Best Chinese stocks to buy amid economic boom

The Chinese economy’s gross domestic product (GDP) grew more than expected in early 2024. 5.3% increase in the first quarterThis is an increase from 5.2% in the previous quarter, as announced by the National Bureau of Statistics. China, the world’s second-largest economy, has adopted a familiar strategy of investing heavily in manufacturing to stimulate growth.

Many new factories have opened here, boosting global sales of solar panels, electric vehicles and a variety of other products. Industrial production in the first quarter increased 6.1% year-on-year, driven by strong expansion of high-tech manufacturing.

In particular, production of 3D printing equipment, electric vehicle charging stations, and electronic components surged by about 40% compared to the previous year. Moreover, last month’s manufacturing Purchasing Managers’ Index (PMI) rose for the first time in six months, and the Caixin/S&P PMI hit its highest level in over a year thanks to increased overseas demand.

That said, China has set an annual growth target of around 5% through 2024. Authorities also implemented interest rate cuts to stimulate bank lending and accelerated central government spending to boost infrastructure investment.

Against this backdrop, investors could take advantage of the economy’s strong momentum by considering buying fundamentally solid Chinese stocks that could yield significant returns.

PDD Holdings (PDD)

PDD Holdings (PDD), the e-commerce operator behind Pinduoduo and Temu, has shaken up the Chinese and U.S. e-commerce sectors with stellar profits and an optimistic long-term outlook. The company primarily focuses on bringing businesses and people into the digital economy. The market capitalization is $164.93 billion.

for fourth quarter PDD’s total revenue for the year ended December 31, 2023 was $12.52 billion, a 123.2% increase over the prior year. Non-GAAP operating income increased 146% year-over-year to $3.46 billion. Non-GAAP net income attributable to common shareholders and non-GAAP income per ADS were $3.59 billion and $2.4 billion, respectively, an increase of 110.4% and 71.7%, respectively, compared to the previous year.

Additionally, cash inflows from operating activities for the quarter increased 38.9% year-over-year to $5.2 billion, primarily due to a surge in net income. This financial strength solidifies the company’s position in the market and sets a high bar for its competitors.

PDD Co-CEO Lei Chen said 2023 “a pivotal chapter,” Pinduoduo’s resilience amid China’s economic downturn and Temu’s burgeoning popularity in the U.S. can be attributed to the company’s strategic capabilities. The company’s trajectory is growing stronger as Pinduoduo’s affordable products resonate with value-conscious consumers amid economic uncertainty.

Going forward, analysts expect PDD’s revenue to hit $10.54 billion in the first quarter ended March 2024, up 97.8% year-over-year, and EPS to hit $1.45, up 47.8% year-over-year. Moreover, the company has an impressive track record of earnings surprises, beating consensus revenue and EPS estimates in all four subsequent quarters.

Additionally, the Street expects PDD’s revenue and EPS to hit $51.37 billion and $8.45 billion in fiscal 2024, up 49.4% and 30.9%, respectively, from the previous year.

Baidu, Inc. (Biddu)

Baidu, Inc. (Biddu)The Chinese technology company, which specializes in internet-related services, products, and artificial intelligence (AI), recently unveiled a number of cutting-edge AI models and toolkits. This advancement democratizes AI development, empowers individuals of all skill levels to create innovative applications, and is a move that will significantly increase BIDU’s presence in the AI ​​field.

One that stands out among them is ERNIE. BIDU’s representative AI model, known for its versatility across a variety of applications. ERNIE Bot, a conversational AI bot built on this framework, has quickly amassed 200 million users since its launch in March 2023 and processes a whopping 200 million queries per day.

Baidu Comate, another innovation powered by ERNIE, has contributed to 27% of new code within BIDU, serves over 10,000 companies, and fostered innovation with an impressive adoption rate of 46%. Additionally, BIDU AI Cloud’s FM platform, Qianfan, has helped more than 85,000 enterprises develop 190,000 AI applications, demonstrating BIDU’s extensive influence in the industry.

BIDU’s financial performance reflects these technological victories. In the fourth quarter of fiscal 2023, the company’s revenue increased 5.7% year-over-year to $4.92 billion. Non-GAAP operating income $996 million, an 8.9% increase over the previous yearNon-GAAP net income grew 44.4% year over year to $1.09 billion.

