The Hong Kong market has been experiencing mixed performance, with the Hang Seng Index recently declining by 0.45% amid weak manufacturing data and global economic uncertainties. Despite these challenges, some stocks may present undervalued opportunities for discerning investors. In this context, identifying good stocks often involves looking for companies with strong fundamentals that have been overlooked or undervalued by the market. This article will explore three such stocks listed on the SEHK that might be undervalued by up to 39%.
Top 10 Undervalued Stocks Based On Cash Flows In Hong Kong
Overview: AAC Technologies Holdings Inc. is an investment holding company that offers solutions for smart devices across Mainland China, Hong Kong, Taiwan, other Asian countries, the United States, and Europe with a market cap of HK$29.48 billion.
Operations: The company's revenue segments (in millions of CN¥) include Acoustics Products: 7498.97, Electromagnetic Drives and Precision Mechanics: 8245.31, Optics Products: 3626.94, and Sensor and Semiconductor Products: 1025.08.
Estimated Discount To Fair Value: 21.9%
AAC Technologies Holdings is trading at HK$24.6, significantly below its estimated fair value of HK$31.52, indicating it may be undervalued based on cash flows. Despite recent dividend decreases to HKD 0.10 per share, earnings are forecast to grow 23.72% annually over the next three years, outpacing the Hong Kong market's average growth rate of 11.3%. However, one-off items have impacted financial results and return on equity is expected to remain low at 8.5%.
Overview: Yunkang Group Limited operates as a medical operation service provider in the People's Republic of China with a market cap of HK$4.87 billion.
Operations: Yunkang Group Limited generates revenue primarily from the provision of diagnosis testing to hospital and non-medical clients, amounting to CN¥891.50 million.
Estimated Discount To Fair Value: 39%
Yunkang Group is currently trading at HK$8.1, significantly below its estimated fair value of HK$13.28, suggesting it is undervalued based on cash flows. Analysts forecast the stock price to rise by 72.7%, with expected annual profit growth above the market average over the next three years. Revenue is projected to grow at 10.9% annually, outpacing the Hong Kong market's 7.4% rate, although return on equity remains low at 2.4%.
Overview: Sunny Optical Technology (Group) Company Limited designs, researches, develops, manufactures, and sells optical and optical-related products as well as scientific instruments, with a market cap of HK$43.86 billion.
Operations: Sunny Optical Technology (Group) Company Limited generates revenue from three main segments: Optical Components (CN¥11.03 billion), Optical Instruments (CN¥629.22 million), and Optoelectronic Products (CN¥21.64 billion).
Estimated Discount To Fair Value: 23.9%
Sunny Optical Technology (Group) is trading at HK$40.3, significantly below its estimated fair value of HK$52.94, indicating it is undervalued based on cash flows. The company expects a profit increase of 140%-150% for H1 2024 due to smartphone market recovery and improved product mix, leading to higher shipment volumes and gross margins. Earnings are forecasted to grow at 24.57% annually over the next three years, surpassing the Hong Kong market's average growth rate.
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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.
Companies discussed in this article include SEHK:2018 SEHK:2325 and SEHK:2382.
