Is China XLX Fertiliser (SEHK:1866) Undervalued After Its Strong 2026 Profit Guidance?

China XLX Fertiliser (SEHK:1866) drew fresh attention after issuing earnings guidance for the first half of 2026, flagging a 52% to 62% year-on-year rise in net profit to about RMB 1.15b to RMB 1.23b.

See our latest analysis for China XLX Fertiliser.

The earnings guidance arrives after a sharp change in sentiment around China XLX Fertiliser, with the share price at HK$9.215 and a 30 day share price return of 6.66% contrasting with a 90 day decline of 27.61%. At the same time, the 1 year total shareholder return of 45.12% and 3 year total shareholder return of almost 2x suggests longer term holders have seen strong gains as investors reassess growth prospects and risk around new capacity and higher priced coal chemical products.

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China XLX Fertiliser now appears to be a business with rising scale benefits and higher priced products, as reflected in fresh guidance and a strong multi year shareholder return. Are investors already paying up for that strength, or not yet?

Preferred P/E of 12.4x on China XLX Fertiliser: Is it justified?

China XLX Fertiliser is trading on a P/E of 12.4x, which sits above both its peer group average of 9.8x and the wider Hong Kong Chemicals industry at 10.5x.

The P/E ratio compares the current share price to earnings per share and is a quick way to see how much investors are paying for each unit of profit. For China XLX Fertiliser, a higher P/E than peers suggests the market is attaching a richer price tag to its earnings relative to other chemicals stocks.

There is a split signal here. On one side, the company is described as good value when its 12.4x P/E is compared to an estimated fair P/E of 12.5x. This sits very close to the current level and implies the market price is near that fair ratio. On the other side, the same 12.4x P/E is described as expensive when set against both direct peers at 9.8x and the broader industry at 10.5x. This indicates investors are paying a premium versus many comparable companies.

That premium stands out because the company has had a fall in earnings of 36.1% over the past year, even though its earnings have grown by 7.4% per year over the past 5 years and are forecast to grow 25.45% per year going forward. Compared with the Hong Kong market and Chemicals industry, where China XLX Fertiliser has delivered stronger 1 year total returns of 45.12%, the higher P/E suggests the market may be pricing in those forecasts and past shareholder returns more generously than it is for peers. The fair ratio gives a level that current sentiment could gravitate towards over time.

Explore the SWS fair ratio for China XLX Fertiliser

Result: Price-to-earnings of 12.4x (ABOUT RIGHT)

However, China XLX Fertiliser still faces risks if coal input costs tighten margins or if urea and methanol selling prices soften and place pressure on current earnings expectations.

Find out about the key risks to this China XLX Fertiliser narrative.

Another view on China XLX Fertiliser using the SWS DCF model

The P/E workup presents China XLX Fertiliser as fairly priced against its fair ratio, yet our DCF model points in a different direction. With the stock at HK$9.22 and an estimated future cash flow value of HK$16.08, the shares appear materially undervalued on this approach.

For investors, that gap raises a practical question. Is the earnings multiple already capturing near term optimism while the cash flow model is focusing more on longer term assumptions, or is the market still underpricing the company despite recent strength in the share price?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out China XLX Fertiliser for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 261 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Next Steps

Given the mixed signals around China XLX Fertiliser, it may be helpful to act promptly and assess both sides of the story using the 3 key rewards and 3 important warning signs

Looking for more investment ideas beyond China XLX Fertiliser?

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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