Additionally, BIDU’s Adjusted EBITDA improved significantly to $1.28 billion, up 10% year-over-year.

Analysts predict a promising growth trajectory for BIDU. Wall Street expects the company’s revenue to reach $19.87 billion for the fiscal year ending December 2024, up 6.3% from the previous year, with projected EPS of $10.74. Additionally, BIDU has topped consensus EPS estimates in all four subsequent quarters, which is notable.

During fiscal 2025, the company’s revenue and EPS are expected to reach $21.43 billion and $11.82 billion, up 7.9% and 10%, respectively, from the previous year. This optimistic outlook highlights BIDU’s unwavering commitment to innovation and its potential for continued success in the dynamic environment of AI technology.

Baojun (BZUN)

Baojun (BZUN), a leading brand e-commerce solutions provider and digital commerce enabler, has strengthened its omnichannel capabilities and expanded its core product categories through high levels of engagement. Working with brand partners and key markets, the company has created an effective go-to-market strategy, resulting in the acquisition of more than 50 new brands in 2023.

BZUN is implementing a new store concept that transitions from large-scale to boutique formats, strengthening the brand DNA and fostering an immersive brand experience that goes beyond simple commerce. In-store pop-ups and campaigns are enriching the consumer experience by further amplifying social engagement.

Additionally, in January, the company approved a new share repurchase program, increasing up to worth $20 million Combines American Depositary Shares (ADS) and Class A ordinary shares issued during the twelve months beginning January 24, 2024.

In its fiscal 2023 fourth quarter earnings call, BZUN unveiled the opening of 10 new stores, including a flagship store in Guangzhou, along with expansions in Shantou, Shenzhen and Beijing. Specifically, newly opened stores saw a 50% increase in square meter efficiency, while existing stores saw a 19% increase in same-store sales.

For the fourth quarter ended December 31, 2023, BZUN reported total net revenue of $391.61 million, up 8.9% year-over-year, marking a significant turnaround from the prior-year loss. The company reported e-commerce adjusted operating income of $16.6 million for the quarter.

Mr. Vincent Qiu, Chairman and CEO of BZUN; said, “In 2023, we began our transformation journey by expanding into three business segments. During the year, we solidified our leadership in the digital commerce industry and further improved operational efficiency. We appreciate the resilience and adaptability of the Baozun team in an ever-changing market environment.”

“Despite the macro uncertainties ahead of 2024, we are committed to sustainably executing our plans with diligence and patience. “The improved health of our business fundamentals gives us confidence that we can enhance our value proposition to our brand partners,” he added.

The Street expects BZUN’s revenue to reach $1.26 billion for the fiscal year ending December 2024, up 3.2% year-over-year. Likewise, the company’s fiscal 2025 revenue is estimated at $1.35 billion, up 6.9% from the previous year.

conclusion

While U.S. stocks can provide stability in turbulent times, diversifying into international stocks can provide significant benefits, especially in terms of portfolio risk management and solid returns. Financial advisors often advocate familiarity with U.S. companies, but expanding into global markets, especially China, can broaden your investment horizons and open up new opportunities.

That’s because China is poised to regain global importance, according to Bloomberg’s analysis of the IMF’s outlook. According to forecasts, China’s economic revival will Outperforms the combined growth rates of G7 countries. China is expected to lead the way, contributing approximately 21% to global economic growth between now and 2029.

By comparison, the G-7 countries are expected to contribute about 20%, while the United States falls short at 12%, or almost half of China’s projected growth. Remarkably, 75% of global growth will occur in just 20 countries, with China, India, the United States, and Indonesia accounting for more than half of this growth.

Investors can take advantage of this dynamic economic environment by exploring fundamentally strong Chinese stocks that could generate significant returns. Among these, PDD, which is experiencing explosive growth in the e-commerce space, BIDU, which leverages cutting-edge AI innovations, and BZUN, a leading brand e-commerce solution provider, stand out.

These stocks’ impressive financial performance, strategic initiatives, and optimistic growth prospects make them attractive investment options for investors seeking exposure to China’s thriving economy.