Recently, China's stock market has been on fire, and some companies have taken off.
A series of policies at the end of September completely reversed the expectations of the secondary market, not just for A-shares, but also for the top ten Chinese concept stocks, which have seen a general increase of about 30% in their stock prices in the last 20 days, with Meituan and JD.com both experiencing gains of over 60%. Such gains have almost never been seen in the past few years.
Market value reflects the market's expectations for a company and changes the competitive landscape of the internet industry. Several investors told "Focus One" that although this wave of increases was driven by market sentiment, the differences in stock gains among individual stocks depended on capital preferences. However, it can still be seen that Chinese concept stocks have been undervalued in recent years, so the rebound has been strong, and leading companies with solid fundamentals have seen significant increases.
Carefully observing the top ten companies on the market value list, one can see some trends from this round of changes.
Tencent still ranks first, with a total market value breaking through 500 billion US dollars again. Among the three major e-commerce giants, Alibaba's market value exceeds 250 billion US dollars, Pinduoduo approaches 200 billion US dollars, which is three times that of JD.com. At the same time, compared with the market value ranking at the end of the second quarter of this year, NetEase fell two places from fifth to seventh, while Ctrip moved up two places from tenth to eighth.
In addition, some companies with small scale but popular industries have also achieved significant gains, such as catering and tea drinks, AI, and recruitment companies, with the highest stock price increase exceeding 80%.
Of course, as the era of high-speed growth in the internet industry recedes, it is not easy for Chinese concept stocks to return to their peak. However, companies with strong fundamentals, popular industries, and steady operations can still break through and maintain growth.
"The stock market can boost confidence, and with confidence, everything will get better. This is the greatest significance of this round of stock market trends," said an investor.
Surge in Internet Giants: E-commerce, Instant Retail, New Energy
Among the top ten internet companies currently ranked by market value, the highest stock price increase in the last 20 days is Meituan and JD.com, with gains exceeding 60%.Meituan's market value once soared to $308.8 billion in 2021, but affected by antitrust investigations and the cooling of Chinese concept stocks, Meituan began to lose its edge in 2022.
Investor Chen Lin believes that the market's previous doubts about Meituan's market value lie in whether it can hold on to local life and instant retail. Behind it, almost all competitors - Douyin, Ele.me, JD.com, Xiaohongshu, and even video numbers - want to enter the market to compete for a share. Among them, Douyin's offensive is particularly fierce, but by this year, Douyin has undergone several adjustments in local life services, and Meituan has temporarily held the market and regained the initiative.
In addition, Meituan's strong performance this year has also boosted the rebound in stock prices. Meituan's stock price has risen by 136.52% year-to-date, with a total market value of $151.9 billion as of October 10, doubling from $79.4 billion in April this year.
Behind Meituan's performance, the structural reform dividend of the entire catering market is indispensable. This year, the revenue of high-end catering has declined, and the number of practitioners has decreased. The revenue and number of practitioners in affordable fast-food services and takeaway businesses have increased year-on-year, and takeaway channels are becoming more and more important.
This has also directly driven Meituan's "core local commerce" revenue to grow by 18.5% year-on-year to 60.7 billion yuan in Q2 this year, and the operating profit to grow by 36.8% year-on-year to 15.2 billion yuan. In the same period, Meituan's revenue from commissions, online marketing, and delivery services all increased year-on-year, by 20.1%, 19.7%, and 13%, respectively.
Among the top three e-commerce companies, JD.com has the highest increase, and it is also the company with the highest increase in the top ten market values.
In this year's Q2 financial report, JD.com achieved a historical high of 12.6 billion yuan in net profit attributable to the parent company, a year-on-year increase of 92%. The more price wars are fought, the more profits are made. The explanation given in the financial report is that low prices do not rely on subsidies, and the overall gross profit level is stable. A senior e-commerce person told "Focus One" that it is not difficult for a company with trillions of revenue to squeeze profits. JD.com now focuses more on profits and is more pragmatic, which is also a good choice.
At the same time, JD.com is also gradually exerting itself in the instant retail industry. In May this year, JD.com's instant retail business brand was upgraded from the original JD.com Hourly and JD.com Home to JD.com Second Delivery, competing with Meituan for business.
In a horizontal comparison, Pinduoduo and Alibaba are also rising fiercely.
Although Pinduoduo was interpreted by many industry insiders as "actively singing its own bearishness and managing market value" after the release of the Q2 financial report, its stock price still reached a 45.46% increase in the past 20 days. In fact, Pinduoduo's monetization ability is continuously improving. Its Q2 net profit attributable to the parent company is 32 billion yuan, a year-on-year increase of 144%. At the same time, Pinduoduo's TEMU is also vigorously expanding the overseas market, which means that its net profit still has room for improvement.Alibaba's stock price has risen by nearly 30% in the past 20 days. After announcing the completion of a three-year restructuring on August 30th, the market is looking forward to Alibaba making bold moves while maintaining its e-commerce territory. Among the high expectations are the international business led by Jiang Fan and Cainiao, which is deeply integrated with this business. In Q2 of this year, the international business had the fastest revenue growth, and Cainiao made a profit of 618 million yuan.
