Goldman Sachs names China's next billion-dollar brands and picks the ‘hottest’ stocks

Published Mon, Apr 19 20219:30 PM EDT

Lucy Handley @in/lucy-handley-b2b0a61a/@lucyhandley

Analysts at Goldman Sachs have picked a number of fast-growing Chinese brands that it says younger consumers are ready to pay a premium for. The bank put together a list of its "hottest" stocks to watch and recommended buying both established and upcoming players. After the Covid-19 outbreak, people in China are upgrading to healthier food and drink brands and Goldman's "winners" are set to tap into the trend. Some of its picks are set to reach $1 billion in annual revenue in the next three to five years, the bank estimated. Goldman's buy-rated stocks include: Nongfu Spring has 21% of the bottled water market in the country and Goldman likes it for its product innovation, expansion into lower-tier cities and increased popularity as consumers "upgrade to healthy products." The buy-rated company is on the bank's "hottest brands" list, with the potential to grow into a $1 billion-turnover firm within the next three to five years. Nongfu also makes tea and juices, and its plant-based yoghurt taps into a rising demand for healthy products, Goldman said. The bank also rates its Tea Pie drink for being "strong and profitable." Milk firm Mengniu is a buy for Goldman for its new products such as cheese and premium yoghurt, and the bank's analysts said it appeals to younger shoppers who are happy to pay more for healthier food. The bank praised its growth in milk-based products post-lockdown — for example the company's premium UHT product saw sales growth of 19% in 2020. The firm is also the controlling shareholder of dairy company Milkground (owning 24%), which is on Goldman's "hottest brands" list with billion-dollar potential. Established takeout chain Zhou Hei Ya is one of the bank's "best positioned to capture current consumer trends," and it said younger shoppers like its "fresh, interactive brand image." While it only has 1,300 or so stores across China, its "easy to eat" food caters to the on-the-go market, Goldman said. Incumbent dietary supplement company By-Health saw a sales bump during the Covid-19 outbreak and its online revenue went up 45% year-over-year in 2020, Goldman said. The bank is buy-rated on the stock and expects a 19% compound annual growth rate in net profit between 2021 and 2025. "Thanks to higher income levels and rising health awareness, consumers in China are spending more on … Vitamin and Dietary Supplements," Goldman's analysts stated. In the Goldman research note published Thursday, analysts led by Lincoln Kong focused on Chinese brands. "The top trending brands have evolved rapidly and the preference for local brands — known as 'Guochao' — is emerging even more strongly than before," they stated. Thr analysts evaluated data from China's three giant e-commerce platforms — Baidu , Tencent 's Wechat and Alibaba 's Tmall — to see how often people searched for and bought products for its "hottest brands" list. Companies on that list (including Nongfu and Milkground) are set to reach $1billion in sales in the next three to five years, the firm forecast. Meanwhile its established-firm picks, including Zhou Hei Ya and By-Health, are "winners" that are tapping into the trend for healthy eating.

An aerial image of Beijing, China

DuKai photographer | Moment | Getty Images

Analysts at Goldman Sachs have picked a number of fast-growing Chinese brands that it says younger consumers are ready to pay a premium for.

The bank put together a list of its "hottest" stocks to watch and recommended buying both established and upcoming players.

After the Covid-19 outbreak, people in China are upgrading to healthier food and drink brands and Goldman's "winners" are set to tap into the trend. Some of its picks are set to reach $1 billion in annual revenue in the next three to five years, the bank estimated.

Goldman's buy-rated stocks include: