Against the backdrop of Sino-US trade war, developing Chinese domestic demand is a feasible strategy to balance China’s economic development. Among the consumer stocks, Uni-President China Holdings Ltd (220.HK) and Tingyi (Cayman Islands) Holding Corp (322.HK) are two strong domestic brands, which are favoured by many investors.
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Instant noodles a growing market
Both companies focus on the beverage and instant noodles market in China. During the first six months of this year, instant noodle sales rose 7.5% year-on-year in the country, according to market research firm Nielsen. Growth in China’s consumer market has brought huge opportunities for food and beverage stocks. Economic growth and higher standards of living drove consumers to pay more attention to the quality of products and services.
“An increasing number of domestic instant noodles makers are innovating their products and banking on original flavors with an accent on health and taste to win back pickier consumers, as they are now presented with various choices from food deliveries,”Meng Suhe, head of the Chinese Institute of Food Science and Technology
Higher end products to attract more consumers
Both Uni-President and Tingyi have in recent years launched higher end products, which are expected to benefit from consumption upgrading. Nevertheless, lower end products are still in demand, especially in lower tier cities, where purchasing power lags behind the big cities.
Tingyi has seen its profit grow by 15% percent year-on-year to 1.5 billion yuan for the first six months of this year. Its instant noodles business saw revenue of 11.5 billion yuan during the first six months, up 6.4% year-on-year. Uni-President reported a profit growth of 39.6% to 998 million yuan in the first half of this year. Its sales in the instant noodles segment has seen a 2.8% year-on-year growth to 4.27 billion yuan.
In times of market uncertainty, both stocks are worth a serious look.