When written in Chinese, the word ‘crisis’ is composed of two characters. One represents danger, and the other represents opportunity. – John F. Kennedy, April 1959
The economic slowdown in China has had ripple effects the world over. Whether one believes that it is an overdue correction, a manifestation of the “endgame of Communist rule,” as the Wall Street Journal suggested recently, or something else, there is no doubt that it is being felt well beyond China’s borders.
This seemed, to me, to be a good time to use the All-In-One Screener to look for undervalued stocks in China. As I did last month when I examined undervalued stocks in Germany immediately following the revelation that Volkswagen (VOW, Financial) manipulated its diesel emission results, I clicked on Asia, then I used the dropdown box to narrow the results to China. This produced a list of 24 undervalued stocks.
I proceeded to examine the four stocks from mainland China that received 5-star predictability ratings:
Kweichow Moutai Co. Ltd. (SHSE:600519, Financial)
Kweichow Moutai is a state-owned company that specializes in liquor production and sales. Its current price is ¥190.31 (about $29.89 in U.S. currency) per share. It has a Financial Strength rating of 7/10 and a Profitability and Growth rating of 9/10.
Kweichow Moutai has a market cap of $239.07 billion and an enterprise value of $211.19 billion. It has a P/E of 14.2, a forward P/E of 13.0, a P/B of 3.9 and a P/S of 6.7. Matthews China Fund (Trades, Portfolio) has shares of Kweichow Moutai in its portfolio.
China Merchants Bank Co. Ltd. (SHSE:600036, Financial)
China Merchants Bank is a Shenzhen, China-based bank with more than 500 branches. It currently sells for ¥17.77 (approximately $2.80 in American dollars) per share. It has a Financial Strength rating of 5/10 and a Profitability and Growth rating of 9/10.
China Merchants Bank has a market cap of $448.16 billion and an enterprise value of $704.95 billion. It has a P/E of 7.7, a forward P/E of 7.7, a P/B of 1.4 and a P/S of 2.4.
Bank of Nanjing Co. Ltd. (SHSE:601009, Financial)
Bank of Nanjing is a Nanjing, China-based bank. It currently sells for ¥14.51 (roughly $2.28 in U.S. money) per share. It has a Financial Strength rating of 7/10 and a Profitability and Growth rating of 8/10.
Bank of Nanjing has a market cap of $48.84 billion and an enterprise value of $137.48 billion. It has a P/E of 6.8, a forward P/E of 4.3, a P/B of 1.1 and a P/S of 2.2.
Gree Electric Appliances Inc. (SHSE:000651)
Gree Electric Appliances is a Zhuhai, China-based major appliance manufacturer and the world’s largest maker of residential air conditioners. It currently sells for ¥16.18 (about $2.54 in American currency) per share. It has a Financial Strength rating of 7/10 and a Profitability and Growth rating of 8/10.
Gree Electric Appliances has a market cap of $97.33 billion and an enterprise value of $31.96 billion. It has a P/E of 4.9, a forward P/E of 7.0, a P/B of 2.4 and a P/S of 0.7.
I then examined the seven undervalued mainland Chinese businesses with 4.5-star predictability ratings:
Bank of Beijing Co. Ltd. (SHSE:601169)
Bank of Beijing is a Beijing-based bank. It currently sells for ¥8.61 (approximately $1.35 in U.S. dollars) per share. It has a Financial Strength rating of 7/10 and a Profitability and Growth rating of 8/10.
Bank of Beijing has a market cap of $109.11 billion and an enterprise value of $245.88 billion. It has a P/E of 5.7, a forward P/E of 4.4, a P/B of 1.1 and a P/S of 2.4.
Yunnan Baiyao Group Co. Ltd. (SHSE:000538)
Yunnan Baiyao Group is a Kunming, China-based pharmaceutical developer and manufacturer. It sells for ¥64 (about $10.05 in American money) per share. It has a Financial Strength rating of 9/10 and a Profitability and Growth rating of 9/10.
Yunnan Baiyao Goup has a market cap of $66.65 billion and an enterprise value of $63.74 billion. It has a P/E of 25.3, a forward P/E of 12.2, a P/B of 5.4 and a P/S of 3.4.
Hua Xia Bank Co. Ltd. (SHSE:600015)
Hua Xia Bank is a Beijing-based bank. It sells for ¥10.11 (roughly $1.59 in U.S. currency) per share. It has a Financial Strength rating of 7/10 and a Profitability and Growth rating of 8/10.
Hua Xia Bank has a market cap of $108.03 billion and an enterprise value of $200.45 billion. It has a P/E of 5.8, a forward P/E of 4.3, a P/B of 1.0 and a P/S of 1.9.
Huadong Medicine Co. Ltd. (SHSE:000963)
Huadong Medicine is a Hangzhou, China-based pharmaceutical company. It sells for ¥69.85 (approximately $10.97 in American dollars) per share. It has a Financial Strength rating of 9/10 and a Profitability and Growth rating of 8/10.
Huadong Medicine has a market cap of $30.32 billion and an enterprise value of $32.31 billion. It has a P/E of 29.4, a forward P/E of 33.0, a P/B of 11.9 and a P/S of 1.5.
Industrial Bank Co. Ltd. (SHSE:601166)
Industrial Bank is a Beijing-based bank. It sells for ¥14.56 (about $2.29 in U.S. money) per share. It has a Financial Strength rating of 6/10 and a Profitability and Growth rating of 8/10.
Industrial Bank has a market cap of $277.4 billion and an enterprise value of $637.27 billion. It has a P/E of 5.6, a forward P/E of 5.6, a P/B of 1.0 and a P/S of 2.0.
China First Pencil Co. Ltd. (SHSE:600612)
Established in 1935, China First Pencil is the country’s biggest pencil manufacturer. It sells for ¥46.32 (roughly $7.28 in American currency) per share. It has a Financial Strength rating of 9/10 and a Profitability and Growth rating of 8/10.
China First Pencil has a market cap of $24.23 billion and an enterprise value of $22.53 billion. It has a P/E of 23.0, a forward P/E of 14.9, a P/B of 5.4 and a P/S of 0.7.
China First Pencil Co. Ltd. (SHSE:900905)
This part of China First Pencil is largely involved in making and distributing stationery, jewelry, arts and crafts and similar products. It sells for $4.07 per share. It has a Financial Strength rating of 9/10 and a Profitability and Growth rating of 8/10.
China First Pencil has a market cap of $2.13 billion and an enterprise value of $2.96 billion. It has a P/E of 23.0, a forward P/E of 14.9, a P/B of 5.4 and a P/S of 0.7. Value Partners (Trades, Portfolio) has shares of China First Pencil in its portfolio.
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