Now that we have entered Q4, Alibaba, JD.com, and Pinduoduo have begun to prepare for the "Double 11" shopping festival. This year, the entire e-commerce industry is trying to correct its course. On one hand, it no longer emphasizes the absolute lowest price, and on the other hand, it introduces policies to reduce the burden on merchants. This has also allowed the market to see the possibility of long-term healthy development in the e-commerce industry, and the stock prices of the three e-commerce giants have further increased.
Finally, among the companies with stock price increases of more than 30% in the past 20 days are Li Auto and Ctrip, which are also representatives of the growth driven by popular industries.
The new energy vehicle industry where Li Auto is located has frequent policy benefits and has entered the stage of large-scale and global development, with market share accelerating towards the top.
In the past three months, Li Auto's monthly sales volume has remained at the top of the new forces, and the delivery volume in September once again set a new high, returning to more than 50,000. At the same time, Li Auto achieved a net profit of 1.1 billion yuan in Q2. Although the gap between Xiaopeng, NIO, and Li Auto is gradually widening, all of these companies have seen an increase in stock prices in the past 20 days, with Xiaopeng's stock price on the Hong Kong stock market increasing by 53%.
As for the surge in Ctrip's stock price, it is also easy to understand. Ctrip is the leader in the online travel track and has recovered quickly after the epidemic. In recent years, cultural and tourism in various places have been working together, and popular cities have emerged one after another. The exit of small and medium-sized players has also led to market share further concentrating towards the top OTAs. Ctrip's performance in 2023 exceeded that of 2019, and the net profit in Q2 of 2024 continued to grow by 501.9% year-on-year.
These giants have all achieved growth by either finding new growth points, stabilizing profits, or leveraging industry trends.
Slowly rising "old kings": Tencent, Baidu, NetEase
Among the top ten internet giants by market value, three are relatively calm, with limited growth. Tencent and NetEase have seen their market value increase by 19.05% and 14.44% respectively in the past 20 days. Baidu's growth is also not as high as other companies, and its market value has dropped to ninth place.
Chen Lin analyzed that Tencent is because of its large size, it is impossible to grow too much; NetEase has not fluctuated much before, has not fallen much, but there is not much room for growth; Baidu is in a transformation period and still needs to prove its development prospects.Among these three companies, Tencent and NetEase primarily rely on games, which is almost the strongest and simplest monetization model in the internet industry, with higher profits and greater stability.
In the eyes of many investors, Tencent is the absolute "stock king", with its share price once exceeding 700 Hong Kong dollars per share, and a market value of over 900 billion US dollars. Over the past three years, due to factors such as internet regulation, lack of business growth, and major shareholder reduction, Tencent's market value once fell to over 380 billion US dollars.
In this round of surge, Tencent's share price reached a two-year high of 438.8 Hong Kong dollars per share, with a market value returning to the 500 billion US dollar mark, which is 68.5 billion more than the combined market value of the second-ranked Alibaba and the third-ranked Pinduoduo.
Although its increase in the past 20 days is only 19.05%, Tencent's share price has accumulated an increase of 50.75% this year, which is already very difficult for such a large company. Some investors also believe that there is not much room for it to rise sharply.
What has led investors to re-examine Tencent's share price is its Q2 financial report that exceeded market expectations. Tencent's Q2 revenue was 161.1 billion yuan, a year-on-year increase of 8%; the net profit attributable to the parent company was 47.6 billion yuan, a year-on-year increase of 82%. The performance is attributed to two areas - games and advertising.
As a moat business of Tencent (accounting for 30.09% of Q2 revenue), the game revenue of 48.5 billion yuan set a new quarterly high, with both domestic and overseas year-on-year growth of 9%, reversing the previous sluggish state of Tencent's games.
In addition, the online advertising, which accounts for 19% of the revenue, has a year-on-year growth rate of nearly 20%, driven by the revenue growth of video numbers and long videos. According to the estimation of Guohai Securities, the daily active user number of video numbers in 2023 is 450 million, which exceeds Kuaishou and is accelerating to catch up with Douyin. Video numbers carry the hope of the entire village of Tencent, this business has great prospects, and it is still in the stage of catching up, and there is hope to carry the banner of e-commerce and advertising revenue in the future.
"Video numbers still need to prove their e-commerce capabilities in order to stabilize the share price in the long term," some investors said to "Focus One".
Although NetEase is not as large as the top six companies, its profitability is extremely strong. Ding Lei is a typical businessman, good at profit control, and NetEase's net profit data in the past five years has been around 20 billion yuan on average.
At the end of February this year, after NetEase announced the financial report for 2023, its market value reached 72.422 billion US dollars, sitting on the throne of the top four in China's internet market value. NetEase has passed the period of fewer product reserves in the past two years and has ushered in the harvest period. "Egg Party" and "Against the Cold" mobile games are industry blockbusters, and there will be "Yanyun Sixteen Sounds" and "Eternal Return" in the second half of this year.NetEase's fundamental position is relatively stable, with high business certainty, low risk, and it is reasonable for its market value to grow steadily. However, its status as the industry's second player remains unchanged, and it lacks any new business that can stand out, limiting its ceiling for growth.
