The three largest SEHK stocks are expected to trade below their market value in July 2024

Amid a global landscape where major indices such as the Dow Jones and S&P 500 are reaching new highs, the Hong Kong market offers unique opportunities for value-seeking investors. As of July 2024, certain stocks in the SEHK appear to be undervalued and offer potential for those looking for investments that may not yet reflect their intrinsic value given current economic conditions.

Top 10 undervalued stocks in Hong Kong based on cash flows

Click here to see the full list of 44 stocks from our Undervalued SEHK Stocks Based on Cash Flows screener.

Let’s take a look at some of the best options from the screener.

Overview: Wasion Holdings Limited is an investment holding company focused on the research, development, production and sales of energy metering and energy efficiency management solutions for the power utility industry in China, Africa, the United States, Europe and other parts of Asia, with a market capitalization of approximately HK$6.42 billion.

Operations: Wasion Holdings generates its revenue in three main segments: Advanced Distribution Operations (CNY 2.48 billion), Power Advanced Metering Infrastructure (CNY 2.67 billion) and Communication and Fluid Advanced Metering Infrastructure (CNY 2.21 billion).

Estimated discount to fair value: 32%

Wasion Holdings currently trades at HK$6.45, significantly below its estimated fair value of HK$9.49, indicating a potential undervaluation based on a discounted cash flow analysis. Despite a low forecast return on equity of 16% over three years, the company’s earnings have grown 61% over the past year and are expected to grow 25.8% annually over the next three years. Revenue growth also outperforms the Hong Kong market average, which is forecast at 22.7% per year versus 7.7%. However, the dividend history remains unstable.

Overview: Inspur Digital Enterprise Technology Limited is mainly active in the People’s Republic of China and is engaged in software development and other software services as well as cloud services. Its market capitalization is approximately HK$3.88 billion.

Operations: The company generates revenue from three main segments: cloud services (CNY 2.00 billion), management software (CNY 2.47 billion) and Internet of Things (IoT) solutions (CNY 3.83 billion).

Estimated discount to fair value: 31.7%

Inspur Digital Enterprise Technology trades at HK$3.4, below its estimated fair value of HK$4.98, suggesting an undervaluation based on cash flows. Despite a modest forecast return on equity of 19.7% over three years, earnings and revenue growth are robust and are expected to grow 38% and 21.8% annually over the same period, respectively – both rates well above the Hong Kong market averages of 11.5% and 7.7%, respectively.

Overview: Hangzhou SF Intra-city Industrial Co., Ltd. is an investment holding company that provides intra-city on-demand delivery services in the People’s Republic of China and has a market capitalization of approximately HK$10.53 billion.

Operations: The company generates its revenue mainly from its inner-city on-demand delivery service, achieving total revenue of CNY 12.39 billion.

Estimated discount to fair value: 40.8%

Hangzhou SF Intra-city Industrial trades at HK$11.5, well below its calculated fair value of HK$19.43, suggesting a potential undervaluation based on cash flows. Recent expansions into the on-demand delivery market in Hong Kong could improve growth prospects, supported by a strong increase in local courier revenues and high market growth forecasts for mainland China. Despite this positive outlook, the company’s return on equity is expected to remain low at 10.9% over the next three years.

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This Simply Wall St article is of a general nature. We comment based solely on historical data and analyst forecasts, using an unbiased methodology. Our articles are not intended as financial advice. They are not a recommendation to buy or sell stocks and do not take into account your objectives or financial situation. Our goal is to provide you with long-term analysis based on fundamental data. Note that our analysis may not take into account the latest price-sensitive company announcements or qualitative materials. Simply Wall St does not hold any of the stocks mentioned.

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