The journey hasn’t been without its hurdles, but amidst these dynamics, the quest for the best Chinese stocks leads to a surprising revelation.
China, often viewed as the economic dynamo of the East, has been grappling with myriad challenges in the past couple of years.
As the nation grapples with the aftershocks of the COVID-19 pandemic, last December marked a significant pivot when the Chinese government shelved its zero-Covid policy, shifting gears towards economic reopening.
Consumer spending took a step back, and bank lending showed signs of slowing. With concerns lingering over potential deflation, things have been far from ideal.
However, the land of the Red Dragon is teeming with promising opportunities, with businesses poised to harness China’s economic revival. For the discerning investor, top Chinese stocks now offer value and the allure of a brighter financial horizon.
Alibaba (BABA)
Amidst the pulsating realm of Chinese technology giants, Alibaba (NYSE:BABA) stands tall, casting a long shadow across eCommerce, retail, and tech landscapes.
Recognizing the power of specialization, Alibaba is charting an ambitious roadmap, opting for a strategic reorganization to split its empire into six business groups. This savvy move promises to shield individual segments from adversity and pave the way for tailored growth trajectories.
However, the unsung hero for Alibaba is its powerful cloud segment called Alibaba Cloud, the lifeline of Alibaba’s digital ecosystem. Beyond catering to the conglomerate, it extends its prowess to multiple sectors, from gaming to healthcare.
While external challenges, including anti-trust fines, have cast a shadow on Alibaba’s share price, the cloud segment continues to deliver robust sales and record EBITDA growth.
Alibaba’s innovation-rich trajectory, evidenced by ventures such as Tongyi Qianwen, underlines its determination to lead in AI.
Yum China (YUMC)
Yum China (NYSE:YUMC) is the powerhouse behind some of the most popular American dining brands in China, such as KFC, Pizza Hut, and Taco Bell. Its stable includes homegrown gems, including Huang Ji Huang and Little Sheep, catering to those with an appetite for authentic Chinese cuisine.
With its sprawling network of over 13,000 locations, it’s no exaggeration to dub Yum China as a culinary titan in the massive Chinese restaurant sphere.
Its shares have seen a modest 4% ascent year-to-date, lagging the broader market. However, its operations’ sheer size and growing customer base ensure Yum China remains a hot pick for investors.
It recently delivered its second-quarter earnings report, registering a vigorous 24% jump in sales to a whopping $2.65 billion. The company’s adjusted earnings per share outshining expectations by eight cents; its financials look appetizing.
With the unveiling of 422 new stores this quarter, coupled with an operating profit that tripled to $257 million year-over-year, Yum China is cooking up a storm.
Vipshop (VIPS)
In the bustling eCommerce bazaar of China, Vipshop (NYSE:VIPS) has carved its distinct identity.
Renowned for providing top-tier brands at jaw-dropping discounts, it has positioned itself as a titan in the online discount retail sphere. As the nation witnesses a surge in consumer spending in the post-pandemic era, Vipshop is primed to ride this wave, positioning itself at the forefront of the retail resurgence.
Its recent second-quarter earnings are a testament to its breathtaking performance. The company posted an impressive 59 cents per share, blowing past estimates by a commendable 15 cents.
With revenue touching the $3.8 billion mark, up 2.7% year-on-year, and gross merchandise value surging 24.5% year-over-year, it’s clear that the firm’s strategic moves are paying off.
Its active customer base expanded by 9.6%, and total orders spiked by 14.7%, emphasizing its prowess.
The cherry on top is that VIPS stock trades at a mere 0.6 times its forward sales estimates, 34% below the sector’s median.
Nio (NIO)
In the electric vehicle (EV) circuit, Nio (NYSE:NIO) has had its fair share of twists and turns.
Supply chain hiccups in China threw a wrench in its production plans, and the economic slowdown resulted in Nio stock shedding more than 43% in value in the past year.
However, Nio’s resilience shines through its recent milestones with the completion of its state-of-the-art Hefei production facility and a staggering capacity to roll out over one million EVs annually.
Fueling optimism further, Nio reported a record-breaking feat in July, delivering north of 20,000 vehicles, an impressive leap of more than 103% year-over-year.
Its innovative battery-as-a-service concept, complemented by a battery exchange service, positions it a cut above its peers. This strategy lets users bypass battery costs and swift charging capabilities, giving the company a distinct competitive edge.
The EV giant’s inroads in Europe and thwarted global expansion plans, thanks to 2022’s supply chain challenges, signal unexplored potential.
Hello Group (MOMO)
Hello Group (NASDAQ:MOMO) holds a unique space in China’s sprawling social networking landscape.
Its applications don’t just connect hearts through its online dating platforms, Omom and Tantan, and the Group diversifies its footprint with Qool, a segment showering its users with music services, film distribution, and film promotion.
The COVID-19 pandemic, which held China in its grip earlier, cast shadows on Hello Group’s performance. As the shutters went down during the lockdowns, so did its stock price.
Its first-quarter earnings painted a somber picture, with revenue plummeting by 10.5% year-over-year to $410.5 million. The user metrics, too, showed a strain, with monthly active users dipping by almost 4%.
However, as 2023 unfolds, there’s a silver lining on Hello Group’s horizon. With China limping back to normalcy and social interactions seeing an uptick, the forecasted decline in second-quarter sales, which range between a mere 0.3% to 3.5%, could be a precursor to brighter days.
The optimism gets a further boost with the Group’s shareholder-friendly moves, a generous special cash dividend of 72 cents per share in the first quarter, and a continuation of the previously allowed $200 million share buyback program.
Daqo New Energy (DQ)
Daqo New Energy (NYSE:DQ) is at the heart of the solar photovoltaic (PV) industry, with an unwavering commitment to high-purity polysilicon.
It effectively positioned itself as an indispensable supplier to global solar cell and module manufacturers. Shielded by its long-term supply contracts, the company enjoys stable revenue flow amidst the tumultuous waves of market uncertainty.
As the sun shines brighter on the solar industry, DQ stands ready to harness the opportunities with its increasing production capacity and expansion blueprints.
Despite its significance in the current global paradigm, the broader solar energy industry has had its fair share of turbulence. Economic challenges, marked by rising interest rates and tepid consumer demand, along with plummeting polysilicon prices, have cast shadows on the firm’s
However, as the landscape clears and the industry gears for recovery, Daqo emerges as a compelling stock proposition. With its stock trading at a mere one times forward sales, a whopping 61% below the sector’s median, savvy investors will likely find DQ an attractive wager.
TAL Education (TAL)
TAL Education (NYSE:TAL) is a true beacon in China’s educational landscape, revolutionizing how students learn since its inception in 2003.
Catering to students from kindergarten to K-12, TAL offers a robust blend of online and offline tutoring, marrying traditional academics with language courses and extracurricular activities. However, TAL doesn’t just stop at regular schooling, and its test prep services are a lifeline for students prepping for China’s rigorous college entrance exams.
The pandemic era witnessed TAL’s adaptability in action. As households transitioned indoors, online tutoring became the order of the day, propelling TAL’s top line to new heights. Its sales grew by a whopping $4.4 billion in 2022, a dramatic leap from a modest $177.52 million in 2012.
Even as the winds shifted post-pandemic, TAL demonstrated resilience in its most recent quarter. Its latest press release reveals a Non-GAAP earnings-per-share of a negative three cents, aligning with expectations, and a commendable 22.9% year-over-year revenue growth at $275.4 million, surpassing estimates by $6.26 million.
On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.