Exploring Undiscovered Gems In China July 2024

As of July 2024, the Chinese market is experiencing a nuanced trajectory, with investor sentiment largely resilient despite weaker-than-expected economic growth figures for the second quarter. The Shanghai Composite and CSI 300 indices have shown divergent trends compared to the broader global markets, highlighting a unique landscape for potential investment opportunities in small-cap companies. In this context, identifying promising stocks involves looking for those that demonstrate robust fundamentals and are positioned to navigate or capitalize on current economic conditions effectively.

Top 10 Undiscovered Gems With Strong Fundamentals In China

Name	Debt To Equity	Revenue Growth	Earnings Growth	Health Rating
Changjiang Publishing & MediaLtd	NA	-5.93%	2.80%	★★★★★★
Changzhou Zhongying Science & Technology	NA	11.49%	22.06%	★★★★★★
Jiangsu JIXIN Wind Energy Technology	4.12%	0.51%	12.27%	★★★★★★
Yantai Ishikawa Sealing Technology	NA	-4.71%	-12.70%	★★★★★★
Xiangyang Changyuandonggu Industry	30.71%	-11.70%	-19.83%	★★★★★★
Hydsoft TechnologyLtd	9.94%	18.09%	11.48%	★★★★★★
Founder Technology GroupLtd	7.56%	-8.80%	15.53%	★★★★★★
Hubei Forbon TechnologyLtd	22.63%	13.47%	-2.72%	★★★★★☆
Xinya Electronic	75.53%	35.77%	6.22%	★★★★☆☆
Silvery Dragon Prestressed MaterialsLTD Tianjin	18.81%	1.13%	-5.28%	★★★★☆☆

Click here to see the full list of 1001 stocks from our Chinese Undiscovered Gems With Strong Fundamentals screener.

Below we spotlight a couple of our favorites from our exclusive screener.

Nanjing LES Information Technology (SHSE:688631)

Simply Wall St Value Rating: ★★★★★★

Overview: Nanjing LES Information Technology Co., Ltd. is a technology company with a market capitalization of CN¥8.62 billion, specializing in the development and implementation of software and integrated solutions.

Operations: The company generates revenue primarily through its core operations, with a significant portion of costs attributed to the cost of goods sold (COGS), which has ranged from CN¥727.04 million in 2019 to CN¥1.27 billion by mid-2024. The firm consistently invests in research and development as well as sales and marketing, which are substantial components of its operating expenses, indicating a focus on innovation and market expansion.

Nanjing LES Information Technology, recently added to two major Shanghai stock indices, showcases robust growth with a 119% earnings increase last year, surpassing its industry's 0.2%. With no debt and positive free cash flow, the company is set for a 20% forecasted annual earnings growth. This performance highlights its potential as an emerging leader in China's tech sector, despite a volatile share price in recent months.

• Click here and access our complete health analysis report to understand the dynamics of Nanjing LES Information Technology.

• Understand Nanjing LES Information Technology's track record by examining our Past report.

Dencare (Chongqing) Oral Care (SZSE:001328)

Simply Wall St Value Rating: ★★★★★★

Overview: Dencare (Chongqing) Oral Care Co., Ltd. is a Chinese company specializing in the research, development, production, and sale of oral care products, with a market capitalization of CN¥4.24 billion.

Operations: Dencare (Chongqing) Oral Care primarily generates revenue through the research, development, production, and sales of oral care products. The company's gross profit has shown a notable increase from CN¥395.76 million in 2019 to CN¥637.17 million by mid-2024, reflecting an upward trend in efficiency or pricing power within its market segment.

Dencare (Chongqing) Oral Care, a lesser-known player in the personal products industry, has shown robust financial health with a 5.7% earnings growth surpassing its industry's -0.2%. With no debt over the past five years and positive free cash flow, the company is well-positioned for sustained operations. Recently, Dencare announced a dividend increase to CNY 6.50 per share and reported first-quarter sales growth to CNY 360.56 million from CNY 342.67 million last year, underscoring its potential as an undiscovered gem in China’s market.

• Navigate through the intricacies of Dencare (Chongqing) Oral Care with our comprehensive health report here.

• Evaluate Dencare (Chongqing) Oral Care's historical performance by accessing our past performance report.

Suzhou Longway Eletronic Machinery (SZSE:301202)

Simply Wall St Value Rating: ★★★★★★

Overview: Suzhou Longway Electronic Machinery Co., Ltd specializes in the development, manufacturing, and distribution of data center infrastructure products including server cabinets and integrated wiring systems within China, with a market capitalization of CN¥3.82 billion.

Operations: Suzhou Longway Electronic Machinery generates revenue primarily through the sale of electronic machinery, with a notable increase in gross profit from CN¥22.30 million in early 2015 to CN¥189.76 million by mid-2024, reflecting significant business growth. The company's cost structure is heavily influenced by its cost of goods sold (COGS), which escalated from CN¥91.84 million at the start of 2015 to CN¥776.41 million by mid-2024, alongside rising operating expenses and research and development costs over the period.

Suzhou Longway Electronic Machinery, a lesser-known yet promising entity in China's tech sector, has demonstrated robust performance with a 17.3% earnings growth over the past year, surpassing the industry average of 0.8%. The company maintains a low net debt to equity ratio at 2.4%, reflecting prudent financial management. Additionally, its interest payments are well covered by EBIT, showcasing an impressive coverage ratio of 891 times. Recent dividend affirmations further underscore its commitment to shareholder returns, with a recent payout of CNY 2 per 10 shares announced for June 2024.

• Click here to discover the nuances of Suzhou Longway Eletronic Machinery with our detailed analytical health report.

• Assess Suzhou Longway Eletronic Machinery's past performance with our detailed historical performance reports.

Key Takeaways

• Investigate our full lineup of 1001 Chinese Undiscovered Gems With Strong Fundamentals right here.
• Are any of these part of your asset mix? Tap into the analytical power of Simply Wall St's portfolio to get a 360-degree view on how they're shaping up.
• Invest smarter with the free Simply Wall St app providing detailed insights into every stock market around the globe.

Want To Explore Some Alternatives?

• Explore high-performing small cap companies that haven't yet garnered significant analyst attention.
• Fuel your portfolio with companies showing strong growth potential, backed by optimistic outlooks both from analysts and management.
• Find companies with promising cash flow potential yet trading below their fair value.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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