China’s withdrawal of the throttling pandemic restrictions has provided a platform for a resilient rebound in its economic activities. Considering its promising economic outlook, let us look at some China stocks FinVolution Group (FINV), Waterdrop Inc. (WDH), and Viomi Technology Co., Ltd (VIOT), trading under $5 now.
China, the world’s second-largest economy, with a GDP of over $17 trillion, has experienced rapid economic growth over the past few decades. However, amid pandemic restrictions, geopolitical turmoil, and inflationary pressure, its economic growth in 2022 slumped to one of its worst levels.
However, in 2023, the relaxation of the pandemic restrictions helped restore Chinese economic activities. As per the U.K. investment giant Schroders’ chief economist, Keith Wade, the easing of restrictions would aid in restoring the global supply chain, consequently benefiting the world at large.
In addition, on the backs of stronger-than-expected first-quarter data, leaders anticipate an improved economic outlook in the foreseeable future. UBS raised China's 2023 full-year Gross Domestic Product (GDP) growth to 5.7% from 5.4%. Moreover, JPMorgan raised China’s 2023 growth outlook to 6.4%, up from a previous forecast of 6%.
Furthermore, China has witnessed an inflow of $2.6 billion in global equity funds from January to April due to a rebound in earnings, as per the Refinitiv Lipper data.
Given this backdrop, fundamentally strong China stocks FINV, WDH, and VIOT, with attractive valuations, could be wise portfolio additions now.
FinVolution Group (FINV)
Headquartered in Shanghai, China, FINV operates a fintech platform that connects underserved individual borrowers with financial institutions in China and internationally. It is engaged in operating an online consumer finance platform. The company’s products and services include loan services and investment services.
As of March 31, 2023, coupled with FINV's historical and existing share repurchase programs, the company had cumulatively repurchased its Class A ordinary shares in the form of ADS with a total aggregate value of approximately $195.70 million.
FINV’s trailing-12-month gross profit margin of 78.85% is 33.6% higher than the 59.02% industry average. Its trailing-12-month ROTA of 11.37% is 915.5% higher than the 1.12% industry average.
In terms of forward EV/EBITDA, FINV is trading at 0.01x, 99.9% lower than the industry average of 10.37x. Its forward Price/Sales and EV/EBIT multiple of 0.63 and 0.01 are 68% and 99.9% lower than the 1.98 and 11.13 industry averages, respectively.
For the fiscal first quarter that ended March 31, 2023, FINV’s net revenue increased 24.7% year-over-year to $444.21 million. Its non-GAAP adjusted operating income stood at $111.05 million, up 26.7% from the prior-year quarter.
Also, its total comprehensive net income and non-GAAP net profit per ADS attributable to FINV ordinary shareholders stood at $97.08 million and $0.36, up 25.3% and 32.4% from the year-ago quarter, respectively.
Analysts expect FINV’s revenue and EPS for the fiscal year ending December 2023 to increase 13.4% and 6.1% year-over-year to $1.84 billion and $1.25, respectively.
Over the past year, the stock has gained 4% to close the last trading session at $3.90. The stock has gained 1.6% over the past month.
FINV’s POWR Ratings reflect solid prospects. It has an overall rating of A, which equates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
It has an A grade for Value and a B for Sentiment and Quality. It is ranked first out of 46 stocks in the China industry.
Click here to see the ratings of FINV for Growth, Momentum, and Stability.
Waterdrop Inc. (WDH)
Headquartered in Beijing, China, WDH provides online insurance brokerage services to match and connect users with related insurance products underwritten by insurance companies. The company offers short-term and long-term health and life insurance products and services and operates a medical crowdfunding platform.
WDH’s trailing-12-month gross profit margin of 63.62% is 7.8% higher than the 59.02% industry average. Its trailing-12-month ROTA of 10.26% is 816.1% higher than the 1.12% industry average.
In terms of forward EV/EBITDA, WDH is trading at 8.03x, 22.6% lower than the industry average of 10.37x. Its forward EV/Sales multiple of 1.06 is 44.2% lower than the industry average of 1.91.
During the fiscal fourth quarter that ended December 31, 2022, WDH’s net operating revenue increased 12.5% year-over-year to $98.51 million, while its operating profit came in at $10.56 million. Moreover, its adjusted net profit amounted to $23.15 million, up significantly year-over-year.
WDH’s net profit per share attributable to ordinary shareholders came in at RMB0.03, compared to a loss of RMB0.02 for the previous-year quarter.
Analysts expect WDH’s revenue and EPS for the fiscal year ending December 2023 to increase 14.6% and 890.9% year-over-year to $466.27 million and $0.22, respectively.
Also, revenue and EPS are expected to increase by 13.7% and 14.2% year-over-year during the fiscal year ending December 2024 to $530.24 million and $0.25, respectively.
WDH’s stock has gained 155.7% over the past year to close the last trading session at $2.71. It has gained 69.4% over the past six months.
It is no surprise that WDH has an overall B rating, which equates to Buy in our POWR Ratings system.
It also has a B grade for Momentum, Stability, and Sentiment. WDH is ranked #14 within the same industry.
For additional ratings on WDH’s Growth, Value, and Quality, click here.
Viomi Technology Co., Ltd (VIOT)
Headquartered in Guangzhou, China, VIOT, through its subsidiaries, develops and sells internet-of-things-enabled smart home products. The company offers IoT-enabled smart home products, smart kitchen products, and other smart products.
VIOT’s trailing-12-month CAPEX/Sales of 6.05% is 91% higher than the 3.17% industry average. Its trailing-12-month asset turnover ratio of 1.05x is 4.1% higher than the 1.01x industry average.
In terms of trailing-12-month Price/Sales, VIOT is trading at 0.12x, 85% lower than the industry average of 0.82x. Its trailing-12-month Price/Book multiple of 0.28 is 86.6% lower than the industry average of 2.07.
Mr. Xiaoping Chen, founder and CEO of VIOT, said, “As we progress through 2023, we will maintain sufficient financial reserves and strictly control costs to provide strong support for our brand development and product upgrades."
For the fiscal fourth quarter that ended December 31, 2022, VIOT’s total net revenues stood at $132.02 million, while its gross profit came in at $30.40 million. Its cash and cash equivalents stood at $106.88 million as of December 31, 2022, up 25.6% year-over-year.
The stock gained marginally intraday to close the last trading session at $0.83.
VIOT’s POWR Ratings reflect promising prospects. The stock has an overall B rating, equating to Buy in our proprietary rating system.
It has an A grade for Value and Sentiment. Within the same industry, it is ranked #4.
Beyond what we have mentioned above, to see the other ratings of VIOT for Growth, Stability, Momentum, and Quality, click here.
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FINV shares were trading at $3.98 per share on Monday morning, up $0.08 (+2.05%). Year-to-date, FINV has declined -15.66%, versus a 10.33% rise in the benchmark S&P 500 index during the same period.
About the Author: Sristi Suman Jayaswal
The stock market dynamics sparked Sristi's interest during her school days, which led her to become a financial journalist. Investing in undervalued stocks with solid long-term growth prospects is her preferred strategy. Having earned a master's degree in Accounting and Finance, Sristi hopes to deepen her investment research experience and better guide investors.
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