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