Top 5 China Plus One Stocks to Watch Out for Long-Term Success

In the early 2000s, China's incredible growth was the global economic story. It quickly became the world's largest factory floor and the second-largest economy.

But over time, cracks started showing. As the cost increased, tax incentives began to fade, and the government's control became tough. Global companies started rethinking their dependence on China. When the "China Plus One" strategy began to take shape.

Instead of completely relying on China, companies began transferring parts of their supply chains to other, more stable and cost-effective countries.

Increasing political stress with Western countries only intensified this trend, with tariffs, export restrictions, and rising trade risks, not only smart - but also necessary.

This is the place where India stepped with its youth workforce, improving infrastructure, and a government is actively emphasizing more manufacturing.

In this article, we will look at 5 China Plus One stocks. These stocks are filtered using Equitymaster's powerful stock screener - Top China Plus One stocks in India.

#1 Dixon Technologies

First on the list is Dixon Technologies.

As a leading Electronics Manufacturing Services (EMS) provider, the company has played a crucial role in localizing the production of LED TVs, mobile phones, security systems, and more.

Over the years, Dixon has evolved from assembling colour televisions in 1994 to becoming a full-fledged manufacturing powerhouse with 23 factories across India, serving global giants like Samsung, Motorola, Xiaomi, and Bosch.

What makes Dixon a textbook case of the China Plus One strategy is its timely alignment with India's Production-Linked Incentive (PLI) scheme.

Since the launch of the PLI program in 2021, Dixon has not only consistently met performance targets but has also been receiving incentives, reinforcing its position as a go-to partner for global brands looking to diversify beyond China.

A major boost came in 2024 when Dixon acquired a 56% stake in Ismartu India, the local unit of Chinese company Transsion Technology.

Ismartu manufactures mobile phones for fast-growing brands like Itel, Infinix, and Tecno. With three factories in Noida, this acquisition strengthens Dixon's manufacturing footprint and deepens its presence in the smartphone segment.

Dixon's competitive edge lies in its large-scale operations, backward integration, and in-house design capabilities, which allow it to move quickly and scale efficiently.

These qualities are highly attractive to global companies looking to de-risk from China amid rising labour costs and geopolitical uncertainties.

The company is now planning to invest US$ 600 million in a new facility, further signalling its commitment to capturing a bigger share of the global electronics supply chain.

For more details, see the Dixon Technologies company fact sheet and quarterly results.

#2 Aurobindo Pharma

Next on the list is Aurobindo Pharma.

Aurobindo Pharma is a major Indian pharmaceutical company engaged in the manufacturing and marketing of generic pharmaceuticals and active pharmaceutical ingredients.

The company operates across several therapeutic segments, including antibiotics, cardiovascular, anti-retrovirals, and central nervous system treatments.

Aurobindo follows a vertically integrated business model, supported by strong R&D capabilities and a presence in over 150 countries.

As global pharma companies seek to reduce their dependence on China, India is emerging as a more cost-effective and reliable option-offering services around 20% cheaper than China.

With its established global footprint and integrated operations, Aurobindo is well-placed to benefit from this shift. Recently, its US subsidiary entered into a collaboration and licensing deal with a global pharmaceutical firm to develop products in the respiratory segment.

Looking ahead, the company also plans to expand its product pipeline to strengthen its position.

For more details, see the Aurobindo Pharma company fact sheet and quarterly results.

#3 Aarti Industries

Next on the list is Aarti Industries.

Aarti Industries Limited (AIL) is one of the world's leading benzene-based speciality chemical companies. The company has grown into a global supplier of chemicals used in pharmaceuticals, agrochemicals, polymers, dyes, pigments, additives, and more.

Over the years, the company has transformed from an Indian company servicing global markets to a global company manufacturing out of India.

The company operates over 16 manufacturing plants across India, with a significant portion of its products exported to international markets.

In May 2024, to strengthen its position further, the company entered into a 50-50 joint venture (JV) with UPL for manufacturing and marketing of speciality chemicals that find applications in multiple downstream industries.

UPL is the largest agrochemical company in India and a leading player in the Indian speciality chemicals industry.

This is a first-of-its-kind partnership between two large Indian companies to develop, manufacture and market the downstream and value-added chemical intermediates for global markets.

The JV is expected to commence commercial supplies by Q1 FY27 with a peak annual revenue potential of Rs 4-5 billion (bn) in the next 2-3 years.

Aarti Industries signed a long-term agreement with a multinational conglomerate to supply a niche speciality chemical. The contract is worth over Rs 600 bn and will last four years.

With global companies looking to diversify away from China, Aarti's strong manufacturing base, export focus, and deep integration into global supply chains make it a key beneficiary of the China plus one shift.

For more details, see the Aarti Industries company fact sheet and quarterly results.

#4 Trident

Next on the list is Trident.

Trident Limited is an Indian business conglomerate, primarily known for its home textiles, paper, and chemicals manufacturing and sales. It operates through two main segments: Textiles (yarn, towels, bedsheets) and Paper & Chemicals.

It's the largest terry towel manufacturer in India and is among the leading players in the home textile segment. Trident's paper division also boasts the highest operating margins among listed peers.

In the chemicals space, it stands out as a key producer of industrial and battery-grade sulphuric acid in northern India.

The company exports to over 150 countries and counts retail giants like Amazon, Wal-Mart, Target, and IKEA among its clients.

As global players look to reduce dependence on China and diversify sourcing, Trident's established global footprint and scale give it a natural advantage-positioning it well to benefit from the China plus one trend.

The company has recently announced ambitious plans at Bharat Tex 2025, targeting a threefold growth by 2027.

This aggressive growth is fuelled by an Rs 10 billion (bn) capital expenditure plan for FY25-26, focusing on sustainability, modernisation, and asset enhancement across its home textiles, yarn, and energy businesses.

For more details, see the Trident company fact sheet and quarterly results.

#5 Maharashtra Seamless

Last on the list is Maharashtra Seamless.

Maharashtra Seamless is a dominant player in seamless pipes, holding an impressive 55% market share in India's seamless pipe segment.

The company, known for high-quality pipes used across industries - oil exploration, boilers, pipelines - is a top supplier for oil & gas, agriculture, engineering, chemicals, and more.

Additionally, it has diversified into renewable energy, broadening its revenue streams and aligning with the global push for sustainable energy sources.

It's flagship product, seamless pipes, is indispensable in oil and gas exploration, a sector experiencing an uptick in demand as exploration and production activities intensify globally.

Moreover, with global buyers actively diversifying their supply chains away from China, Maharashtra Seamless stands to benefit significantly from the China Plus One strategy, emerging as a reliable alternative for quality pipe exports.

Going forward, the company expects to dispatch approximately 500,000 tonne in FY27.

For more details, see the Maharashtra Seamless company fact sheet and quarterly results.

Conclusion

China Plus One has been one of the most promising global manufacturing changes in recent years.

As companies looked at their dependence on China due to rising labour costs, strict rules, and increasing geopolitical stresses, countries such as India, Vietnam, and Indonesia have emerged as viable options.

India, in particular, has been a major beneficiary, thanks to its cost-practical labour, improved infrastructure, and government support through PLI plans. US President Donald Trump's decision to enforce a 104% tariff on China will only accelerate this process.

However, investors should evaluate the company's fundamentals, corporate governance, and valuations of the stock as key factors when conducting due diligence before making investment decisions.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...