China's economy is anticipated to have grown approximately 5% or slightly higher in 2023, surpassing the performance of the global economy. Despite challenges and a slower pace compared to pre-COVID times, this growth demonstrates resilience in the face of economic headwinds.
Moreover, considering bright prospects for this year, investors could consider robust Chinese stocks, Autohome Inc. (ATHM), Tuniu Corporation (TOUR), and Vipshop Holdings Limited (VIPS), with considerable potential for gains in 2024.
China is expected to play a crucial role in driving global economic growth in 2024, providing certainty and positive energy amid global economic uncertainties, according to statements from the Chinese Foreign Ministry spokesperson Wang Wenbin. The International Monetary Fund (IMF) Senior Resident Representative in China predicts continued sound growth for the Chinese economy, accounting for one-third of global economic growth.
Additionally, the Economist Intelligence Unit and institutions like the U.S. Center for Strategic and International Studies anticipate that China's economy in 2024 will see further strengthening of fundamentals, with strong exports in electric vehicle batteries, electronic products, and minerals, making several Chinese industries globally competitive.
On top of it, the Chinese economy's stable growth was bolstered by policy support, rising consumption expectations, increased investment in manufacturing, and a recovering real estate market last year. In the fiscal fourth quarter, the expanding consumption demand, rising investment in construction and manufacturing, and policy measures supporting the real estate industry are expected to have boosted the Chinese economy.
Besides, the International Monetary Fund (IMF) has upgraded China's GDP growth forecast for 2024 to 4.6%, up from the October estimate of 4.2%. The upward revision is attributed to China's approval of a 1 trillion yuan ($137 billion) sovereign bond issue and measures to support the economy.
Given the industry tailwinds, let us now dig deeper into the fundamentals of these China stocks, beginning with number three.
Stock #3: Autohome Inc. (ATHM)
Based in Beijing, China, ATHM operates as an online destination for automobile consumers. The company delivers interactive content and tools to automobile consumers through its three websites, autohome.com.cn, che168.com, and ttpai.cn on PCs, mobile devices, mobile applications, and mini apps.
ATHM’s trailing-12-month net income margin of 29.07% is 804.9% higher than the 3.21% industry average. Its trailing-12-month levered FCF margin of 23.24% is 197.1% higher than the industry average of 7.82%.
On December 29, ATHM pays a cash dividend of $1.15 per ADS. Its annual dividend yields 4.25% on the prevailing price level, higher than the four-year average dividend yield of 1.51%.
In the fiscal third quarter, which ended on September 30, 2023, ATHM’s total net revenues increased 3.4% year-over-year to $261.24 million, while its gross profit rose 1.3% from the prior-year quarter to $210.04 million. The company’s adjusted net income and EPS amounted to $78.69 million and $0.16, up 2.3% and 4.2% from the prior-year quarter, respectively. In addition, its adjusted EBITDA improved 22.4% year-over-year to $74.03 million.
Street expects ATHM’s revenue and EPS to grow 4.4% and marginally year-over-year to $1.03 billion and $2.41 in the fiscal year 2024. Moreover, the company topped its revenue and EPS estimates in each of the trailing four quarters, which is notable.
ATHM’s shares have returned 3.7 over the past month to close the last trading session at $27.05.
ATHM’s POWR Ratings reflect this promising outlook. The stock has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted optimally.
It has a grade of B for Value and Quality. Within the A-rated China industry, it is ranked #9 among 40 stocks.
In addition to the POWR Ratings we’ve stated above, one can access ATHM’s ratings for Growth, Momentum, Stability, and Sentiment ratings here.
Stock #2: Tuniu Corporation (TOUR)
Headquartered in Nanjing, China, TOUR operates as an online leisure travel company in China. The company provides several packaged tours, such as organized and self-guided tours and other travel-related services, including tourist attraction tickets, visa application services, financial services, and hotel booking services. Also, it offers car rental and insurance services.
TOUR’s trailing-12-month gross profit margin of 62.73% is 77.3% higher than the industry average of 35.38%. Its 7.77% trailing-12-month net income margin is 72% higher than the industry average of 4.52%.
TOUR’s net revenues rose 128.9% year-over-year to RMB178.19 million ($25.06 million) during the fiscal third quarter that ended September 30, 2023. Its gross profit improved 154.9% from the prior-year quarter to RMB114.77 million ($16.14 million).
Non-GAAP income from operation amounted to RMB38.09 million ($5.36 million), compared to a loss of RMB12.33 million ($1.73 million) in the prior-year quarter. Moreover, non-GAAP net income amounted to RMB45.46 million ($6.41 million), compared to a loss of RMB21.57 million ($3.03 million).
TOUR anticipates a 220-240% year-over-year increase in net revenues, projecting RMB87.40 million ($12.29 million) -92.90 million ($13.06 million) for the fiscal fourth quarter ended December 2023.
TOUR’s EPS and revenue are expected to rise 92.9% and 40.3% year-over-year to $0.08 and $84.97 million in the fiscal year 2024.
TOUR’s stock rose marginally intraday to close the last trading session at $0.67.
TOUR’s POWR Ratings are consistent with its steady fundamentals. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.
TOUR has a B grade for Growth, Value, Sentiment and Quality. The stock is ranked #7 in the same industry.
Click here to access TOUR’s additional Momentum and Stability ratings.
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.
VIPS’ trailing-12-month asset turnover ratio of 1.83x is 83.4% higher than the industry average of 1x. Its trailing-12-month net income margin of 6.73% is 48.9% higher than the industry average of 4.52%.
In November 2023, VIPS’ launched its "Online Outlet" immersive experience pavilion at the 6th China International Import Expo (CIIE) alongside the release of its Global Buyer Manifesto. The 300-square-meter pavilion focuses on themes like fashion, trends, quality living, and sustainability, offering a unique experience. Concurrently, VIPS introduced the "CIIE on the Cloud" section in its app, featuring nearly 100,000 high-quality products from international brands across various categories, aiming to provide users with a diverse selection of premium items at competitive prices.
The company repurchased $13.40 million of its ADSs in the third quarter of 2023 under its $1 billion share repurchase program, which is valid until March 2025. As of September 30, 2023, there remains an unutilized amount of $551.50 million under this program.
During 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.
Also, 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.
The company forecasts total net revenues between RMB31.80 billion ($4.47 million) and RMB33.3 billion ($4.68 million) for the fiscal fourth quarter ended December 2023, indicating a year-over-year increase of about 0% to 5%.
Analysts expect VIPS’ EPS and revenue to rise 34.3% and 1.1% year-over-year to $0.71 and $4.65 billion in the fiscal fourth quarter ended December 2023. The company has exceeded the consensus EPS estimates in each of the trailing four quarters.
The stock has gained 13% over the past nine months, closing the last trading session at $16.59. It has soared 8.6% over the past three months.
VIPS’ healthy 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, Value, Momentum, Quality, and Sentiment. It is ranked #6 in the same industry.
To access VIPS’ Stability ratings, click here.
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
VIPS shares were trading at $16.31 per share on Monday morning, down $0.28 (-1.69%). Year-to-date, VIPS has declined -8.16%, versus a -1.06% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.
3 China Stocks With 2024 Gain Potential StockNews.com
