Broker: UOB Kay Hian
Date of Report: August 5, 2025

Top China Stocks to Watch: August 2025 Conviction Picks and In-Depth Analysis

With Chinese equities showing robust momentum in July and policy tailwinds supporting leading domestic sectors, UOB Kay Hian delivers its latest conviction calls for August 2025. The report highlights key stock recommendations, detailed company analysis, and portfolio performance insights for investors navigating the Greater China market. Below, we break down the top picks, performance metrics, and the outlook for each featured company.

Market Overview: Optimism Tempered by Economic Headwinds

July was a strong month for Chinese equities, with the Hang Seng Index (HSI) and MSCI China Index posting gains of 2.9% and 4.5% month-on-month, respectively. This growth was buoyed by the Politburo meeting and a 90-day trade truce between China and the US, which temporarily eased trade tensions and lifted investor sentiment. However, concerns remain over downward economic pressures, a slowdown in consumer goods trade-in programs, and weakening real estate markets.

Amid these dynamics, UOB Kay Hian’s July alpha picks delivered standout performances, especially Sino Biopharm (1177 HK), up 43%. The focus remains on policy beneficiaries and sector leaders, particularly in healthcare and IT.

Portfolio Changes: New Additions, Profits Taken, Losses Cut

• New Buys: JBM Healthcare (2161 HK) and Lenovo (992 HK)
• Profits Taken: CATL (3750 HK), Han’s Laser (002008 CH), KE Holdings (2423 HK), Longfor (960 HK)
• Losses Cut: CR Beer (291 HK), Midea Group (000333 CH)
• Maintained Buys: Alibaba (9988 HK), Innovent (1801 HK), JD Logistics (2618 HK), Shuanghuan Driveline (002472 CH), Sino Biopharm (1177 HK), Tencent (700 HK), Tencent Music Entertainment (1698 HK), Xiaomi Corp (1810 HK)

Key Stock Recommendations and Financial Targets

Alibaba (9988 HK): Capitalizing on AI and E-commerce Growth

Alibaba is set to benefit from strong online retail growth and AI integration, particularly through Taobao Tmall Group (TTG). With a domestic focus and resilient consumption supported by national subsidies, Alibaba’s core merchant revenue is forecast to grow 8% year-on-year to RMB 247 billion in FY26. Key growth drivers include:

• Integration of new retail resources and enhanced “Flash Purchase” channel
• Collaboration with Ele.me to improve real-time delivery
• AliCloud’s accelerated demand (18% YoY growth in 4QFY25), driven by public cloud and AI-related products
• EBITA margin improved to 8% in 4QFY25, with AI cloud revenue up over 100% for seven consecutive quarters

Alibaba is trading at 12.7x FY26F PE, below its historical mean, with an 11% EPS CAGR expected from FY26-29. Target price is HK\$165.00 (16.3x FY26F PE).

Innovent (1801 HK): Pioneering Innovation in Biopharma

Innovent received marketing approval for Mazdutide, a dual agonist for obesity, cementing its leadership in China’s weight management market. The company’s highlights include:

• 16 commercial products, with five more approvals expected by 2025
• 1Q25 product revenue of RMB 2.4 billion, up over 40% YoY
• Drug sales target of RMB 20 billion by 2027 (30%+ CAGR 2024-27)
• Globalization strategy: out-licensed IBI3009 (DLL3-ADC) to Roche with US\$80m upfront

With a robust product pipeline and strong global ambitions, Innovent aims for five global registrational trial assets by 2030. The target price is HK\$110.00, based on DCF valuation (WACC 11%, terminal growth 4%).

JBM Healthcare (2161 HK): Iconic Brand Revival and Strong Cash Flow

JBM Healthcare stands out as a leading branded healthcare provider in Hong Kong, leveraging legendary products such as Ho Chai Kung, Po Chai Pills, and Hoi Tin CCMG. Key points include:

• Effective marketing strategies rejuvenating iconic products
• Three-year EPS CAGR of 17.9% projected for FY26-28
• Strong cash flow and accelerated e-commerce expansion
• Dividend yield of 7.0% in FY26, assuming 70% payout ratio

The ex-dividend date is August 11, with new marketing campaigns pending. Target price is HK\$3.31 (11.2x FY26F PE).

