The Zhitong Finance app learned that Huatai Securities released a research report saying that considering the current internal and external environment,Overall demand in the food and beverage sector is expected to recover steadily in '24Combining the current low valuation level (CS Food and Beverage PETTM is in the 9% quartile since 2018) and optimism about the long-term potential of domestic food and beverage consumption, the sector still has medium- to long-term allocation value. Looking ahead to 24 years, it is recommended to seize rhythm/structured investment opportunities,Focus on the three main lines of cost improvement/efficiency improvement/demand recovery.Overall, the liquor department is in a weak cycle of adjustment, with a moderate recovery as the main tone; beer focuses on cost improvements and structural upgrades, and profits are firmly supported; demand for condiments is lackluster, focusing on the effectiveness of leading channel/category changes; casual snack leaders rely on new channels such as snack mass sales, which is expected to continue to grow well; demand for dairy products and liquid milk is expected to continue to improve, and the future product structure is expected to improve; demand for frozen food is improving, and the boom will continue.

▍ The main views of Huatai Securities are as follows:

Cost improvement: Raw material prices are now at a downward inflection point, and cost improvements lead to profit recovery

The 23H1 casual snacks/baking sub-sector benefits from falling prices of raw materials such as palm oil, and the cost pressure has been significantly eased; the cost pressure relief in the beer/condiment sector continues to be realized; and the cost pressure on halogenated products/roasted nuts/yeast has deepened due to high prices of major raw materials. From 23H2 to 24, prices of raw materials such as duck sive/sunflowers/soybeans/molasses/barley are expected to enter a downward channel one after another. Opportunities for profit recovery are emerging. Judging from the pace of implementation:

The procurement pace of the halogen products sector is flexible, and profitability has gradually improved in 23Q3; the new procurement season for sunflower seeds in roasted nuts (melon seeds) has arrived, and cost improvements are expected to gradually be realized starting in 23Q4; the yeast/beer sector is expected to gradually release profit elasticity in 24 years after price negotiations at the end of the year due to the long price lock period for raw materials; the condiments sector is expected to benefit from continued easing of soybean supply in 22/23, and cost pressure is expected to continue to improve.

Efficiency improvement: Demand for efficiency improvement is being strengthened, and the trend of channel integration is gradually showing

Since this year, the overall external consumption environment has shown a weak recovery trend, which can further test whether the operating efficiency of enterprises is solid, and chain interpretation is accelerated. With the development and improvement of the supply chain industry, it has been observed that there is an obvious phenomenon of high-efficiency channels crowding out or replacing inefficient channels in the industry (interpreting high-efficiency channels as a “win-win” model of suppliers, channel parties, and consumers). For example, leading chain enterprises in the catering industry have recovered better, and long-term supply chain accumulation has led to continuous optimization of their operating efficiency;

Demand for bakery products is shifting from bakery shops with high mark-up rates to supermarkets and restaurants (including coffee/tea shops, etc.) channels with better product cost performance. At the same time, frozen bakery manufacturers can rely on scale effects to achieve high operating rates; snack mass stores with extreme cost performance are booming, and the integration of high-efficiency terminals is speeding up.

Demand recovery: Cost-effective consumption is expected to continue, and demand is expected to gradually boost

Judging from the pace of recovery in 23 years, domestic consumption experienced a pulsing recovery during the 23Q1 Spring Festival. The recovery slope has slowed since 23Q2, and since 23Q3, market confidence has rebounded with the introduction of policies, and positive signs are beginning to appear. Looking ahead, as the impact of compensatory consumption such as the low base effect and scenario recovery gradually declines, it is determined that the pace of recovery in the food and beverage sector may stabilize in '24. The extent of recovery still depends on the degree of marginal improvement in consumer spending power.

Judging from consumer trends, judging “cost performance” may still be the main theme throughout next year, and it is expected that consumer spending ideas will gradually move closer from price reduction to quality improvement. Judging from the competitive landscape, the trend of differentiation may continue, and centralization will still be the main line. It is recommended to select leading enterprises with outstanding fundamentals.

Risk warning:

The risk that economic growth will fall short of expectations, industry competition will be higher than expected, and food safety issues.