This article comes from Haitong International's "Investment Strategy of Consumer Industry in 2023: consumption recovery still has twists and turns, and investment must be selected first and then optional".
Haitong International recently published a research report on the investment strategy of the consumer industry in 2023. The agency said that it continues to be optimistic about the consumer industry and suggests that priority should be given to the necessary consumption with stable demand in the early stage, especially excellent companies with low valuations. After the change is clear after the epidemic, then the layout of optional consumption.
Demand: there are still twists and turns in the recovery of consumption after the epidemic
We have found that after the liberalization of overseas epidemic prevention last year, retail sales in most countries and regions achieved restorative growth, but since the beginning of this year, retail sales have basically stabilized and returned to the pre-epidemic trend. Consumer confidence in Japan, South Korea and Taiwan even fell again after a brief repair. After the epidemic, non-durable goods consumption continued to recover moderately, and durable goods consumption rebounded rapidly and completed "filling the hole" within two quarters, but the recovery of service industry consumption was relatively slow and lagging behind.
Combined with the domestic situation, in 2023 weWe are relatively optimistic about the growth of beer, dairy products and prepared vegetables for the whole year, while spirits, catering and textile clothing will improve in the second half of the year.
Cost: CPI and PPI deviate to increase profitability
With the recovery of demand, rising prices of agricultural products and clearing of services, there is a good chance that domestic CPI will rise moderately next year. The foreign economic recession and domestic housing downturn may lead to a fall in commodity prices and a drag on PPI. The HTI consumer cost index shows that the spot index of soft drinks, beer, dairy products, instant noodles and condiments is down 14%, 9%, 9%, 7% and 6% respectively from the same period last year, while the futures index of condiments, soft drinks, beer and instant noodles is down 11%, 9%, 7% and 2% respectively from the same period last year.
Capital: both domestic and foreign capital are expected to be extremely successful.
Historical data show that the capital side of the stock market is positively related to the market. With the further confirmation of the upward trend of China's fundamentals and policies, market sentiment will be boosted. The household savings rate is likely to decline for many years from a high of about 35% in 22 years, and the proportion of investment in funds and stocks is expected to rise at a low level. The net inflow of Lukutong funds this year was almost zero as of early November, a change from the situation that has been sustained for many years. On the other hand, worries about recession abroad have intensified, and concerns about domestic epidemic prevention and control and exchange rate depreciation have eased. The net inflow in mid-to-late November has reached about 10 billion yuan, and it is expected to return to a substantial net inflow in 2023.
Valuations: a shares and H shares are lower than US stocks
The A-share food and beverage industry PE (TTM) is in the 75% quartile (31.4x) from 2011 to 2019 (higher than that before the COVID-19 epidemic); the lower quantiles in the sub-industry are meat products (0% menus 17.3x), health products (11% meme 23.0x) and dairy products (23% dairies 24.8x).
The H-share essential consumer industry is in the 77% quartile (21.6x); the lower quantiles in the sub-industry are packaged food (0% meme 12.2x), supermarkets and convenience stores (0% meme 11.2x) and dairy products (4% meme 13.3x).
The US stock consumer goods industry is in the 100% quantile (25.7x); the lower quantiles in the sub-sectors are food retailing (31 per cent), tobacco (46 per cent 16.4x) and beer (65 per cent 23.9x).
Suggestion: continue to be optimistic about the consumer industry, it is recommended that you must choose first and then choose.
Recently, all provincial regions across the country have been disturbed by the epidemic, and the number of new patients has reached a new high this year. Looking forward to next year, it is expected that the control of the epidemic is more likely to be relaxed, but compared with the recovery of foreign consumption, it may first restrain and then rise or even flatten.
therefore,It is suggested that priority should be given to the necessary consumption with stable demand in the early stage, especially the excellent companies with low valuation, and then distribute the optional consumption after the change is clear after the epidemic.The recommended order of the main food and beverage sub-industries is as follows: beer = dairy products = high-end liquor = aquaculture > regional liquor = condiment > sub-high-end liquor = convenience food.
Look at multiple stocksFor China Resources Beer, Tsing Tao Beer, Chongqing Beer, Yili shares, China Mengniu Dairy, China Feihe Limited, Guizhou Moutai, Wuliangye, Shanxi Fenjiu, Luzhou laojiao, Yanghe shares, Yingjiagong Liquor, Golden Dragon Fish, Pastoral shares, Youran Animal Husbandry, Modern Animal Husbandry, etc.Be bearish on individual stocksFor Gujing tribute wine, willing wine industry, alcoholic wine, Budweiser Brewing Company APAC Limited, Haitian flavor industry and so on.Recommend individual stocks in other consumer industriesFor China exemption, Jinjiang Hotel, Haier Smart Home, Oupai Home, Li Ning Co. Ltd. and so on.
Edit / lydia