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The World Bank cut China’s GDP growth forecast from 4.8% to 4.4% for 2024. The main culprit is the underperforming property market, as infrastructure building caused housing oversupply. Gavekal Research estimates that China’s property developers owe $390 billion to suppliers.At the same time, China’s property sales are down 19.8% year-over-year. The impact of further decline could be severe as 70% of China’s household wealth is tied up in real estate vs only 35% in the US. Moreover, there is a close relationship between China’s stock market and the real estate sector, according to Zeyu Di et al. study in 2022. However, the lag period between changes is long. Nonetheless, the world’s 2nd largest economy generated many companies with global reach and expansion plans.Here are two “strong buy” China-based stocks not directly impacted by the latest US restrictions on chip exports.
Miniso Group Holding Limited (MNSO)
This retailer for a wide range of household goods is comparable to US-based discount sellers, such as Family Dollar or Dollar General. Miniso expanded to 5,500 stores globally across 100 countries, with the bulk of revenue (~70%) coming from Mainland China. As of last November, Miniso holds 74 stores in the US, aimed at trendier and younger customers.Per the retailer’s Annual Report 2023, Miniso’s core business model centers around a developed supply chain, low operating costs, and low-priced everyday items, making it resilient to economic downturns. Miniso ended the Q4 2022 quarter with a $1.2 billion revenue, a 23.7% increase year-over-year, while the company’s net income increased 22.6% year-over-year (YoY).By January 2023, average sales per Miniso store increased 33% year-over-year. For Q3 fiscal year 2023, the retailer announced 64.4% YoY gross profit, with an impressive 308.5% YoY operating profit increase. Miniso’s overseas markets in the June quarter of 2023 yielded a 42% YoY increase.Year-to-date, MNSO stock is up 132%, greatly outperforming Dollar General (DG), which suffered a 51% downturn in the same period. Based on three analysts pulled by Nasdaq, MNSO shares are now a “strong buy”. The average MNSO price target is $27.90 per TipRanks, vs the current price at $24.97. The lowest price forecast is $25.20, over the bottom at press time.
BYD Company Limited (BYDDF)
The Chinese EV and battery giant reported record Q3 earnings this Monday. At quarterly $1.42 billion net profit, this represents an 82.2% increase year-over-year. The company’s revenue grew to $22.6 billion, a 38.5% YoY increase. Most notably, BYD’s gross margin for the quarter topped 22.12%, the highest since Q3 2020. Overall, the Chinese EV equivalent to Tesla posted significantly better financials than its US-based counterpart. Called new energy vehicles (NEV), their sales hit the record high of 824,001 NEVs, a 52.96% YoY increase.Although China holds 8% of the world’s lithium supply, the country holds half of all lithium refining facilities, alongside critical rare minerals such as gallium and germanium. As a vertically integrated company, BYD plans to invest $4.2 billion across lithium projects in Yichun, Jiangxi province. On top of the company’s proprietary Blade batteries, this makes BYD enter the lithium stock territory. Investors should note that ticker BYDDY represents BYD’s over-the-counter (OTC) trading in the US. The Hong Kong Stock Exchange (HKSE) lists the Chinese EV manufacturer as BYDDF. BYD, with BYDDY shares trading at twice the price of BYDDF shares. Per TipRanks, BYDDF shares are now a “strong buy.” The average BYDDF price target is $50.63, pulled from five Wall Street analysts. The high target is $75.44, while the bottom is $37.08 vs the BYDDF price of $30.20 at press time.More By This Author:New Chip Restrictions Can Force Nvidia To Cancel $5B In Orders
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