JD Logistics (2618 HK): Logistics Leader with Domestic Focus

JD Logistics is projected to maintain healthy core earnings growth at a 7.8% CAGR through 2025-27, supported by:

• Deepening penetration on Taobao/Tmall platforms
• International expansion aligned with Chinese enterprise overseas growth
• Strong domestic focus (95% of revenue), well insulated from global trade tensions
• Beneficiary of government consumption stimulus and trade-in programs

JD Logistics trades at a compelling 11.7x 2025F core PE (5.7x excluding net cash), below its closest peers. The DCF-based target price is HK\$22.00.

Lenovo Group (992 HK): Outperformance Expected in Upcoming Results

Lenovo is set to report earnings on August 13, with the following drivers:

• PC shipments exceeded estimates by 8%
• Sustained recovery in server (ISG) business
• Enterprise-driven PC placement cycle picking up faster than expected

Concerns over tariffs are manageable due to multinational mitigation strategies. Target price is HK\$12.10 (11.5x FY26F PE).

Shuanghuan Driveline (002472 CH): Poised for EV and Robotics Growth

Zhejiang Shuanghuan Driveline is well-placed to benefit from:

• Continued EV market growth and overseas expansion
• Product mix upgrades, notably increased use of plastic smart actuators in EVs
• Gear content per vehicle surpassing RMB 1,000 for specific projects
• Leadership in robotic planetary reducers, positioned for the humanoid robot investment trend

Double-digit growth in core businesses is expected, with a target price of RMB 41.90 (27.3x 2025F PE).

Sino Biopharm (1177 HK): Expanding Pipeline and Double-Digit Growth

Sino Biopharm’s acquisition of LaNova Medicines (up to US\$950.9m) enhances its First-in-Class and Best-in-Class innovative drug pipeline. Additional highlights:

• LaNova turned profitable in 1H25 (RMB 4.2b revenue, RMB 1.7b net earnings)
• Marketing approval for Anlotinib + chemotherapy in soft tissue sarcoma, now with nine indications
• Innovative drugs revenue rose 10% YoY to RMB 28.87b in 2024
• Six new innovative products approved in 2024; over 10 launches targeted for 2025-27
• Innovative products expected to contribute 50% of revenue in 2025, 60% in 2027

The target price is HK\$7.70, based on SOTP valuation.

Tencent (700 HK): AI and Gaming Powerhouse

Tencent remains a favorite, driven by its resilience and AI adoption in gaming:

• Online game revenue forecast to grow 12% YoY to RMB 222b in 2025
• Non-GAAP net profit projected to rise 11% YoY to RMB 246b in 2025
• 13 new in-house titles announced, with global publishing partnerships
• Deferred revenue up 15% YoY in 1Q25, indicating strong momentum

Tencent is currently trading below its historical mean, with a target price of HK\$650.00 (22x 2025F PE).

Tencent Music Entertainment Group (1698 HK): Monetization and Market Leadership

Tencent Music Entertainment is set to sustain industry-leading growth with:

• Online music services projected to grow 15-16% YoY in 2025-26
• Increased focus on monetization, including the SVIP package
• ARPPU expected to rise at 6.2% CAGR from RMB 11.70 to RMB 13.70 (2025-28)
• Paying subscriber base to grow at 5.5% CAGR from 125.8m to 145.9m (2025-28)
• Strategic acquisition of Ximalaya to boost long-form audio and user retention

The SOTP-based target price is HK\$85.00 (US\$22.00), implying 28x 2025F PE.

Xiaomi Corp (1810 HK): Beyond Smartphones, Into IoT and EVs

Xiaomi is leveraging its strength in IoT devices and EVs to enhance its AI ecosystem:

• YU7 SUV non-refundable orders exceeded 300,000 units as of early July
• Share price underperformed recently due to slower smartphone/appliance growth, but premiumization and share gains expected to drive future growth
• SOTP valuation: HK\$52.10 for core business (30x 2025F PE, 1SD above historical mean), HK\$17.80 for EV business (10-year DCF, 5.1x 2025F P/S)

Target price is HK\$69.90.

Portfolio Performance and Return Metrics

The portfolio’s performance shows consistent outperformance against market benchmarks using market cap-weighted returns, supporting the conviction in UOB Kay Hian’s selection methodology.

Conclusion: Focused on Policy Beneficiaries and Sector Leaders

UOB Kay Hian’s August 2025 report underscores optimism for China’s healthcare and IT sectors, while remaining vigilant about macroeconomic risks. With a disciplined approach—adding new leaders, taking profits on strong movers, and cutting laggards—the portfolio is positioned to deliver sustainable returns. Investors should closely monitor upcoming earnings, new product launches, and policy developments for further opportunities.