BYD and more: AllianceBernstein names top Asian stock picks for the next 6 months, gives one over 60% upside
Several sectors — and stocks — in Asia-Pacific look “particularly attractive right now,” according to AllianceBernstein. The stocks are “highly ranked on a quantitative basis and our companies where our Bernstein analysts have a strong positive view,” the Wall Street Bank’s analysts, led by Ann Larson, wrote in a Jan. 16 note, which touched on its Asian “top picks for the next six months.” AllianceBernstein said its last “Quant + Fundamental portfolio” beat the MSCI Asia benchmark by 10.5% on an equal-weighted basis and 13.6% on a market capitalization-weighted basis over six months from July 2023. According to the bank, the “alpha model” it uses has been “effective in differentiating winners from losers in Asia over the long-term as well.” Here are four of its top outperform-rated stocks. Samsung Electronics and SK Hynix The South Korean giants are among AllianceBernstein’s top stock picks as their memory arms are set to get a boost from the cyclical recovery in demand and average selling prices which are “driving a rebound in margin and profit at memory vendors.” “We also believe the demand for memories will remain strong thanks to the growing demand for generative AI and more broadly for compute,” the bank’s analysts wrote. AllianceBernstein expects the share price of Samsung to hit 92,000 Korean Won ($68.44) in the next 12 months, giving it potential upside of 29.4%. It has a price target of 140,000 Korean Won on SK Hynix, or around 64.8% upside. Between the two companies, the investment bank noted that “SK Hynix is showing stronger performances near-term mainly thanks to its lead in HBM (high bandwidth memory). Hence, it has been getting more love from investors which is reflected in its more expensive valuation.” Conversely, it observed, Samsung’s price-to-book has “only expanded mildly in the same period of time.” Still, AllianceBernstein “like[s] both of them as the cyclical rebound plays out,” adding that Samsung likely offers more value and upside. BYD Automotive giant BYD has been making waves since it dethroned Tesla in the fourth quarter for 2023 to become the top electric vehicle maker after selling more battery-powered vehicles than its rival. AllianceBernstein is bullish on the company as it continues “to expand into the under-penetrated mass and premium segments in China.” The investment bank estimates that the mass market segment, which accounts for approximately 20% of China’s auto market, has only 9% EV penetration (excluding micro EVs). “BYD’s unparalleled cost structure and vertical integration of powertrain will enable it to achieve a dominant market share in this segment,” the bank’s analysts wrote. They expect the automaker to deliver 3.7 million units on 23% growth, in line with consensus. AllianceBernstein’s target price of 334 Hong Kong dollars ($42.71) gives it around 61.5% upside. PDD Holdings AllianceBernstein also favors PDD Holdings, the parent company of giants Pinduoduo and Temu, as it “continues to gain share within the domestic e-commerce market.” “We think the recent gains go beyond poor macro and consumers down trading. PDD has won close to a 40% share of incremental industry GMV (gross merchandising value) in the past year; we’re optimistic this can continue,” the bank’s analysts wrote. “We think upside remains for PDD’s domestic take rate too… reflecting both the superior availability of user traffic on the platform and PDD’s greater marketing spend,” they added. AllianceBernstein gave the giant a price target of $170, giving it around 33% upside. — CNBC’s Michael Bloom contributed to this report.
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