It’s been a challenging year for the Chinese markets with the Shanghai (SSE Composite Index) declining by 6%. Macroeconomic headwinds have played spoilsport. However, China is a big economy and there are sectors and stocks that continue to do well. Looking at the stock predictions for Q4 2023, I believe that there are few Chinese stocks to buy that are poised for a strong rally.
It’s worth noting that China’s growth outlook for 2024 has been trimmed to 4.4% from an earlier estimate of 4.8%. Macroeconomic headwinds will therefore sustain in the coming year. However, my focus is on bottom-up analysis where I have considered quality companies that are positioned for healthy growth. At least for the coming quarters, I don’t see growth headwinds for the companies discussed. Additionally, any potential economic stimulus can boost the growth outlook for these companies.
For now, given the valuations and the growth outlook, I am bullish on these Chinese stocks to buy.
Li Auto (LI)
Among the bullish stock predictions, Li Auto (NASDAQ:LI) is the best in Chinese stocks to buy. It’s worth noting that LI stock has surged by 67% year-to-date. However, considering the stellar deliveries growth numbers, I expect the positive momentum to sustain.
For Q3 2023, Li Auto reported deliveries growth of 296.3% on a year-on-year basis to 105,108. Robust growth ensures that the company’s upcoming results will be impressive. With Li Auto pursuing aggressive retail expansion within China, the growth outlook for 2024 is strong.
Besides expanding retail presence, deliveries growth has been supported by the launch of new models. Li L7, Li L8 and Li L9, will continue to be deliveries growth drivers.
Additionally, the company will be launching Li MEGA in December. Li Auto believes that the new model is likely to be the highest selling vehicle in China priced at more than 500,000 yuan. With these positives, LI stock is poised for a renewed rally after the recent profit booking driven correction.
Miniso Group (MNSO)
Miniso Group (NYSE:MNSO) is another Chinese stock that’s taking a breather after skyrocketing year-to-date. I believe that the correction is a good entry opportunity with MNSO stock trading at an attractive forward price-earnings ratio of 24. Additionally, the stock offers a dividend yield of 1.67%.
I like the point that the lifestyle retailer is in an aggressive global expansion spree. Further, the expansion activities are delivering results in the form of strong growth and margin expansion.
For the financial year of 2023, Miniso opened 592 new stores on a year-on-year basis. Of this, overseas markets accounted for 214 new store openings. For Q4 2023, Miniso reported robust revenue growth of 40.3% on a year-on-year basis to $448.5 million. For the same period, the company’s adjusted EBITDA margin expanded by 820 basis points to 26.3%.
As aggressive store opening continues coupled with an increase in the number of SKUs, the outlook for 2024 is bullish. Dividend initiation coupled with share repurchase will also create shareholder value.
NetEase (NTES)
NetEase (NASDAQ:NTES) stock has been in a strong consolidation mode around $100. With NTES stock trading at an attractive forward price-earnings ratio of 15.7, a breakout on the upside is imminent.
To put things into perspective, 35 analysts offering a 12-month price forecast for NTES stock have a median target of $124.19. This would imply an upside of 25.17% from current levels. I would therefore not be surprised if the stock gains 30% from current levels in the next few months.
It’s worth noting that for Q2 2023, NetEase reported subdued revenue growth of 3.7% on a year-on-year basis to $3.3 billion. However, the company has a robust games pipeline that includes “highly anticipated games in diversified genres.” It’s likely that revenue growth will accelerate in the coming quarters.
Of course, the gaming segment remains the revenue and cash flow driver. However, NetEase is diversifying with investment in innovative businesses that will deliver value in the next few years.
On the date of publication, Faisal Humayun did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
