Gianni Di Poce is an analyst at The Mercator, a analysis firm devoted to the examine of financial and monetary market tendencies.
Poce additionally pens Benzinga Professional’s unique weekly ‘Insider Report’ with technical evaluation, buying and selling concepts, and market commentary.
For the week starting July 4, Poce focuses on the Chinese language tech sector.
“This ties into the photo voltaic commerce we’ve been highlighting in latest weeks. Briefly, Chinese language tech shares are nonetheless buying and selling at discounted valuations regardless of latest energy within the Chinese language inventory market,” Poce writes. He calls China’s tech sector his primary alternative.
What Is Taking place: Daqo New Vitality Crop DQ
Daqo is a number one producer of high-purity polysilicon for the worldwide photo voltaic PV trade. Based in 2008, the corporate is likely one of the world’s lowest-cost producers of high-purity polysilicon. Daqo’s extremely environment friendly and technically superior manufacturing facility in Xinjiang, China at the moment has a nameplate annual polysilicon manufacturing capability of 70,000 metric tons.
The corporate grew income to $1.2 billion final quarter, with a web revenue of $535 million. “Nice margins!” famous Poce. Daqo has a modest valuation, with a P/E ratio of 4.5 versus 16.0 for the S&P 500.
The enterprise is coming off of a banner yr: in 2021, annual income and earnings grew to $1.68 billion and $748.92 million, versus $675.6 million and $129.19 million in income and earnings only one yr earlier.
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Why It’s Taking place: Poce says the rise in gross sales, coupled with the modest valuation is the crux of his thesis, although he considers that every one Chinese language shares are married to main danger, authorities intervention, and commerce regulation.
He notes that Daqo matches into the photo voltaic commerce theme, and the corporate will moreover profit from President Joe Biden’s two-year tariff vacation on photo voltaic panel imports.
“I’m bullish on DQ so long as the inventory stays above $60.00-$61.00,” Poce notes, with an upside goal of as much as $112.00.
Worth motion: Daqo New Vitality shares traded 4.12% decrease on Friday to shut at $73.83.
What is occurring: Nio Inc – ADR NIO
NIO is a Chinese language multinational vehicle producer headquartered in Shanghai, specializing in designing and growing electrical automobiles. The corporate is understood for its improvement of battery-swapping stations for its automobiles as an alternative choice to standard charging stations.
Poce remembers that NIO was a very fashionable inventory amongst retail buyers in 2021, however three-quarters of flat income, coupled with a shift of curiosity drew the inventory down greater than 42% within the final 9 months.
The corporate continues to be dropping cash on an annual foundation, he notes — it misplaced greater than $4 billion in 2021 — and shares are nonetheless buying and selling at a valuation that isn’t comparatively low cost.
Why it’s occurring:
The crux of the NIO thesis, Poce says, is predicated on two components:
Vitality is shifting again into Chinese language equities after a major wash-out
- A promising technical sample — Rounding Backside
- On July 1, NIO reported June deliveries have been 60% larger year-over-year. The corporate additionally expects to start deliveries of three new fashions, the ES6, ES7, and ES8.
“I’m bullish on NIO as long as the inventory stays above $19.00-$19.25,” Poce mentioned with an upside goal of as much as $36.00
Worth motion: Nio shares gained 0.40% on Friday to shut at $22.60.
