The industrials sector tends to be highly cyclical, impacting companies operating in an array of areas such as building products, aerospace and defence. Currently, Ka Shui International Holdings and Thelloy Development Group are industrial companies I’ve identified as potentially undervalued, meaning their share price is below what these companies are actually worth. Investors can determine how much a industrial company is worth based on how much money they are expected to make in the future, or compared to the value of their peers. The list I’ve put together below are of stocks that compare favourably on all criteria, which potentially makes them good investments if you believe the price should eventually reflect the stock’s actual value.

Ka Shui International Holdings Limited (SEHK:822)

Ka Shui International Holdings Limited, an investment holding company, primarily manufactures and sells zinc, magnesium, and aluminium alloy die casting products and components. Formed in 1980, and run by CEO Cheong Yiu Wong, the company employs 5,800 people and with the company’s market capitalisation at HKD HK$397.72M, we can put it in the small-cap category.

822’s stock is now trading at -73% beneath its true level of $1.65, at a price tag of HK$0.45, based on my discounted cash flow model. This discrepancy gives us a chance to invest in 822 at a discount. In terms of relative valuation, 822’s PE ratio is currently around 5.1x compared to its Machinery peer level of, 14.96x suggesting that relative to its competitors, we can buy 822’s stock at a cheaper price today. 822 is also strong financially, as near-term assets sufficiently cover liabilities in the near future as well as in the long run.

More detail on Ka Shui International Holdings here.

Thelloy Development Group Limited (SEHK:1546)

Thelloy Development Group Limited, an investment holding company, provides building construction services primarily in Hong Kong. Formed in 1982, and currently run by Kin Wing Lam, the company size now stands at 206 people and with the stock’s market cap sitting at HKD HK$424.00M, it comes under the small-cap category.

1546’s stock is currently floating at around -82% below its true level of $2.9, at a price of HK$0.53, based on my discounted cash flow model. This mismatch indicates a chance to invest in 1546 at a discounted price. In addition to this, 1546’s PE ratio is trading at around 9.08x compared to its Construction peer level of, 10.38x meaning that relative to its comparable company group, we can buy 1546’s stock at a cheaper price today. 1546 is also strong in terms of its financial health, with short-term assets covering liabilities in the near future as well as in the long run. 1546 also has no debt on its balance sheet, which gives it headroom to grow and financial flexibility. More on Thelloy Development Group here.