I have identified four Chinese stocks that U.S. investors should consider for inclusion in their portfolios. I am expecting these stocks to outperform their Chinese as well as global peers. Here is my fundamental analysis on these four stocks. Please use my research as a starting point for your own due diligence.
Shengda Technology Incorporation (SDTH, Financial) is a Chinese manufacturer of specialty additives. The company is engaged in developing, manufacturing and marketing nano precipitated calcium carbonate products. In late 2009 the company acquired Anhui Chaodong Nano materials. Its ROE is 13.58% while its competitors Fuchs Petrolub (FPEG) and H & R (2HR), who are doing well, reported their respective returns on equity at 31.36% and 22.97%. The company's beta is 1.41 indicating a volatile stock. The sector offers a dividend yield of 1.54% and has a Price to Earnings (P/E) multiple of 11.48x. The company reported a gross profit margin of 40.71% which is higher than the sector's gross profit margin of 27.41%. Also Shengda Technology has an EBITDA margin of 38.65% while the sector's is 16.98%. The company reported interest coverage of 3.41 as compared to the sector interest coverage of 6.44x. And its projected revenue growth is 35.63% compared 17.66% of the sector.
51 Job Incorporation (JOBS, Financial) is a provider of integrated human resource service in China. In its recent accounts, the company's revenue increased 33% to RMB1.03 bn. Its net income totaled RMB 234.6mn which is up by 104.45%. The increase in revenue is mainly on account of an increase in income from online recruitment services and other human resource related revenue. Higher income also translates into an increase of 72.44% in the company's gross profit margin.The company's stock price is up by 90% from its year low. It has a beta of 1.25 which means the stock is volatile in nature. The company reported a net profit margin of 29.91% and its liquidity management is quite extraordinary, reflected from its current ratio of 5.31. 51 Job has a return on equity of 20.36%.
Fuqi International Incorporation (FUQI, Financial) is a designer of precious metal jewelry in China, developing, promoting and selling a range of products in the Chinese luxury goods market. The company's beta is 0.93 which means the stock is not volatile in nature. Its return on equity is 20.38% while its competitors Powland (PWLD) and Gerry Weber (GWIG) have reported returns on equity of 83.14% and 25.63% respectively. The sector's price to earnings ratio is 17.21x while the sector dividend yield is 2.56%. Fuqi International offers a revenue growth of 35.77% compared to the sector revenue growth of 9.83%. It reported a receivable turnover of 7.5 compared to sector's 10.01 and an asset turnover of 1.70 compared to sector's 1.09. The company's current ratio is 4.32x compared to the sector's current ratio standing at 1.35x. Fuqi International reported a gross profit margin of 23.54% and an EBITDA margin of 13.55% in comparison to the sector averages of 30.35% and 12.40% respectively. The company's net profit margin is 10.28% which is far better than the sector's net profit margin of 4.94%.
China Precision Steel Incorporation (CPSL, Financial) is performing below par in the recent past compared to its peer group, but that could improve. The return on equity of the company is 0.19% which is quite low as compared to its peer companies like Cliffs Natural CLFand Sun Coke SXC with returns on equity of 26.52% and 37.67% respectively. The sector's average Price to Earnings ratio is 12.32x. China Precision Steel's current ratio is 2.39% which is quite good. However, the company's Cashflow/BVPS is negative $0.161 million and free cash flow after dividend is negative 26.925mn. The company reported a revenue growth of 24.40% compared to the sector's 17.66%. It is weak in its interest coverage ratio of 0.6 compared to the sector's ratio of 6.44x. China Precision Steel is weak in the profitability ratios as well compared to other potential China investments with upside. It reported a gross profit margin of 0.15% and EBITDA margin of 5.10% compared to sector's margins of 27.41% and 16.98% respectively.
Shengda Technology Incorporation (SDTH, Financial) is a Chinese manufacturer of specialty additives. The company is engaged in developing, manufacturing and marketing nano precipitated calcium carbonate products. In late 2009 the company acquired Anhui Chaodong Nano materials. Its ROE is 13.58% while its competitors Fuchs Petrolub (FPEG) and H & R (2HR), who are doing well, reported their respective returns on equity at 31.36% and 22.97%. The company's beta is 1.41 indicating a volatile stock. The sector offers a dividend yield of 1.54% and has a Price to Earnings (P/E) multiple of 11.48x. The company reported a gross profit margin of 40.71% which is higher than the sector's gross profit margin of 27.41%. Also Shengda Technology has an EBITDA margin of 38.65% while the sector's is 16.98%. The company reported interest coverage of 3.41 as compared to the sector interest coverage of 6.44x. And its projected revenue growth is 35.63% compared 17.66% of the sector.
51 Job Incorporation (JOBS, Financial) is a provider of integrated human resource service in China. In its recent accounts, the company's revenue increased 33% to RMB1.03 bn. Its net income totaled RMB 234.6mn which is up by 104.45%. The increase in revenue is mainly on account of an increase in income from online recruitment services and other human resource related revenue. Higher income also translates into an increase of 72.44% in the company's gross profit margin.The company's stock price is up by 90% from its year low. It has a beta of 1.25 which means the stock is volatile in nature. The company reported a net profit margin of 29.91% and its liquidity management is quite extraordinary, reflected from its current ratio of 5.31. 51 Job has a return on equity of 20.36%.
Fuqi International Incorporation (FUQI, Financial) is a designer of precious metal jewelry in China, developing, promoting and selling a range of products in the Chinese luxury goods market. The company's beta is 0.93 which means the stock is not volatile in nature. Its return on equity is 20.38% while its competitors Powland (PWLD) and Gerry Weber (GWIG) have reported returns on equity of 83.14% and 25.63% respectively. The sector's price to earnings ratio is 17.21x while the sector dividend yield is 2.56%. Fuqi International offers a revenue growth of 35.77% compared to the sector revenue growth of 9.83%. It reported a receivable turnover of 7.5 compared to sector's 10.01 and an asset turnover of 1.70 compared to sector's 1.09. The company's current ratio is 4.32x compared to the sector's current ratio standing at 1.35x. Fuqi International reported a gross profit margin of 23.54% and an EBITDA margin of 13.55% in comparison to the sector averages of 30.35% and 12.40% respectively. The company's net profit margin is 10.28% which is far better than the sector's net profit margin of 4.94%.
China Precision Steel Incorporation (CPSL, Financial) is performing below par in the recent past compared to its peer group, but that could improve. The return on equity of the company is 0.19% which is quite low as compared to its peer companies like Cliffs Natural CLFand Sun Coke SXC with returns on equity of 26.52% and 37.67% respectively. The sector's average Price to Earnings ratio is 12.32x. China Precision Steel's current ratio is 2.39% which is quite good. However, the company's Cashflow/BVPS is negative $0.161 million and free cash flow after dividend is negative 26.925mn. The company reported a revenue growth of 24.40% compared to the sector's 17.66%. It is weak in its interest coverage ratio of 0.6 compared to the sector's ratio of 6.44x. China Precision Steel is weak in the profitability ratios as well compared to other potential China investments with upside. It reported a gross profit margin of 0.15% and EBITDA margin of 5.10% compared to sector's margins of 27.41% and 16.98% respectively.
