China International Capital (SEHK:3908) moved to expand its international footprint with the launch of an asset custody service in Hong Kong, unveiled at its inaugural Embark Salon on 30 July.
See our latest analysis for China International Capital.
At a share price of HK$22.1, China International Capital has a 1-day share price return of 2.50% and a year-to-date share price return of 9.51%. Its 1-year total shareholder return of 11.58% and 3-year total shareholder return of 33.05% point to momentum that has built over a longer period, despite a softer 30-day share price return of 2.64%.
If this kind of cross-border expansion has your attention, it can be useful to scan other financial stocks with global ambitions by checking out 105 top founder-led companies
China International Capital now has an HK$22.1 share price and a new Hong Kong custody platform on the table. Does that setup favour buying in today, or waiting for a different entry point as the valuation picture unfolds next?
Preferred P/E of 8.7x: Is it justified?
On the latest numbers, China International Capital trades on a P/E of 8.7x, which sits below both peers and an estimated fair P/E level, suggesting a discounted valuation at the current HK$22.1 share price.
The P/E ratio compares what you pay today for each unit of current earnings. For a diversified financial services group like China International Capital, it is a simple way to see how the market is pricing its profitability relative to other capital markets stocks.
At 8.7x earnings, the stock is described as good value versus the Hong Kong Capital Markets industry average of 13.6x and a peer average of 9.2x. It also sits under an estimated fair P/E of 12.3x that the SWS model suggests the market could move toward if sentiment or fundamentals line up with those assumptions. This combination points to the market applying a cheaper multiple than both peers and that fair ratio benchmark.
Explore the SWS fair ratio for China International Capital
Result: Price-to-earnings of 8.7x (UNDERVALUED)
However, the softer 30 day share price return and China International Capital’s broad exposure across investment banking, trading and wealth management could both challenge that valuation story.
Find out about the key risks to this China International Capital narrative.
Another view on China International Capital's value
Alongside the P/E of 8.7x, the SWS DCF model points to a fair value of HK$44.32 per share for China International Capital, compared with the current HK$22.1 price. That gap suggests the DCF view also sees the stock as undervalued. Which signal do you put more weight on?
For a closer look at how this cash flow based view is built, including the assumptions behind it, take a moment with 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 China International Capital 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 251 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.
Next Steps
Given the mixed signals around China International Capital, it helps to see the underlying data for yourself and decide how compelling the story feels. To understand what investors are optimistic about and how those factors align with your own thesis, take a closer look at the 5 key rewards.
Looking for more investment ideas beyond China International Capital?
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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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