In This Article:
Zhou Hei Ya International Holdings Company Limited (HKG:1458), a HK$11.01b small-cap, is a consumer staples company operating in an industry which is facing a change in consumer taste and pressure for organic and sustainable foods, spurred by more health-conscious consumers. Consumer staple analysts are forecasting for the entire industry, a strong double-digit growth of 18.0% in the upcoming year , and an enormous growth of 48.1% over the next couple of years. However this rate still came in below the growth rate of the Hong Kong stock market as a whole. Today, I’ll take you through the sector growth expectations, and also determine whether Zhou Hei Ya International Holdings is a laggard or leader relative to its consumer staples sector peers.
Check out our latest analysis for Zhou Hei Ya International Holdings
What’s the catalyst for Zhou Hei Ya International Holdings’s sector growth?
Changing tastes in consumer preferences is becoming more disruptive than that of industry competitors. Many consumers now prefer to buy whole, raw ingredients and prepare more of their meals at home. Furthermore, companies that are now emerging are latching on these trends with efficient business models. In the previous year, the industry saw growth in the teens, though still underperforming the wider Hong Kong stock market. Zhou Hei Ya International Holdings lags the pack with its negative growth rate of -6.0% over the past year, which indicates the company has been growing at a slower pace than its food product peers. Although Zhou Hei Ya International Holdings is poised to deliver a 1.6% growth next year, moving it from negative to positive territory, it still lags its industry average rate of growth of 18.0%.
Is Zhou Hei Ya International Holdings and the sector relatively cheap?
Food product companies are typically trading at a PE of 13.73x, relatively similar to the rest of the Hong Kong stock market PE of 11.57x. This illustrates a fairly valued sector relative to the rest of the market, indicating low mispricing opportunities. Furthermore, the industry returned a similar 9.4% on equities compared to the market’s 9.5%. On the stock-level, Zhou Hei Ya International Holdings is trading at a PE ratio of 14.07x, which is relatively in-line with the average food product stock. In terms of returns, Zhou Hei Ya International Holdings generated 16.8% in the past year, which is 7.5% over the food product sector.
Next Steps:
If Zhou Hei Ya International Holdings has been on your watchlist for a while, now may not be the best time to enter into the stock. The company is a food product industry laggard in terms of its future growth outlook, and is trading relatively in-line with its peers. If growth and mispricing are important aspects for your investment thesis, there may be better investments in the consumer staples sector. However, before you make a decision on the stock, I suggest you look at Zhou Hei Ya International Holdings’s fundamentals in order to build a holistic investment thesis.