Is Grand Baoxin Auto Group Limited (HKG:1293) On The Right Side Of Disruption?
Grand Baoxin Auto Group Limited (HKG:1293), a HK$6.44b small-cap, operates in the retail industry which has experienced a structural shift in terms of digitalization. Growth has been a result of investment in streamlining distribution and improving website platforms to accommodate the shift in spending. Retail analysts are forecasting for the entire industry, a positive double-digit growth of 21.2% in the upcoming year , and a massive growth of 69.1% over the next couple of years. This rate is larger than the growth rate of the Hong Kong stock market as a whole. Below, I will examine the sector growth prospects, and also determine whether Grand Baoxin Auto Group is a laggard or leader relative to its retail peers.
View our latest analysis for Grand Baoxin Auto Group
What’s the catalyst for Grand Baoxin Auto Group’s sector growth?
E-retailing is expected to remain the fastest growing sales channel, shifting the retail landscape. Significant number of retail store closures and bankruptcies were an indication of both changing consumer preferences and rising online competition. In the previous year, the industry saw growth in the teens, beating the Hong Kong market growth of 14.8%. Grand Baoxin Auto Group leads the pack with its impressive earnings growth of 94.0% over the past year. Furthermore, analysts are expecting this trend of above-industry growth to continue, with Grand Baoxin Auto Group poised to deliver a 25.0% growth over the next couple of years compared to the industry’s 21.2%. This growth may make Grand Baoxin Auto Group a more expensive stock relative to its peers.
Is Grand Baoxin Auto Group and the sector relatively cheap?
The retail sector’s PE is currently hovering around 10.88x, in-line with the Hong Kong stock market PE of 11.83x. This illustrates a fairly valued sector relative to the rest of the market, indicating low mispricing opportunities. Furthermore, the industry returned a similar 11.7% on equities compared to the market’s 9.7%. On the stock-level, Grand Baoxin Auto Group is trading at a PE ratio of 6.68x, which is relatively in-line with the average retail stock. In terms of returns, Grand Baoxin Auto Group generated 11.7% in the past year, in-line with its industry average.
Next Steps:
Grand Baoxin Auto Group’s future growth prospect aligns with that of the broader market and it is trading in-line with its peers. So if you like its growth prospects, you’ll be paying a fair value for the company. If the stock has been on your watchlist for a while, now may be the time to enter. However, before you make a decision on the stock, I suggest you look at Grand Baoxin Auto Group’s fundamentals in order to build a holistic investment thesis.
Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
Historical Track Record: What has 1293’s performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Grand Baoxin Auto Group? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
