HONG KONG, April 20, 2015 /PRNewswire/ -- With capital flooding into HK from Shanghai under Shanghai-Hong Kong Stock Connect, HK stock market continues its outperformance and HSI was sent to a 7-year high. However, a great gap in PE ratios still remains between Mainland and HK stocks, following more focus placed by Mainland securities companies on domestic leading companies listed in HK. An original report from Sina Leju follows.
On Apr. 20, Guotai Junan Securities and Haitong Securities, two leading securities companies in China, release their research reports regarding Evergrande (3333.HK) as an underlying stock under the Shanghai-Hong Kong Stock Connect. Evergrande has its "Mkt Outperform" and "Buy" rating affirmed by analysts at Guotai Junan Securities and Haitong Securities who predict HKD 6.5 and HKD 7.74 respectively for Evergrande stock.
As revealed in the report released by Guotai Junan Securities, Evergrande is a leading property developer enjoying impressive growth and annul compound growth rate of 110.7% in annual net profit for almost 6 years. Additionally, the optimized distribution allows the Group to be a core beneficiary of the new-type urbanization, next round of growth is expected to be driven by its new businesses in FMCG and health industry, and a approx. 42% discount to NAV per share of the stock price allows the Group stock to have high safety margin and flexibility, according to the report.
Guotai Junan Securities also predicts that Evergrande's EPS in 2015, 2016 and 2017 will be RMB 0.96, RMB 1.13 and RMB 1.18 with year-on-year growth of 18%, 17% and 5% respectively.
The report of Haitong Securities points out that Evergrande's change in logic of valuations will be the highlight of the Group moves. The report also revealed that the Group features reasonable distribution and improved products structure, and the proper diverse business development will bring the Group another increase in profit. Additionally, it can be learnt from the report that Evergrande's implementation of the strategy focusing on high turnover, high profit, high value yet light asset will allow the Group to secure higher flexibility in underlying factors and more space for growth.
Since the launch of Shanghai-Hong Kong Stock Connect, Evergrande stock has been outperforming the market, and the stock price even climbed to a 52-week high with growth exceeding 60%. However, the PE ration of Evergrande is 4 to 5 folds only, a figure much lower than those over 10 folds of its counterparts in domestic A-share market. More research reports placing a focus on Evergrande are expected to be released by other leading securities companies after the report release of two leading securities companies today.
