China Consumer Stocks Gaining Interest As Inflation Stays Soft

China’s July inflation data points to gently rising prices and room for more policy support, which puts consumer wallets in the spotlight. When inflation stays contained and officials talk up pro consumption measures, investors often start looking for consumer discretionary stocks that could benefit. This article walks through three larger Chinese consumer discretionary stocks from our screener that appear well placed under these conditions.

The three stocks below are just a sample from this idea, and the full screen surfaced 23 more larger Chinese consumer discretionary companies with financial profiles and narratives that may be just as interesting but are not covered here. To see the wider opportunity set and quickly identify your own higher conviction ideas, go straight to the Consumer Discretionary (China) screener.

Shenzhen MTC (SZSE:002429)

Shenzhen MTC is a Shenzhen based electronics manufacturer focused on home audio visual hardware. It designs and produces LCD TVs and displays, smart audio visual and network communication equipment plus a range of IoT and LED products for consumer and related markets in China. The company is sizeable, with a market cap of about CN¥36.9b.

Shenzhen MTC sits in an interesting spot for investors watching China’s pro consumption push. Analysts expect strong earnings growth and the stock currently trades slightly below an internal fair value estimate, yet recent earnings were hit by one off items and profit margins softened. Add in an unstable dividend record and higher risk borrowings and you get a business with clear earnings potential but some real questions around consistency and capital structure. For investors who can tolerate bumps in the financials, Shenzhen MTC could be a stock to watch as consumer focused stimulus and moderate inflation support demand for TVs, smart devices and other home electronics.

Shenzhen MTC’s earnings story looks stronger than its recent headline numbers suggest, with one off hits and softer margins clouding the picture. Get the full earnings context in the analyst forecasts for Shenzhen MTC and see what could surprise next.

Build your own Shenzhen MTC style growth and value screen

Shenzhen MTC and the two other stocks in this article all came from applying a few simple filters, and you can run the same playbook in seconds. Use our flexible Screener to mix metrics like valuation, earnings outlook, balance sheet strength, risks and dividends, or jump straight into our curated Investing Ideas for ready made shortlists.

Anhui Jianghuai Automobile GroupLtd (SHSE:600418)

Anhui Jianghuai Automobile GroupLtd is a Hefei based automaker that develops and sells a full range of vehicles, including trucks, buses, SUVs, sedans, vans, pickups and electric vehicles, as well as related components and auto services in China and overseas markets. The company generated about CN¥48.2b in revenue from manufacturing and selling automobiles and related accessories, and currently has a market cap of roughly CN¥54.4b.

Anhui Jianghuai Automobile GroupLtd sits at the intersection of China’s vehicle demand and policy support for consumption, with a broad line up that spans commercial vehicles and EVs. Analysts have highlighted the company’s earnings and revenue growth potential, while noting that the business is currently loss making and relies heavily on external borrowing, which raises funding risk if conditions weaken. For investors this combination of anticipated growth, experienced governance and a newly approved share buyback plan points to a more complex story than recent profitability might suggest, particularly if pro consumption measures and moderate inflation continue to support auto purchases.

Anhui Jianghuai Automobile GroupLtd sits at a crossroads of vehicle demand, EV exposure and policy support, yet its loss making status can mask the full story. Get the full analyst forecasts for Anhui Jianghuai Automobile GroupLtd and see what the borrowing profile might really signal.

JoyoungLtd (SZSE:002242)

JoyoungLtd is a Jinan based small home appliance specialist that sells soy milk makers, rice and induction cookers, air fryers and food processors in China and overseas markets, supported by grain storage and processing plus appliance consulting services. The company sits within a larger corporate group as a subsidiary of Shanghai Li Hung Enterprise Management and currently has a market cap of about CN¥6.7b.

JoyoungLtd operates in a segment aligned with China’s efforts to support household spending, with its kitchen appliances closely tied to everyday consumption. Earnings grew 5.5% over the past year and analysts expect earnings growth of about 34% a year, yet current profitability is thin with a 1.2% net margin, a low 2.7% ROE and dividends that are not well covered. In addition, there was a CN¥109.6m one off loss, reliance on higher risk external borrowing and upcoming August meetings on results and governance. Supportive inflation data and pro consumption policies may therefore have a significant influence when assessing the recent headline numbers.

JoyoungLtd’s earnings profile and thin margins hint at a story that many investors may be underpricing. Put its growth expectations, one off hits, and funding needs into context with the analysis report for JoyoungLtd

Seeking Alternatives Before The Crowd Moves

Fresh opportunities can move from quiet to crowded fast. Some stocks are building momentum while they are still under the radar for now. Scan them before the breakout and review them early.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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