The Chinese equity markets have been under unprecedented pressure over the past few months amid increasing COVID-19 cases leading to strict lockdowns and lingering supply chain disruptions. After easing the lockdown restrictions some time ago, regulators are once again placing fresh COVID-19 alerts on specific cities and districts due to rising cases.
Yesterday, various Chinese stocks plunged on the Nasdaq and New York Stock Exchange as a part of a sharp selloff amid growing concerns about Fed’s aggressive interest rate hikes to bring down prices and a possible slowdown in the United States, the world’s largest economy. However, the current market dip creates an excellent opportunity to buy fundamentally sound stocks now trading at attractive valuations. Given the strong financials, healthy cash flows, and solid growth attributes, the quality Chinese stocks are well-positioned to weather current market uncertainties.
Given the backdrop, quality Chinese stocks FinVolution Group (FINV) and 360 DigiTech, Inc. (QFIN), now trading at discounted prices, could be solid investments.
FinVolution Group (FINV)
Headquartered in Shanghai, the People’s Republic of China, FINV is an investment holding company that operates an online consumer finance marketplace. Its fintech platform connects unserved individual borrowers with financial institutions and investors and provides standard and other loan products. The company has more than 132 million registered users.
On April 30, 2022, FINV repurchased its Class A ordinary shares in the form of ADSs with a total aggregate value of $147.20 million, combined with the previous repurchase programs. On November 17, 2021, FINV’s Board of Directors extended the company’s existing $60 million share repurchase program for another year, effective from January 1, 2022, through December 31, 2022. The share repurchase programs might help the company create value for its shareholders.
FINV's net revenue grew 15.8% year-over-year to $385.97 million in the fiscal 2022 first quarter ended March 31, 2022. The company's other income rose 19.1% from the year-ago value to $8.02 million. Net cash provided by financing activities amounted to $63.29 million. In addition, its cash and cash equivalents and total assets came in at $571.20 million and $3.06 billion, respectively, as of March 31, 2022
The $1.53 billion consensus revenue estimate for the fiscal year 2022, ending December 2022, represents a 9.6% improvement from the last year. Analysts expect FINV’s EPS for fiscal 2023 to increase 12.1% year-over-year to $1.30.
The stock has declined 10.3% year-to-date and 46.6% over the past year to close yesterday’s trading session at $4.18.
FINV's POWR Ratings reflect this promising outlook. It has an overall grade of B, equating to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
FINV has a grade of B for Value, Quality, and Sentiment. Within the China industry, it is ranked #2 of 41 stocks. To see additional POWR Ratings (Momentum, Growth, and Stability) for FINV, click here.
360 DigiTech, Inc. (QFIN)
QFIN operates a financial technology platform under the 360 Jietiao brand and is headquartered in Shanghai, the People’s Republic of China. The company offers credit-driven services that connect borrowers with financial institution partners. It also provides e-commerce, enterprise, and invoice loans to SME owners. It serves consumers and micro-and small-business owners.
As of March 31, QFIN’s platform has connected 122 institutional financial partners with 192.9 million consumers having potential credit needs, cumulatively registering an increase of 14.1% from 169.1 million consumers a year ago. This development reflects the company’s strong business growth and profitability.
In the fiscal 2022 first quarter ended March 31, 2022, QFIN's net revenue grew 20% year-over-year to $681.47 million. Net cash provided by operating activities improved 90.5% year-over-year to $223.94 million, while net cash provided by financial activities rose 36.5% from the prior-year value to $169.90 million. As of March 31, 2022, the company’s cash and cash equivalents and current assets stood at $974.31 million and $4.64 billion, respectively.
Analysts expect QFIN’s EPS to grow 21.4% year-over-year to $5.17 for the fiscal year 2022, ending December 2022. The $2.92 billion consensus revenue estimate for the next year represents a 15% rise from the previous year. The company has surpassed the consensus EPS estimates in each of the trailing four quarters.
QFIN’s shares have decreased 31.7% year-to-date and 60.7% over the past year to close yesterday’s trading session at $15.41.
QFIN’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall grade of B, translating to a Buy in our proprietary rating system.
QFIN has a grade of B for Value and Quality. Within the Consumer Financial Services industry, it is ranked #6 of 49 stocks. To see additional POWR Ratings (Momentum, Stability, Growth, and Sentiment) for QFIN, click here.
FINV shares were trading at $4.50 per share on Tuesday afternoon, up $0.32 (+7.66%). Year-to-date, FINV has declined -4.01%, versus a -21.06% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.
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