ab19 February 2024Global Research and Evidence LabPowered byUBS Evidence LabYESChina IndustrialsAPAC Focus: Made in China, made by China – Seeking alpha as Chinese companies go globalWhile investors are worried about trade restrictions and question China's global competitiveness, overseas revenue is in reality rising for the 32 Chinese manufacturers we cover, up at a 20% CAGR in 2023-25E to 31% of total revenue vs 28% in 2022 and below 6% in 2010. With this growth comes margin expansion too. Leveraging the insights of over 20 UBS analysts globally, we build a "China+1" country scorecard, identify sectors and markets with the most debate on Chinese competitiveness, and dive deep into LatAm and ASEAN as +1 destinations. We introduce a list of 10 most preferred stocks under the "going global" theme. Made in China: export upgrades increases China's global competitivenessBetter exports, in the form of product upgrades, mix improvements and more service exports, create significant overseas growth opportunities for Chinese auto, battery, construction, solar, grid equipment and selective consumer sector supply chains, where China has projected its domestic competitiveness to global markets. We forecast unit export value (US$/t) to rise another 7% over 2023-25E, on top of the 12% gain already notched up from 2011 in 2023E. Made by China: "China+1" brings another revenue source from overseasChinese manufacturers have been investing overseas in recent years, motivated by the opportunity to navigate trade restrictions, benefit from cost differentials and access destination market demand. Our country-by-country scorecard analysis confirms LatAm and ASEAN are well-placed to gain potential capacity expansion by Chinese corporates. Our sector-by-sector analysis shows companies in auto parts, construction machinery, data centres, two-wheelers, and variety retail as being active in overseas expansion. Our most preferred 10 stocks under the "going global" theme NameRIC CodeMarket Cap (US$ bn) RatingPT (LC) Price (LC)FER PE 2024EP/BV 2024EROE 2024E NameRIC CodeMarket Cap (US$ bn) RatingPT (LC) Price (LC)FER PE 2024EP/BV 2024EROE 2024EBYD1211.HK70.7 Buy360.00 190.00 89%12x3.0x29% CCCC1800.HK7.6 Buy4.10 3.67 12%2x0.2x8%Linglong601966.SS4.4 Buy30.00 21.34 41%19x1.4x8% Hengli601100.SS9.9 Buy72.00 54.50 32%22x4.2x21%Yutong600066.SS5.3 Buy18.80 16.79 12%17x2.7x15% CIMC000039.SZ6.6 Buy11.00 8.78 25%18x0.9x5%Yadea1585.HK4.8 Buy22.00 12.18 81%11x3.4x34% MinisoMNSO.N5.7 Buy28.50 17.96 59%17x4.2x26%Huaming 002270.SZ2.0 Buy18.00 15.93 13%22x3.8x18% Haier600690.SS31.4 Buy27.10 23.95 13%12x1.9x17%Source: UBS estimate. Note: closing prices as of 16 February 2024.This report has been prepared by UBS Securities Asia Limited. ANALYST CERTIFICATION AND REQUIRED DISCLOSURES, including information on the Quantitative Research Review published by UBS, begin on page 24. UBS does and seeks to do business with companies co...
