Shares of Great Wall Motor Company Limited (HKG:2333) surged 7.50% on October 10th, as investors reacted positively to a comprehensive valuation analysis that suggested the automaker's stock is significantly undervalued.
According to the analysis, Great Wall Motor's fair value stands at HK$25.03 per share based on a discounted cash flow (DCF) model. This implies a potential upside of around 40% from the current share price of HK$14.94, indicating that the market may be underappreciating the company's intrinsic value.
The DCF model used conservative growth rate assumptions and a discount rate of 11%, which was derived from the company's levered beta. The analysis highlighted several strengths of Great Wall Motor, including earnings growth outpacing the industry, low debt levels, and decent dividend coverage. Additionally, the company is expected to benefit from forecasted revenue growth that exceeds the Hong Kong market, and its attractive valuation based on the price-to-earnings ratio.