Company / Analytics

Analytics, 18 August 2022

Top equities from major emerging markets

Emerging market economies have, over the years, offered investment opportunities to investors who dared search for “diamond-in-the-rough” stocks, or stocks that would simply bring multi-fold profits.

An emerging market economy can be defined as the economy of a developing nation that is becoming more engaged with global markets as it grows. These economies are currently big beneficiaries of global economic shifts including the energy transition, the rise of electric vehicles, and other, ongoing solid trends.

Investors whose primary currency of trade in offshore trading is the US dollar will particularly benefit from the strength of the dollar. This is because the profits for companies in the emerging markets that sell their products, directly or indirectly, to American consumers and/or companies increase.

In this article, we analyze some top equities from major emerging markets.

Market of China

BYD-Build Your Dreams. (BYDDF)

Chinese electric automaker BYD (Build Your Dreams), popularly known as “the biggest Chinese EV maker”, has over the recent weeks announced entry into new markets including Germany, Sweden, Australia, and Japan.

The company’s performance justifies why the stock appears first on our list. In July, the company’s EV sales soared 222% year-over-year, reaching a record 162,350. Its Q2 sales growth was better than expected, as sales jumped an incredible 256% YOY and 24% versus Q1 to 355,000. The Warren Buffet-backed company looks to further expand its EV business to many more countries, and it also has a large EV battery business, enabling it to benefit from the EV boom in more ways than one.

In the EV market, only Tesla beats BYD in production and valuation. At $128 billion, BYD is the world’s third largest auto manufacturer by market cap. It is behind only Tesla at $963 billion and Toyota (TM) at $223 billion.

In terms of sales for Q2Tesla remained No. 1 in BEVs with 254,695. However, one advantage BYD has over Tesla is its very wide product range at different levels of the market. It seems that Tesla will remain offering only top-of-the-range cars for quite some years.

Baidu (BIDU)

Baidu (NASDAQ: BIDU) Is a China-based search engine, that currently boasts of being the second largest search engine globally, behind Google. The company was luckily unaffected by the recent crackdown on the tech community by regulators in China. Although the crackdown has since withered down, most tech equities were affected and this was evident in the stock markets’ performance.

The company is also swiftly becoming the world’s leading robotaxi operator. The company’s robotaxi business in China is operating in “10 cities and has completed over 500,000 rides across three quarters.

In terms of market performance, Baidu’s stock has declined by about 6% year-to-date and remains down by 58% from its early 2021 highs., trading at levels of around $130 per share currently. However, their stock has outperformed the broader Nasdaq-100, which remains down by about 17% year-to-date.

Market of India

Tata Motors (TTM)

Tata Motors is an India-based EV automaker that made its way into the EV four-wheeler space with Nexon EV and has two cars in its electric portfolio for the Indian market, Tata Tigor EV being the second one. It also recently launched Tata Nexon EV Max, a premium version of the e-SUV.

The company has been vocal about its ambitions as it plans to sell roughly 50,000 EVs during its current fiscal year and 100,000 in the subsequent fiscal year. Tata’s fiscal Q1 of 2023, which ended in June, its commercial vehicle and passenger vehicle revenue doubled year over year to indicate steady growth. With the company’s supply chain situation improving, recent financial results indicate further growth is imminent.

The company’s overall revenue climbed 8% YOY to $9 billion, while its EBITDA margin jumped two percentage points YOY to 6.1%. The company sold a record 9,300 electric units in the April to June quarter and commanded over 85 percent of India’s electric car sales in FY22.

Vale (VALE)

Vale is a Brazil-based mining company that generates most of its revenue from iron ore, which, of course, is used to make steel. The company is expected to benefit majorly from the ongoing EV revolution and demand for clean energy, which increases the demand for solar panels and wind turbines.

Factors including the recovery of economic superpowers and auto supply chains should lead to an increase in the construction of more vehicles and new planes significantly. Both of those trends should greatly increase the demand for steel and, consequently, meaningfully lift Vale’s iron ore sales.

The company also produces copper, which is used in EV batteries, solar panels, and wind turbines. Finally, the company sells nickel, which is also used to make EV batteries.

Wall Street is positive on Vale. On average, analysts give VALE a Buy rating. The average price target is $17.363, which means analysts expect the stock to increase by 30.06% over the next twelve months.

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