According to Zhitong Finance App, Guolian Securities released a research report stating that in the first half of 2024, the overall performance of the consumer industry's stock prices was relatively stable on the basis of little change in the fundamentals, due to changes in capital flows. Looking ahead to the second half of the year, a series of policies to boost the real estate market and stimulate internal demand are expected to be gradually implemented, helping to accelerate the growth of consumer data in the second half of the year on a low base. Based on stronger defense and higher dividend yields, it is expected that the price performance of must-choose consumer stocks in the second half of the year may be better than optional consumer stocks, and eligible consumer companies may have better stock price performance.
Condition 1: Revenue growth driven by going global.
Considering the sustained weakness of the Chinese consumer market, consumer product companies that actively seek new growth space by going global will be favored by the market. Going overseas can also reduce a company's dependence on a single market and spreading the political and economic risks brought about by the region. According to Pu Yin International, for manufacturing companies, the key to successful overseas expansion lies in the uniqueness of the product in terms of function, design or marketing, as well as the expansion of channels. For retail companies, the efficiency of the supply chain and store operations will determine the success or failure of overseas expansion.
Condition 2: Catering to the consumer demand in the lower-tier market.
As various consumer competition tracks increasingly penetrate into high-tier cities, many consumer product companies are turning their focus to lower-tier markets. Pu Yin International believes that in the long run, the constantly improving consumer awareness and the demand for consumption upgrades in the lower-tier market will bring broad development space for consumer companies. However, faced with insufficient short-term consumption power, consumer companies must be able to meet the demand of lower-tier market consumers in terms of product design, cost-effectiveness, marketing, and sales channels in order to effectively expand their market share in the lower-tier market.
Condition 3: Undervaluation plus excellent shareholder returns.
Faced with greater market uncertainty, long-term investors should focus more on the improvement of corporate fundamentals, the improvement of profitability, and shareholder returns (including dividends and buybacks). Stable profit performance and improved operating efficiency will ensure good operating cash flow, and high-quality operating cash flow will ensure that the company has the ability to maintain a high dividend payout ratio. The lower valuation level plus the higher dividend payout ratio will ultimately bring abundant shareholder returns (represented by a higher dividend yield) to investors. Pu Yin International predicts that consumer companies with high dividend yields will probably continue to outperform the industry in the second half of 2024.
Condition 4: Short-term performance with obvious catalysts.
Under the backdrop of capital flows influencing the overall performance of the industry, consumer product companies with significant short-term improvements in fundamentals or obvious upward trends in brand strength may achieve better-than-expected performance, bringing excess returns to investors. Recommended: Anta Sports (02020) (the release of Owen basketball shoes and the continuous promotion of brand strength during the Olympics), Juzi Bio (02367) (recombinant collagen product stands out and helps the brand continue to monetize), and Teahouse International (09658) (turnover rate continues to increase, and listing in the US is expected to accelerate store opening process).
Investment risks: the pace of consumption recovery continues to slow down, consumer confidence is declining, and the valuation of high-growth companies continues to decline.