China’s economy is holding well amid challenges, showcasing resilience and adaptability. Its quarterly GDP growth reflects a stable trend, with policymakers actively shaping a dynamic future. The resilience creates a compelling stage for investors to explore opportunities in Ping An Insurance (Group) Company of China, Ltd. (PNGAY), Alibaba Group Holding Limited (BABA) and Tencent Holdings Limited (TCEHY).

In the third quarter of the fiscal year, China’s economy grew by 4.6%, surpassing the 4.5% forecast. While slightly behind the 4.7% growth recorded in the second quarter, it demonstrates a strong foundation. Such stability strengthens confidence in the nation’s economic trajectory.

Retail sales figures add to this optimism. In September, they jumped by 3.2% compared to the previous year, hitting a four-month high and beating the anticipated 2.5% growth. Industrial production also excelled, growing by 5.4% in September, outpacing predictions of 4.5%.

September’s recovery trends set the tone for a robust final quarter. Sheng Laiyun, deputy head of China’s statistics bureau, exuded confidence in achieving the country’s 5% GDP growth target for 2024.

In parallel, the government might issue 6 trillion yuan ($850 billion) in treasury bonds over three years, channeling funds into fiscal stimulus and alleviating “off-the-books debt” in local governments.

Also, late September marked the introduction of a fresh monetary stimulus package, including interest rate cuts and a $114 billion injection into the stock market. These initiatives underline China’s commitment to revitalizing its economy, ensuring it adapts and thrives in the evolving global landscape.

Furthermore, China’s strategic pivot away from foreign technology dependence further enhances its growth story. The Made in China 2025 initiative fuels innovation, empowering domestic companies to compete globally. By fostering such advancements, China could position itself for long-term economic and market leadership.

Now, let us dive deep into the fundamentals of three China stocks, starting with #3.

Stock #3: Ping An Insurance (Group) Company of China, Ltd. (PNGAY)

Headquartered in Shenzhen, China, PNGAY is a provider of financial products and services for insurance, banking, asset management, and technology businesses. The company has five segments: Life and Health Insurance; Property and Casualty Insurance; Banking; Asset Management; and Technology.

PNGAY trailing-12-month ROCE of 12.95% is 27.4% higher than the industry average of 10.17%. Moreover, its trailing-12-month cash from operations of $66.31 billion is significantly higher than the industry average of $137.60 million.

For the nine months, which ended September 30, 2024, PNGAY’s revenue increased 8.7% year-over-year to RMB 861.82 billion ($118.29 billion). Profit for the period attributable to owners of the parent rose 36.1% from the year-ago value to RMB 119.18 billion ($16.36 billion).

Additionally, earnings per share attributable to ordinary equity holders of the parent grew 35.7% from the prior year’s quarter to RMB 6.58, respectively.

Analysts expect PNGAY’s revenue for the fiscal year ending December 2025 to increase 5.8% year-over-year to $80.91 billion.

Shares of PNGAY have surged 25.1% over the past six months and 36.5% over the past year, closing the last trading session at $11.78.

PNGAY’s POWR Ratings mirror its solid fundamentals. It has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings are calculated by taking into account 118 different factors, with each factor weighted to an optimal degree.

PNGAY has an A grade for Growth and Momentum and a B for Value. Within the A-rated China industry, PNGAY is ranked #10 out of 42 stocks.

In addition to the POWR Ratings highlighted above, you can check PNGAY’s ratings for Stability, Sentiment, and Quality here.

Stock #2: Alibaba Group Holding Limited (BABA)

Based in Hangzhou, China, BABA offers technology infrastructure and marketing reach to help merchants, brands, and retailers connect with international users and customers. Its segments include: China Commerce; International Commerce; Local Consumer Services; Cainiao; Cloud; Digital Media and Entertainment; and Innovation Initiatives and Others.

On December 17, BABA announced the sale of 100% of the equity interest in Intime, a leading department store operator in the PRC, to a consortium of purchasers comprising Youngor Group and members of Intime’s management team. The expected gross proceeds to BABA from the sale is approximately $1 billion.

BABA’s trailing-12-month EBITDA margin of 18.16% is 60.1% higher than the industry average of 11.34%. Its trailing-12-month levered FCF margin of 8.75% is 94.5% higher than the sector average of 4.50%. Furthermore, the stock’s trailing-12-month net income margin of 8.98% is 105.3% higher than the 4.37% industry average.

For the fiscal 2025 second quarter that ended September 30, 2024, BABA’s revenue increased 5.2% year-over-year to $33.70 billion. Its income from operations rose 4.9% from the year-ago value to $5.02 billion. Moreover, the company’s adjusted EBITDA was reported to be $6.74 billion.

BABA’s non-GAAP net income and non-GAAP EPS came in at $5.20 billion and $0.27, respectively.

For the fiscal 2025 third quarter ending December 2024, Street expects BABA’s revenue and EPS to increase 5.6% and 4.1% year-over-year to $38.22 billion and $2.75, respectively.

BABA’s shares have surged 2.9% over the past three months and 17% over the past year to close the last trading session at $87.15.

BABA’s robust prospects are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.

BABA has a B grade for Growth, Sentiment, Quality and Momentum. It is ranked #8 out of 42 stocks within the China industry.

To access BABA’s Value and Stability ratings, click here.

Stock #1: Tencent Holdings Limited (TCEHY)

With its headquarters in Shenzhen, China, TCEHY is an investment holding company that provides value-added services, online advertising, fintech, and business services. The company operates through four segments: VAS; Online Advertising; FinTech and Business Services; and Others.

On November 6, TCEHY announced a strategic partnership with Visa Inc. (V) to introduce its palm recognition technology for digital payments in international markets. With the rise of convenient and fast digital payment methods, the new partnership could strengthen TCEHY’s market share in the e-payments market.

TCEHY’s trailing-12-month gross profit margin of 52.28% is marginally higher than the industry average of 52.13%. Its trailing-12-month EBITDA margin of 34.61% is 84.4% higher than the 18.77% industry average. Additionally, the stock’s trailing-12-month net income margin of 26.40% is 585.8% higher than the sector average of 3.85%.

For the fiscal third quarter that ended September 30, 2024, TCEHY’s revenues increased 8.1% year-over-year to RMB 167.19 billion ($22.95 billion). Its gross profit rose 16.1% from the year-ago value to RMB 88.83 billion ($12.19 billion).

Additionally, non-IFRS operating profit and EPS for profit attributable to equity holders of the company grew 33.2% and 50.4% from the prior year’s quarter to RMB 59.81 billion ($8.21 billion) and RMB 5.64, respectively.

The consensus revenue and EPS estimates of $23.31 billion and $0.81 for the fiscal fourth ending December 2024 exhibit a year-over-year rise of 8.1% and 31.1%, respectively. Moreover, the company topped the consensus EPS estimates in three of the four trailing quarters.

The stock has surged 6.9% over the past six months and 30.4% over the past year to close the last trading session at $52.27.

TCEHY’s strong prospects are apparent in its POWR Ratings. It has an overall rating of A, equating to a Strong Buy in our proprietary rating system.

TCEHY has an A grade for Stability and a B for Sentiment. Within same industry, the stock is ranked #3 out of 42 stocks.

Click here to access TCEHY’s ratings for Growth, Quality, Value, and Momentum.

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TCEHY shares were unchanged in premarket trading Wednesday. Year-to-date, TCEHY has gained 39.35%, versus a 28.33% rise in the benchmark S&P 500 index during the same period.

About the Author: Aanchal Sugandh

Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns. More...

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