11 Cheap Chinese Stocks to Buy According to Analysts
In this article, we discuss 11 cheap Chinese stocks to buy according to analysts. If you want to see more stocks in this selection, check out 5 Cheap Chinese Stocks to Buy According to Analysts.
China's stock market has been under immense pressure as monetary and fiscal stimulus measures struggle to have long-term impacts. The MSCI China Index, which captures large and mid-cap companies across China A shares, is down by more than 20% from January highs. The index is already in bear market territory as support measures designed to fuel investor sentiments prove to be short-lived.
The brutal selloff underscores the uncertain outlook of China's economy, which is only trying to bounce back following years of Beijing's disruptive zero COVID policy. Sell off in the first half of the year was also exacerbated by the country's central bank's failure to hint at the possibility of future stimulus measures.
In addition, sentiments about Chinese equities have taken a hit amid growing tension between Beijing and Washington. The US curbing the sale of some technologies in the semiconductor space to Chinese sentiments has only gone to rattle the market. With investors questioning the attractiveness of Chinese assets amid deteriorating economic ties, a deep selloff could always happen.
Nevertheless, the deep selloff has presented unique opportunities for high-risk tolerant investors. With valuations tanking significantly, Chinese equities are looking increasingly enticing compared to US equities with significant upside potential.
US equities have rallied significantly in recent weeks in the wake of the US Federal Reserve going slow on monetary policy tightening. The S&P 500 is already up by more than 15%, with tech-heavy Nasdaq up by more than 30%. As concerns about US equities valuations escalate, Chinese equities are the real deal on the value proposition.
Chinese Premier Li Qiang has reiterated that the country is on track to reach the annual growth target of 5% in the year's second half. The economy grew by 4.5% in the first quarter, better than expected. The World Bank has already raised China's growth forecast to 5.6% from 4.3%. The positive economic outlook should continue to strengthen sentiments on the highly battered Chinese equities.
Source: Unsplash
In addition to economic growth, easing regulatory crackdown is also offering support to Chinese equities, especially in the embattled tech sector. Premier Li Qiang's meeting with Alibaba Group Holding Limited (NYSE:BABA)'s cloud unit and Meituan (HKSE:3690.HK) showed that China is easing its pressure on the tech industry after a long period of scrutiny. He asked them to contribute more to the economic recovery and assured them of clearer and fairer rules for platform firms. This followed the end of a regulatory campaign that had imposed fines on Ant Group and Tencent and erased $1.1 trillion from the market value of the top players. The premier had also met with other tech leaders and urged local governments to support their businesses. This indicates that China is relying more on internet companies to achieve its industrial goals and create jobs and growth. Analysts welcomed the meeting as a sign of optimism for the tech sector and investors.
Alibaba Group Holding Limited (NYSE:BABA), and JD.com, Inc. (NASDAQ:JD) rank among the most popular Chinese stocks.
Our Methodology
Improving economic outlook, easing government crackdown, and increasing government stimulus plans have made the following stocks attractive as bargains after a slump in the year's first half. We selected the stocks based on analysts price target and upside potential to current levels. The stocks are also trading for less than $100 a share making them some of the cheapest in the market. The stocks were ranked based on their upside potential.
Cheap Chinese Stocks to Buy According to Analysts
11. Tencent Holdings Limited (OTCMKTS:TCEHY)
Average Price Target: $50
Upside Potential: 11%
Price to Earnings Multiple: 16.63
Tencent Holdings Limited (OTCMKTS:TCEHY) is one of China's largest internet companies offering value-added services, online advertising and fintech services. Based in Mainland China, it is one of the largest video game publishers and the company behind the popular WeChat social networking app. Its vast business empire also includes a footprint in the cloud-computing sphere.
Having suffered from a tech crackdown, it appears to have found its footing and is well-poised to outperform in the second half of the year. Tencent Holdings Limited (OTCMKTS:TCEHY) is already up by more than 10% over the past month.
While trading with a price-to-earnings multiple of 16, it commands a $50 average price target on Wall Street, representing an 11% upside potential from current levels.
Tencent Holdings Limited (OTCMKTS:TCEHY) is among the Chinese stocks that analysts suggest buying, along with Alibaba Group Holding Limited (NYSE:BABA) and JD.com, Inc. (NASDAQ:JD).
10. Li Auto Inc. (NASDAQ:LI)
Average Price Target: $40.66
Upside Potential: 12.48%
Price to Earnings Multiple: 90
Li Auto Inc. (NASDAQ:LI) is one of the companies that stands out in the crowded Chinese EV market. However, it has carved a niche in designing and producing unique plug-in hybrid electric vehicles. Production’s been ramping up to take advantage of the strong demand for electric vehicles. Its deliveries in the first quarter were up by 66% compared to a 47% increase in 2022.
