U.S. Markets closed

6 Undervalued-Predictable Chinese Companies

According to the Undervalued-Predictable Screener, a major Premium feature of GuruFocus, the top six undervalued-predictable companies in China as of Thursday based on the discounted earnings model are Youyuan International Holdings Ltd. (HKSE:02268), Zhejiang Jianfeng Group Co. Ltd. (SHSE:600668), Anhui Conch Cement Co. Ltd. (SHSE:600585), Henan Xinye Textile Co. Ltd. (SZSE:002087), Dongguan Development Holdings Co. Ltd. (SZSE:000828) and Huaxin Cement Co. Ltd. (SHSE:600801).


China stock market remains undervalued despite U.S. trade optimism

The China stock market's total market cap index to gross domestic product ratio is just 42% according to global market valuation statistics. If we assume the market valuation level reverses to the median of 142%, Berkshire Hathaway Inc. (NYSE:BRK.A)(NYSE:BRK.B) CEO Warren Buffett (Trades, Portfolio)'s favorite market indicator implies a contribution of 16.41% to the expected market return per year on average over the next eight years. Including dividends and economic growth, the total expected return per year is 27.4% on average.

1568305779733.png

Stock markets soared during the week of Sept. 9 as investors cheered on trade progress between China and the U.S. On Wednesday, the Dow Jones Industrial Average closed above 27,000 for the first time since July 30.

5e64301f57866acdb7613ab475cb6006.png

The Dow closed at 27,182.45 on Thursday, up 45.41 points from Wednesday's close of 27,137.04.

Youyuan International Holdings

Youyuan International Holdings offers a 97.50% margin of safety based on the discounted earnings model. The Jinjiang, Fujian-based company generates revenue primarily through the manufacture and sale of wrapping tissue paper.

322289850.png

GuruFocus ranks Youyuan's profitability 8 out of 10 on several positive signs, which include operating margins that are near a 10-year high of 32.86% and outperform 98.88% of global competitors. Additionally, the company's business predictability ranks 4.5 stars out of five on strong and consistent revenue growth over the past 10 years.

c6118ee96b2fff61169ed2b46578a6fc.png

Zhejiang Jianfeng

Zhejiang Jianfeng offers a 77.17% margin of safety based on the discounted earnings model. The company produces building products and medication products in China.

93b8616450865c0dc3375bad030cf87e.png

GuruFocus ranks the company's profitability 9 out of 10 on several positive signs, which include expanding profit margins, a solid Piotroski F-score of 6 and returns on assets that outperform 92.75% of global competitors. The website gives Zhejiang Jianfeng the business predictability rank of four stars.

9dae8c6d69c92e1958d682aa5c539ba8.png

Anhui Conch Cement

Anhui Conch Cement offers a margin of safety of 72.71% based on the discount earnings model. The company's products range from regular gray and white Portland cement to oil well Portland cement and sulfate.

GuruFocus ranks Anhui Conch Cement's financial strength and profitability approximately 9 out of 10 on several positive indicators, which include strong interest coverage, a solid Piotroski F-score of 7 and operating margins that have increased approximately 5.30% per year over the past five years and are outperforming over 93% of global competitors.

6a69444ae461efd137429745533f6828.png

Henan Xinyue

Henan Xinyue offers a margin of safety of 68.23% based on the discount earnings model. The company produces and distributes cotton, blended yarn, cotton blended fabric and dyed yarn.

GuruFocus ranks the company's profitability 9 out of 10 on several positive indicators, which include expanding profit margins and a three-year revenue growth rate that outperforms over 74% of global competitors. The website gives Henan Xinyue the business predictability rank of five stars on strong and predictable revenue and earnings growth over the past 10 years.

19b6be7bcd0e43e254eb1240c85567ce.png

Dongguan Development Holdings

Dongguan Development Holdings offers a margin of safety of 67.58% based on the discounted earnings model. GuruFocus ranks the company's profitability 9 out of 10 on several positive indicators, including expanding operating margins and a return on equity that outperforms 80.56% of global competitors. The website gives Dongguan Development the business predictability rank of five stars.

e28deb9f54f66e664c9009345ba88db1.png

Huaxin Cement

Huaxin Cement offers a margin of safety of 55.55% based on the discounted earnings model. The Wuhan, Hubei-based company produces and distributes cement, ready-mix concrete, cement equipment and cement packaging products.

GuruFocus ranks Huaxin Cement's financial strength 7.2 out of 10 and profitability 9 out of 10 on several positive signs, which include a strong Piotroski F-score of 8, a solid Altman Z-score of 3.98 and operating margins that are near a 10-year high of 29.92% and outperform 94.96% of global competitors.

12d0d43f8f00b032af703361d08d521e.png

Disclosure: No positions.

Read more here:

  • 5 Semiconductor Companies Gurus Agree On
  • Top 6 Holdings of Jeremy Grantham's GMO
  • Warren Buffett's Market Indicator Remains Around 140%



Not a Premium Member of GuruFocus? Sign up for a free 7-day trial here.

This article first appeared on GuruFocus.