On Tuesday, HSBC analyst Helen Fang increased the price target for Haitian International (1882:HK), a Hong Kong-listed company, to HK$30.00, up from the previous HK$23.50. The firm continues to endorse a Buy rating for the stock. The adjustment comes as Haitian's shares have experienced a significant surge, climbing 28% year-to-date, which reflects investor optimism about an anticipated recovery in China's economy.
Fang's revised price target is supported by earnings per share (EPS) forecasts that suggest a compound annual growth rate (CAGR) from 2023 to 2026 of approximately 15%. This growth rate is in line with the company's performance from 2018 to 2021, where it achieved a CAGR of 17%. In 2021, Haitian's average forward price-to-earnings (PE) ratio was 13.2 times, and the new price target implies a 13.1 times forward PE ratio for the year 2025.
The analyst's confidence in the new target price is further bolstered by Haitian's improved earnings forecasts, lower capital expenditure (capex) expectations post-2026, and anticipated longer payable days as the company expands. These factors have been integrated into a discounted cash flow (DCF) analysis, leading to the increase in the target price.
HSBC's stance on Haitian International remains positive, with expectations that rising domestic demand could contribute to further re-rating of the stock. The firm's analysis includes a sensitivity analysis on earnings and target PE, detailed in Exhibit 1 of their report, which underscores the rationale behind maintaining the Buy rating.
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