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Is It Too Late To Consider Buying China Yuchai International Limited (NYSE:CYD)?

AInvestThursday, Jan 2, 2025 5:39 am ET
4min read


China Yuchai International Limited (NYSE:CYD) has been making waves in the automotive and industrial sectors, with its innovative powertrain solutions and expanding globalization efforts. As the company's stock price has been on an upward trajectory, investors may be wondering if it's too late to consider buying CYD. This article will explore the company's recent performance, valuation, and future prospects to help investors make an informed decision.



Recent Performance and Growth

China Yuchai International has demonstrated impressive growth in recent years. In 2023, the company's revenue increased by 12.57% to 18.05 billion, while earnings grew by 30.62% to 285.52 million. This strong performance can be attributed to the company's focus on research and development, launching innovative products like the 350hp IE-Power Hybrid system, and expanding its globalization efforts, such as opening a factory in Thailand.



Valuation and Comparisons

To determine if China Yuchai International is overvalued or undervalued, we can compare its valuation multiples with those of its peers and historical averages.

1. Price-to-Earnings (P/E) Ratio: CYD's P/E ratio of 8.15 is lower than the average P/E ratio of the Consumer Discretionary sector, which is around 12.5. This suggests that CYD might be undervalued compared to its peers.
2. Price-to-Sales (P/S) Ratio: CYD's P/S ratio of 0.15 is also lower than the average P/S ratio of the Consumer Discretionary sector, which is around 1.5. This further indicates that CYD might be undervalued.
3. Enterprise Value (EV) to Sales (EV/S) Ratio: CYD's EV/S ratio of 0.11 is lower than the average EV/S ratio of the Consumer Discretionary sector, which is around 1.2. This is another sign that CYD might be undervalued.



Future Prospects and Risks

While China Yuchai International's recent performance and valuation suggest that it might be undervalued, investors should also consider the company's future prospects and potential risks.

1. Policy Tailwinds and Repurchases: China's new government policy offering subsidies for heavy-duty truck replacements could boost the industry's sales volume in the second half of 2024. Additionally, CYD's potential FY 2024 buyback yield might be as high as 4.5%, which could further enhance shareholder value.
2. R&D Focus and ESG Trend: China Yuchai International is investing heavily in R&D, launching innovations like the 350hp IE-Power Hybrid system, and collaborating with the government of Nanning Municipality. This exposure to the growing ESG trend could provide additional growth opportunities.
3. Globalization Efforts: The company's expansion into new markets, such as Thailand, can help diversify its revenue streams and mitigate risks associated with relying too heavily on a single market.

Conclusion

Based on China Yuchai International's recent performance, valuation multiples, and future prospects, it appears that the company might be undervalued. However, investors should also consider the potential risks and challenges that the company faces, such as market fluctuations, regulatory changes, and competition. By carefully evaluating these factors, investors can make an informed decision about whether it's too late to consider buying China Yuchai International Limited (NYSE:CYD).
Disclaimer: the above is a summary showing certain market information. AInvest is not responsible for any data errors, omissions or other information that may be displayed incorrectly as the data is derived from a third party source. Communications displaying market prices, data and other information available in this post are meant for informational purposes only and are not intended as an offer or solicitation for the purchase or sale of any security. Please do your own research when investing. All investments involve risk and the past performance of a security, or financial product does not guarantee future results or returns. Keep in mind that while diversification may help spread risk, it does not assure a profit, or protect against loss in a down market.