Rise Of China's Secondary Consumption: Key Stocks To Watch

The era of China's investment-led growth seems to have ended. The country's economic growth is expected to be driven by household consumption. Data released Monday showed China's retail sales growing 4.0% year-on-year in the first two months of 2025, accelerating from December's 3.7% growth.

Given China's subdued economic growth, consumers are increasingly shifting toward secondary consumption (preowned and refurbished), prioritizing affordability and sustainability.

Here's a look at companies capitalizing on this trend and their recent performance.

PDD Holdings Misses Q4 Revenue Estimates

PDD Holdings Inc. PDD, parent of Chinese e-commerce platforms Pinduoduo and Temu, announced its fourth quarter and fiscal year 2024 results on Thursday.

Although the company generated strong growth across all key metrics, quarterly revenues fell short of elevated expectations. Total revenues grew by 24% year-on-year in the fourth quarter to RMB 110.61 billion ($15.15 billion), missing the consensus estimate of RMB 115.15 billion.

Operating profits rose 14% year-on-year to RMB 25.59 billion ($3.51 billion), while non-GAAP earnings stood at RMB 28 billion ($3.86 billion). Adjusted earnings per American depositary share (ADS) came in at RMB 20.15 ($2.76), beating expectations of RMB 19.84.

"Looking ahead, we will continue to prioritize investments in the platform ecosystem as the cornerstone of our long-term value creation strategy," Jun Liu, VP of Finance at PDD Holdings, said during the earnings call.

Analyst Rating Changes For PDD Holdings

• Nomura analyst Jialong Shi downgraded the rating from Buy to Neutral on Thursday, lowering the price target from $137 to $130.
• US Tiger Securities analyst Bo Pei downgraded the rating from Buy to Hold while keeping the price target unchanged at $130.

Check out other analyst stock ratings.

Xiaomi Posts Record Annual Revenues And Earnings

China's smartphone giant, Xiaomi Corporation XIACF, reported 49% year-over-year growth in fourth-quarter revenues on Tuesday. The figure reached a record high of RMB 109 billion ($15.1 billion), beating market expectations of RMB 103.94 billion.

Adjusted net profit jumped 70% year-on-year to RMB 8.32 billion, beating estimates of RMB 6.399 billion.

For the full year, Xiaomi posted record revenues of RMB 365.9 billion ($50.62 billion), up 35%. The company's adjusted net profits also hit an all-time high of RMB 27.2 billion ($3.76 billion), rising 41.3% year-on-year. 

The company raised its 2025 target for EV deliveries from 300,000 to 350,000, posing stiff competition to Tesla Inc TSLA, which has seen its share price tank almost 40% year to date.  Xiaomi also raised its handset shipment target to 180 million as it continues to gain market share in China at the cost of Apple Inc AAPL.

"This has been a milestone year for Xiaomi. We have stepped onto the fast track of growth with our mobile phone, automobile, IoT, and other businesses advancing in parallel," company president Lu Weibing said on Xiaomi's earnings conference call.

ATRenew Turns Profitable

ATRenew Inc RERE recently announced its fourth-quarter revenues surged 25.2% year-on-year to RMB 4.85 billion ($664.4 million). The company reported operating income of RMB 53.1 million ($7.3 million), versus a loss in the same quarter in 2023.

For the full year, ATRenew's revenue climbed 25.9% to RMB 16.39 billion ($2.24 billion), with adjusted operating income soaring 62.8% to RMB 409.7 million ($56.1 million).

Other Stocks In Focus

• Apple leads the global refurbished smartphones market, with around a 50% share.
• Refurbished products contribute more than 60% of eBay Inc's EBAY gross merchandise value (GMV).
• Other key players in this space include Samsung Electronics Co. Ltd. SSNLF, Amazon.com Inc AMZN, and Best Buy Co Inc BBY.

Price Action

• Shares of PDD Holdings were trading lower by 2.89% at $127.13 at the time of publication on Friday.
• Xiaomi’s stock had declined by 2.75% to $7.06 at the time of publication on Friday.
• Shares of ATRenew were down 1.10% at $3.14 at the time of publication on Friday.

Read More: Chinese Stocks Poised For Best Quarter Vs. S&P 500 Since 2007 As Investors Bet On Policy Turnaround

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