Li Auto Inc. (NASDAQ:LI)’s revenue is expected to grow at a compound annual growth rate of 65% by 2025, attributed to strong demand for EVs in the market. Even though the company trades with a price-to-earnings multiple of 90, it is still cheap, with a share price of about $37, it boasts a 12.48% upside potential.
9. Chindata Group Holdings Limited (NASDAQ:CD)
Average Price Target: $9.37
Upside Potential: 16%
Price to Earnings Multiple: 26.98
Chindata Group Holdings Limited (NASDAQ:CD) has carved a niche in providing carrier-neutral hyper-scale data centre solutions in China, India and Southeast Asia. It is billed as one of the biggest hyper-scale data centre support and services companies. It’s been strengthening its prospects in the industry with the construction of Malaysia Bridge Data Centre, a cutting-edge collocation service facility.
Chindata remains the go-to company for businesses looking to do something constructive on the mountain of digital at their disposal. Likewise, it has emerged as an acquisition target for China Merchants Capital holdings that has tabled a $4.6 a share bid that values it at about $3.4 billion
While trading with a price-to-earnings multiple of 26.98, it boasts a $9.37 average price target on wall street representing 16% upside potential from current levels.
8. Bilibili Inc. (NASDAQ:BILI)
Average Price Target: $20.48
Upside Potential: 23.37%
Price to Earnings Multiple: N/A
Bilibili Inc. (NASDAQ:BILI) specializes in offering online entertainment services to young people in China. It runs a platform that offers a range of content, including video services, mobile games and value-added services. The company has been executing a strategy focused on prioritizing profitability while fostering a vibrant and highly engaged community for users.
Consequently, Bilibili Inc. (NASDAQ:BILI) registered a 22% year-over-year increase in advertising revenues in Q1 as daily active users on its platform increased by 18% to $93.7 million. Additionally, the company’s outlook has received a boost from the Chinese central bank cutting select benchmark interest rates. The prospect of stimulus measures to get the economy going also supports the company’s long-term prospects. With an average analyst price target of $20.48, Bilibili Inc. (NASDAQ:BILI) stock has a 23.37% upside potential.
7. Baidu, Inc. (NASDAQ:BIDU)
Average Price Target: $190.08
Upside Potential: 26.60%
Price to Earnings Multiple: 28.4
Baidu, Inc. (NASDAQ:BIDU) is China's internet search giant that offers search feeds and other services. The stock is already up by more than 7% in the second half of the year as it benefits from a booming Chines economy. It's benefiting from businesses increasing advertising spending to capture growing consumer spending. It registered a 10% year-over-year increase in revenues in Q1. Digital advertising grew by 6% in Q1.
Additionally, Baidu, Inc. (NASDAQ:BIDU) has tapped artificial intelligence technology to strengthen its edge on search as it also leverages the technology in its autonomous ride-hailing operations.
Analysts on walls street have a $190.08 average price target on the stock representing a 26.66% upside potential from current levels.
6. ZTO Express (Cayman) Inc. (NYSE:ZTO)
Average Price Target: $38.70
Upside Potential: 43%
Price to Earnings Multiple: 21
ZTO Express (Cayman) Inc. (NYSE:ZTO) is a company that serves e-commerce and traditional merchants across China while offering express delivery and other value-added logistics services. With the easing of COVID-19 restrictions, ZTO Express (Cayman) Inc. (NYSE:ZTO) should continue experiencing booming business for its logistics services across the country amid increased consumer spending.
ZTO Express (Cayman) Inc. (NYSE:ZTO) delivered impressive first quarter results, with earnings topping 34 cents a share against 24 cents a share expected as revenues increase 13% by $1.3 billion owing to robust delivery business. It has since increased its revenue annual volume guidance to grow by between 20% and 24%
While trading with a price-to-earnings multiple of 21, it is one of the cheapest and most valuable Chinese stocks, going for about $27 a share. With an average price target of $38.70 it boasts of a 43% upside potential.
Analysts recommend buying Chinese stocks such as Alibaba Group Holding Limited (NYSE:BABA), JD.com, Inc. (NASDAQ:JD), along with ZTO Express (Cayman) Inc. (NYSE:ZTO).
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Disclosure: None. 11 Cheap Chinese Stocks to Buy According to Analysts is originally published on Insider Monkey.