"Perhaps this is also a deliberate choice made by William Ding. He doesn't care about the rise, but cares more about stability, letting others take the limelight and fight, while he hides away, defending his position and counting money at the same time," said Chen Lin.
As for Baidu, it once dominated the search engine as a traffic distribution entry point, relying on advertising to support 90% of its revenue, making a fortune. However, with the rise of short video platforms, more and more competitors are trying to snatch Baidu's business, making it not so easy for Baidu to make money.
In recent years, Baidu has been telling the story of AI, investing a lot of time and money in it, but the business has not yet reached the stage of large-scale transformation, and its main business of search must be transformed. "Whether Baidu can be king again depends on how much change the AI large model can bring to Baidu," said Chen Lin.
Hot industries benefit: catering, AI, and recruitment
In addition to the top ten internet companies by market value, among the companies that have seen an increase in market value in this wave, there are several industries. Although the scale of the companies involved is not large, the stock price increase has reached up to 80%, mainly including catering, AI, and recruitment.
The growth logic of catering companies is similar to that of Meituan.
The "2024 Beijing Catering Industry Observation Report" mentioned that the lower-priced "snacks and drinks" have become the mainstream of consumption. From the category division, snacks and fast food, beverages, and hot pot have become the categories with the most catering stores in Beijing.
It can be seen that companies with soaring stock prices, such as Jiu Mao Jiu (84.14%), Helen's (76.23%), and Xiabu Xiabu (52.44%), all belong to the high cost-performance ratio of affordable catering categories.
These catering brands rely on their own years of accumulated supply chain, store operations, cost control, etc., to quickly adapt to the trend of affordable catering this year, and quickly carry out a series of "self-help" activities. For example, Jiu Mao Jiu's takeout business revenue in the first half of this year increased by 14.4% year-on-year to 510 million yuan, mainly due to the introduction of the takeout satellite store model to reduce the pressure of opening stores, and the number of restaurants providing takeout services increased.Additionally, in this round, Chabaido has seen a surge of 55.29% over nearly 20 days. Investors who focus on the milk tea industry analyze that this round of increase is due to the market's enthusiasm for investing in the milk tea industry into existing targets. This year, Gu Ming, Ba Wang Cha Ji, and Mixue Bing Cheng are all actively planning to go public. The milk tea market will see more and more "close combat" situations, making the market more lively.
AI-related companies are also beneficiaries of this round of market trends. SenseTime, CloudWalk, Cambricon, Kunlun Wanwei, and iFLYTEK have all seen their stock prices rise, with SenseTime, listed on the Hong Kong stock market, achieving the highest increase of 58.72% over nearly 20 days.
Data as of the closing on October 10, 2024.
In the first half of this year, SenseTime achieved a revenue of 1.74 billion yuan, a year-on-year increase of 21%. Among them, the revenue from generative AI business increased by 256% to nearly 1.1 billion yuan, accounting for as much as 60% of the total revenue.
SenseTime's current way of making money with large models is to provide API interfaces and services for customers, and at the same time, based on the daily new large model system, it has released a series of generative AI applications for enterprises, including digital humans. That is to say, it makes money not only from the basic large models but also through industry applications.
There is also a significant increase in stock prices for online recruitment platforms.
It is difficult for individuals to find jobs and for companies to recruit people. Behind the information matching battle in the past two years, online recruitment platforms have been making steady money. In the first half of this year, BOSS Zhipin achieved a year-on-year revenue increase of 30.9% and a year-on-year profit increase of 92.5%, outperforming most companies. However, from 2019 to 2021, BOSS Zhipin was still in a loss state.
Due to the relatively stable pattern of the online recruitment industry, the market has basically invested its enthusiasm in two companies, BOSS Zhipin and Tongdao Liepin. Among them, BOSS Zhipin has a market value of 57.7 billion Hong Kong dollars, and its 20-day stock price increase has reached 34.52%; Tongdao Liepin has a market value of 1.343 billion Hong Kong dollars, and due to the small base, the increase has reached 57.23%.
However, for BOSS Zhipin, its Q2 net increase in paying corporate users is 200,000, which is the lowest value in the past year. Some HRs analyzed to "Focus One" that this may be because the current job seekers will lower their job search conditions, increasing the matching degree between the recruiters and the job seekers, and reducing the payment demand of the business owners. If this trend continues, the company's stock price may be affected.
In general, although this stock market heat is unprecedented and many companies have seen a surge, the ranking of the Internet's market value list has not changed much, because the dividend period has ended, and the opportunities in various sub-tracks have basically been excavated. Unless there is a disruptive technological innovation, it is difficult to have explosive growth again.However, this round of stock market fervor has given the market a glimmer of hope. The big players are becoming more active, and the level of attention is increasing. Is it far from the birth of the next giant?