United Laboratories (SEHK:3933): Evaluating a Low P/E Valuation After New China Drug Consistency Approval

United Laboratories International Holdings (SEHK:3933) just cleared a meaningful regulatory hurdle, with its subsidiary’s Cefoperazone and Sulbactam injection passing China’s consistency evaluation, reinforcing its anti infective franchise and long term growth platform.

See our latest analysis for United Laboratories International Holdings.

Despite the setback of a roughly 27 percent 3 month share price return, the stock has still delivered a strong 1 year total shareholder return near 20 percent, with this latest approval helping keep the longer term growth narrative intact.

If this kind of regulatory driven story has your attention, it could be worth scanning other healthcare stocks that might be setting up for their next leg of growth.

With the shares still trading at a sizable discount to analyst targets and implied intrinsic value, the key question now is whether this approval-fueled growth runway is underappreciated, or if the market is already pricing in the next leg of expansion.

Price to Earnings of 7.6x: Is it justified?

On a price to earnings basis, United Laboratories International Holdings looks inexpensive, with its 7.6x multiple sitting well below many peers at the current HK$12.92 share price.

The price to earnings multiple compares what investors pay today to each unit of current earnings, a key lens for profitable, established pharmaceutical businesses. For United Laboratories, a 7.6x multiple suggests the market is assigning a relatively modest value to its earnings stream despite positive net profit growth and resilient margins.

That discount stands out even more against the Hong Kong Pharmaceuticals industry average of 13.8x. In addition, our estimated fair price to earnings ratio of 18.4x signals considerable room for the market to re rate if sentiment or growth expectations improve.

Explore the SWS fair ratio for United Laboratories International Holdings

Result: Price to Earnings of 7.6x (UNDERVALUED)

However, investors still face risks from potential pricing pressure in China and execution challenges in scaling new products, which could cap any valuation re-rating.

Find out about the key risks to this United Laboratories International Holdings narrative.

Another View: What Does Our DCF Say?

While the 7.6x earnings multiple paints United Laboratories International Holdings as cheap versus peers, our DCF model goes even further and suggests the shares may be around 54% below fair value at roughly HK$28.15. Is the market missing something, or are forward risks heavier than they look?

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 United Laboratories International Holdings 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 906 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 United Laboratories International Holdings Narrative

If you would rather dig into the numbers yourself and come to your own conclusions, you can build a personalized narrative in just a few minutes, Do it your way.

A great starting point for your United Laboratories International Holdings research is our analysis highlighting 3 key rewards and 3 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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