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Sport News | 4 Chinese stocks to buy at discounted prices

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4 Chinese stocks to buy at discounted prices

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I have always supported the idea that in any market or economic condition, there are pockets of value. This can be in different industries, regions or asset classes. Chinese stocks have been underperforming in 2021. Compared to the US and Europe, Chinese markets have underperformed by 40%.

I think there are good reasons to consider exposure to some Chinese equities at current levels. It is difficult to predict an exact moment for the reversal. There may be another price or time correction. However, given the valuations, it seems very likely that the downside risk is capped and the upside potential is significant.

It should be noted that regulatory concerns have been a major reason why Chinese stocks remain depressed. However, it is the private sector of the economy that is the dynamic sector or the sector that triggers GDP growth. Government and the private sector will eventually iron out the differences. The updated valuation therefore presents a good opportunity for accumulation.

Let’s briefly discuss four Chinese stocks that are worth buying at current levels.

  • Nio (NYSE:NIO)
  • Alibaba Group (NYSE:BABA)
  • JD.com (NASDAQ:J.D.)
  • XPeng (NYSE:XPEV)

Chinese stocks to buy: Nio (NIO)

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At current levels near $30 per share, Nio stock is probably one of the most attractive Chinese stocks. The correction in Nio stock over the past 12 months is due to profit booking, chip scarcity and stock dilution. However, the worst seems to be over and with big plans for growth in 2022, the stock is about to reverse.

Nio is expected to launch three new models during the year. Delivery of ET7 is expected to begin in March. Additionally, the ET5 is expected to ship from September 2022. The new models will ensure shipment growth remains robust in 2022 and 2023.

It should also be noted that Nio is pursuing aggressive international expansion. The company plans to be present in 25 countries by 2025. The focus should continue to be on China and Europe. To meet the additional demand, Nio is already expanding its manufacturing capacity.

From a financial perspective, the company reported cash and cash equivalents of $7.3 billion in the third quarter of 2021. With the recent market offering, the company has a cash reserve of over 9 .0 billion. This gives Nio the flexibility to invest in innovation and expand its marketing and sales efforts.

Overall, I wouldn’t be surprised if NIO’s stock doubles from current levels in the next 12-18 months.

Alibaba Group (BABA)

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The best time to buy a stock is when fear is the dominant sentiment. This is still true for Alibaba Group stocks. Recently, Warren Buffett’s sidekick Charlie Munger increased his stake in BABA shares. This indicates that value investors are increasing their exposure to current levels.

Regulatory headwinds are likely to continue for the tech sector in China. However, BABA stock seems to have ignored the concerns. In fact, the stock is already 20% higher from December 2021 lows.

Alibaba also provided strong numbers. For the September quarter, the company reported total revenue growth of 29%. Growth remained healthy in core e-commerce and cloud businesses. In addition, it is very likely that the EBITDA margin of the cloud business will increase. This will boost cash flow in the coming quarters.

From a financial perspective, Alibaba reported cash and cash equivalents of $68.8 billion in September 2021. With buoyant free cash flow, Alibaba has ample financial flexibility to invest in emerging businesses.

Within the e-commerce segment, the following point is worth noting; the company’s business activities in China grew by 30% year-on-year. However, the growth of international trade was 34%. I believe that the growth of international trade will continue to outpace the growth of e-commerce in China. The main reason is Alibaba’s presence in Southeast Asia, which is another high-growth market.

Overall, the BABA stock is expected to consolidate and rise in 2022 as regulatory headwinds ease on a relative basis.

Chinese stocks to buy: JD.com (JD)

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JD.com stock is another Chinese name that has underperformed over the past 12 months. However, on a relative basis, JD stock outperformed BABA stock. JD.com remains on a strong growth trajectory and the stock looks attractive for exposure at current levels.

For the third quarter of 2021, JD.com reported revenue growth of 26% on an annual basis. Additionally, for the first nine months of 2021, the company reported free cash flow of 28.5 billion renminbi ($4.49 billion). Strong cash flow provides flexibility for organic and acquisition-driven growth.

One factor that sets JD.com apart from its peers is a robust logistics network. The geographical coverage of the company covers all counties and districts in China. Execution capabilities allow the company to expand aggressively into lower tier cities.

In addition, JD.com is also expanding its omnichannel business presence. In September 2021, the company opened its first JD Mall. These factors will ensure that the company’s core business growth remains healthy.

Coming back to the logistics segment, JD Logistics recently launched an air freight route between East China and London. With the expansion of the international transport network, the company has ambitious growth plans for this segment.

Overall, JD.com generated healthy cash flow and the business is spreading its wings. JD.com already has a presence in e-commerce, brick and mortar, healthcare, logistics and real estate. JD stock is worth keeping in the long-term portfolio.

XPeng (XPEV)

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XPeng stock is another name among Chinese stocks worth keeping in the portfolio for the long term.

The biggest catalyst for stock XPEV is innovation. In October 2021, XPeng indicated that it was ready to launch flying cars in 2024. The cars can also be driven on the roads. This is just one example of the Guangzhou-based manufacturer’s vision.

In terms of core business growth, XPeng recorded vehicle deliveries of 98,155 vehicles in 2021. On an annual basis, deliveries increased by 263%. It looks likely that the robust growth in shipments will continue through 2022.

XPeng plans to launch its G9 model in the third quarter of 2022. The car “will feature XPeng’s Xpilot semi-autonomous driving system, lidar technology and Nvidia chips.” With XPeng already expanding into Europe, the G9 model is likely to provide the necessary growth traction.

From a financial perspective, XPeng reported cash and cash equivalents of $7.0 billion in the third quarter of 2021. The financial flexibility will help continue international expansion and increase investment in research and development. At the same time, as deliveries increase, the company is positioned for continued vehicle margin growth.

Overall, XPEV stock looks positioned for a rally in 2022. With multi-year tailwinds for the EV segment, the stock is worth holding for the long term.

On the date of publication, Faisal Humayun has not held (directly or indirectly) any position in any of the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com publishing guidelines.

Faisal Humayun is a senior research analyst with 12 years of experience in credit research, equity research and financial modeling. Faisal is the author of over 1,500 stock-specific articles focused on the technology, energy and materials sectors.

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