The omicron variant has dampened the rapid expansion of the Chinese economy due to depressed demand and consumption. Goldman Sachs cut its 2022 forecast for China’s economic growth from 4.8% to 4.3%. However, several experts still believe the Chinese market to be a potential outperformer for fiscal 2022. Invesco’s Kristina Hooper has included China as one of the 2022′s top places to put money to work. The winter Olympics is expected to revive consumption levels and boost tourism, as people from all over the world are expected to visit the country during this period.
So, it could be wise to bet on fundamentally sound Chinese stocks, FinVolution Group (FINV), LexinFintech Holdings Ltd. (LX), and Fuwei Films (Holdings) Co., Ltd. (FFHL), which are trading below their 52-week highs now, ahead of the winter Olympics.
FinVolution Group (FINV)
Headquartered in Shanghai, FINV, an investment holding company, operates an online consumer finance marketplace in the People’s Republic of China.
On November 18, 2021, Mr. Jiayuan Xu, CEO, FINV, said, “We successfully issued and listed our first ABS on China’s Shenzhen Stock Exchange, marking an important milestone in our strategic transition towards better quality borrowers. With the diversification in funding sources through different avenues, we expect future improvement in funding efficiency. Our profitability also continued to improve with non-GAAP operating profit of RMB751.3 million, an increase of 7.7% year over year and a sequential increase of 3.5%. These results are a powerful testament to our effective business strategy and skillful execution.”
FINV’s net revenue increased 40.8% year-over-year to $391.89 million in the third quarter ended September 30, 2021. Its total comprehensive income came in at $99.42 million, up 13.3% year-over-year, and its EPS came in at $0.07, up 4.9% year-over-year.
Analysts expect FINV’s revenue to increase 25.7% year-over-year to $1.48 billion for fiscal 2021. Its EPS is estimated to grow 1.3% per annum for the next five years. In addition, it has surpassed the consensus EPS estimates in three of the trailing four quarters. It is currently trading 56.8% below its 52-week high of $10.61, which it hit on March 11, 2021, to close Friday’s trading session at $4.58.
FINV’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which indicates a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
FINV has an A grade for Value and a B grade for Quality. Within the China industry, it is ranked #2 of 50 stocks. Click here to see the additional POWR Ratings for Growth, Momentum, Sentiment, and Stability for FINV.
LexinFintech Holdings Ltd. (LX)
Shenzhen-based LX, through its subsidiaries, operates as an online consumption and consumer finance platform for young professionals in China. The company operates Fenqile.com, a consumption and consumer finance platform.
On November 11, 2021, Ms. Sunny Rui Sun, Lexin’s chief financial officer, said, “Quality growth is a key focus. At the same time, we will continue to support the overall profitability by strengthening cost management and operational efficiency.”
LX’s platform-based services income increased 26.3% year-over-year to $120.33 million for the fiscal third quarter ended September 30, 2021. The company’s gross profit increased 54% from the same period last year to $233.81 million. Its net income came in at $90.09 million, up 68.4% year-over-year.
Analysts expect LX’s revenue to come in at $2.02 billion in fiscal 2022, representing a 6.1% year-over-year rise. The company’s EPS is expected to increase 220.6% year-over-year to $2.18 in fiscal 2021. In addition, it surpassed Street EPS estimates in each of the trailing four quarters. It is trading 77.4% below its 52-week high of $15.42, which it hit on February 19, 2021, to close Friday’s trading session at $3.49.
LX has an overall grade of B, equating Buy in our POWR Ratings system. It has an A grade for Value and a B grade for Sentiment and Quality. Within the same industry, it is ranked #5. Also, click here to see the additional POWR Ratings for Growth, Momentum, and Stability for LX.
Fuwei Films (Holdings) Co., Ltd. (FFHL)
Headquartered in Weifang, the People’s Republic of China, FFHL, through its subsidiaries, engages in the development, manufacture, and distribution of biaxially oriented polyethylene-terephthalate films in the People’s Republic of China.
FFHL’s net sales came in at RMB100.6 million (US$15.6 million), up 21.4% year-over-year, for the second quarter ended June 30, 2021. Its sales of specialty films came in at RMB69 million (US$10.7 million), up 43.5% year-over-year. The company’s net profit came in at RMB19.8 million (US$3.1 million), up 40.4% year-over-year.
FFHL’s EPS is estimated to grow at 7% per annum for the next five years. It is currently trading 55.7% below its 52-week high of $17.12, to close Friday’s trading session at $7.58.
FFHL’s strong fundamentals are reflected in its POWR ratings. The stock has an overall A rating, which equates to a Strong Buy in our proprietary rating system. In addition, it has an A grade for Growth and Value and a B grade for Momentum and Quality. FFHL is ranked #1 in the China industry. Click here to see the additional POWR Ratings for FFHL (Stability and Sentiment).
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FINV shares were trading at $4.50 per share on Tuesday afternoon, down $0.08 (-1.75%). Year-to-date, FINV has declined -8.72%, versus a -3.88% rise in the benchmark S&P 500 index during the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries. More...
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