With the gradual implementation of diverse stimulus measures, China's economic growth is poised to accelerate in the near future. Considering this optimistic outlook, it seems wise to invest in China stocks JOYY Inc. (YY), JD.com, Inc. (JD), and Vipshop Holdings Limited (VIPS) for robust gains in 2024. Let’s understand this in more detail.
China's economy outperformed expectations with a 4.9% expansion in the third quarter, propelled by a robust surge in consumption and industrial activity in September. The region's economic vigor stemmed from resilient domestic demand, increased remittances, and a revitalized tourism sector, fostering consistent and dynamic growth.
Despite the nation’s recent economic successes, challenges persist with volatility, deflationary pressures, and wavering consumer confidence. In a strategic move, China has committed to strengthening fiscal policies in 2024, aiming to rejuvenate its ailing economy and counter the prevailing adversities.
In the latest meeting chaired by President Xi Jinping and attended by the influential 24-member Politburo, officials committed to escalating endeavors in expanding domestic demand while concurrently stabilizing foreign trade and investment.
Meanwhile, China's government advisers propose an economic growth target of 4.5% to 5.5% for 2024, with a preference for approximately 5%, aligning with the current year's objective.
Furthermore, the Asian Development Bank (ADB) contends that Asia's expected growth may exceed previous forecasts, chiefly propelled by China's economic resurgence. The ADB has revised China's growth projection to 5.2%, up from 4.9%, while sustaining a 4.5% forecast for the world's second-largest economy in the coming year.
In light of these encouraging trends, let’s look at the fundamentals of the three China stocks.
Stock #3: JOYY Inc. (YY)
Headquartered in Singapore, YY is a dynamic social media enterprise that orchestrates captivating experiences across diverse video-based platforms. The company's portfolio includes Bigo Live, Likee, Hago, imo, and Shopline. The company operates in China as well as internationally.
In terms of forward non-GAAP P/E, YY is trading at 10.37x, 32.6% lower than the industry average of 15.38x. Its forward Price/Sales of 1.04x is 9.6% lower than the 1.15x industry average. Moreover, the stock’s forward Price/Book of 0.48x is 75.4% lower than the industry average of 1.94x.
For the third quarter that ended September 30, 2023, YY’s net revenues were registered at $567.07 million. Its non-GAAP net income and non-GAAP net income per ADS grew 5.9% and 27.1% from the prior year’s period to $74.65 million and $1.22, respectively. In addition, as of September 30, 2023, YY’s cash and cash equivalents came in at $1.24 billion, compared to $1.21 billion as of December 31, 2022.
Analysts expect YY’s revenue to increase 2.4% year-over-year to $2.29 billion for the fiscal year ending December 2024. Likewise, the company’s EPS for the next fiscal year is estimated to grow 1.3% from the prior year to $3.82. Shares of YY have gained 34.3% over the past six months to close the last trading session at $39.88.
YY’s positive fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, equating to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
YY has a B grade for Value and Growth. It is ranked #17 out of 41 stocks within the A-rated China industry.
In addition to the POWR Ratings I’ve highlighted, you can see YY’s Momentum, Stability, Quality, and Sentiment ratings here.
Stock #2: JD.com, Inc. (JD)
Based in Beijing, China, JD offers supply chain technologies and services. It provides a range of products, including computers, communication devices, consumer electronics, home appliances, and general merchandise. JD further facilitates third-party merchants through its online marketplace services, enhancing their reach and sales opportunities.
In terms of forward non-GAAP P/E, JD is trading at 8.88x, 43.4% lower than the industry average of 15.68x. Also, its forward EV/Sales of 0.18x is 85.5% lower than the 1.25x industry average. Furthermore, the stock’s forward EV/EBITDA of 4.68x compares with the industry average of 10.08x
JD’s non-GAAP income from operations increased 11.8% year-over-year to $1.52 billion for the third quarter that ended September 30, 2023. Its non-GAAP EBITDA rose 12.4% from the year-ago value to $1.78 billion.
In addition, non-GAAP net income attributable to the company’s ordinary shareholders and non-GAAP net income per share grew 5.9% and 6.7% from the prior year’s period to $1.46 billion and $0.46, respectively.
The consensus revenue estimate of $151.05 billion for the fiscal year ending December 2023 reflects a marginal year-over-year improvement. Similarly, the consensus EPS estimate of $3.01 for the ongoing year exhibits an 18.2% rise from the previous year. Furthermore, the company surpassed the consensus EPS estimates in all of the trailing four quarters.
The stock has gained 6.5% over the past five days to close the last trading session at $27.60.
JD’s sound prospects are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
JD has a B grade for Growth and Value. It is ranked #11 out of 41 stocks within the China industry.
Click here to access the additional JD ratings (Stability, Quality, Sentiment, and Momentum).
Stock #1: Vipshop Holdings Limited (VIPS)
Based in Guangzhou, China, VIPS is an online discount retailer that operates primarily through its vip.com website, conducting flash sales of branded products. The company boasts a vast inventory featuring offerings from more than 17,000 domestic and international brands, solidifying its position in the e-commerce market.
In terms of forward non-GAAP P/E, the stock is trading at 7.44x, 52.6% lower than the industry average of 15.68x. Its forward EV/Sales of 0.44x is 64.8% lower than the 1.25x industry average. Moreover, VIPS’ forward EV/EBITDA of 5.10x is 49.4% lower than the industry average of 10.08x
For the third quarter that ended September 30, 2023, VIPS’ net revenues increased 5.3% year-over-year to $3.12 billion. Its non-GAAP income from operations rose 33% from the year-ago value to $284.16 million.
Furthermore, non-GAAP net income and non-GAAP net income per share attributable to VIPS’ shareholders grew 15.5% and 30.4% from the prior year’s period to $252.34 million and $2.28, respectively.
For the fiscal year ending December 2023, analysts expect VIPS’ revenue to increase 4.6% year-over-year to $15.64 billion. The company’s EPS for the current year is expected to be $2.26, up 46% from the prior year. Also, the company topped the consensus EPS estimates in all four trailing quarters.
The stock has gained 21.9% over the past year, closing the last trading session at $16.63.
VIPS’ robust outlook is apparent in its POWR Ratings. The stock has an overall rating of B, which equates to Buy in our proprietary rating system.
VIPS has a B grade for Growth, Momentum, Quality, Value, and Sentiment. It is ranked #6 out of 41 stocks within the same industry.
Click here to access additional VIPS ratings for Stability.
What To Do Next?
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JD shares were trading at $27.06 per share on Wednesday morning, down $0.54 (-1.96%). Year-to-date, JD has declined -51.09%, versus a 26.18% rise in the benchmark S&P 500 index during the same period.
About the Author: Aanchal Sugandh
Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns.
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