While investors may concern about the impact of the prolonged protests on Hong Kong, one thing many would be pleased to know is that domestic demand remains resilient as majority of listed companies in Hong Kong have their operations in mainland China. As domestic demand and healthcare sectors continues to play a critical role in the Chinese economy, here are 5 stocks that ride on these themes.
#1 Haier Electronics Group Co., Ltd. (1169.HK)
Haier is known for its household appliances, such as washing machines and water heaters. Haier’s strong brand name helps put the company in a favourable position among Chinese consumers. This allows the company to fend off competition from foreign brands. The continuous urbanisation of secondary and lower tier cities will drive demand for Haier’s products, strengthening its reach throughout the country. Given the growth prospects of this company, a P/E ratio of about 14 times appears to be very reasonable.
#2 Hengan International Group Company Limited (1044.HK)
Hengan is a leading manufacturer of daily care products in China. The company produces and sells paper products, such as paper towels, and women’s care products, such as sanitary napkins. Within the sanitary napkins space, there is a move towards higher quality products. Hengan has introduced more premium products which aim to improve users’ comfort. The stock is currently trading at a P/E ratio of around 15 times, below its historical levels which were usually above 20 times. Its dividend yield is also close to 5%, a respectable achievement for a company still in a growing phase.
#3 Tingyi (Cayman Islands) Holding Corporation (322.HK)
Tingyi (Cayman Islands) Holding Corporation, better known by its Master Kong brand name, produces and sells instant noodles, packaged drinks and other daily consumer goods. The company has been actively exploring higher end products, in line with consumption upgrading in China. The stock is currently trading at an attractive valuation with a P/E ratio of 20 times. This looks cheap compared to historical values of over 30 times. The company’s growth prospect remains strong due to robust domestic demand.
Healthcare sector in China is what you don’t want to miss!
China’s already huge healthcare sector is growing fast as growing affluence means that people demand higher quality healthcare. There remains a shortage of doctors in China. As such, there is opportunity for innovation in healthcare delivery.
Healthcare technology comes to mind as a way for service providers to use the internet to reach out to customers. Two healthcare technology stocks have been making the news.
#4 Alibaba Health Information Technology (241.HK)
Alibaba Health Information Technology is partly owned by Alibaba Group. The company is one of China’s largest online pharmaceutical platforms with more than 130 million annual active consumers.
For the year ended March 2019, the platform had gross merchandise volume of RMB 59.5 billion. Besides, sales from the company’s pharmaceutical e-commerce platform business almost quadrupled to RMB 690 million. The company has recently invested more in AI and hopes to launch more AI powered medical services in the future.
#5 Ping An Healthcare and Technology (1833.HK)
Ping An Healthcare and Technology had 265 million registered users and 54.7 monthly active users at the end of 2018. Through its online services, the company provides users with access to thousands of doctors and medical personnel for online consultation services supplemented with AI technology. The company’s platform also connects users with thousands of hospitals for arranging appointments.
The company’s daily average consultations rose 58% year-on-year in the first half of 2018. Sales more than doubled from RMB 448.6 million in the first half of 2017 to RMB 1.12 billion in the first half of 2018. As the stock trades at a price-to-sales ratio of 10, it may look expensive to some. Nevertheless, there is a huge potential in the market which should not be ignored.
Clear long term potential in this sector
Both companies are two homegrown leaders in the healthcare tech industry. Given the growth of the sector, there will be strong upside if you have the patience.