Zhītōng Cáijīng APP learned that Huáfú Security has released research reports stating that the overall consumption is slowly recovering, but there are still structural opportunities. It is currently in the third stage of the consumer clock, seeking value for money in the upgrade. In the short term, consumers can get a more cost-effective consumption experience by reducing the pursuit of brands and returning to the product itself; In the long term, as market competition intensifies, after the reshuffling and repositioning of brand values by the market, brand premiums as a reasonable component of product prices will not be realized if the prices and products are mismatched. Following the example of Japan, China's underlying logic of consumption is different, and the upward space driven by internal and external demand is huge. Broad-based upgrades are an inevitable choice for social development.
Huafu Securities' main points are as follows:
Looking horizontally and vertically, the valuation level of the food and beverage industry is attractive.
The food and beverage industry has been adjusting since 2021, and compared with the whole A-share market, the current PE (TTM) is only at the 4th percentile of the past ten years, and the valuation has fallen to a safe range with strong support. From the perspective of consumption, seasoning and fermented products, dairy products, pre-processed foods, and baked goods have ten-year PE percentiles all under 0.3%, which are at extremely low valuation levels. And looking from the PB-ROE perspective, the baijiu, dairy products, baked goods, and pre-processed foods also have low valuation performance, with strong attractiveness and cost-effectiveness highlighting the sector. The fundamentals of mature industries are resilient and in a state of both attack and defense.
Baijiu: The industry is accelerating its differentiation under the growth model of decreasing incremental price and pressure of inventory turnover. The overall fundamentals remain stable. The price fluctuations of Maotai have suppressed the recovery of the sector, but the main single product of Feitengwai has performed steadily on the pricing side. The confirmation on the financial statement is still strong, and the strong opening for Q1 lays a good foundation for the whole year. Macro pressures on the valuation side are suppressing elasticity, but the resilience of the industry leader is still there, and the safety cushion of the valuation is high.
Beer: The high-end trend has reached a bottleneck, and the space is still broad, but the rhythm has slowed. Initial realization of flexibility on the cost side supports profit growth for the whole year, and performance confidence is expected to remain high. Condiments: Basic seasonings like soy sauce face problems such as weak demand and intensified competition; while compound seasonings benefit from B-end chain operation and prefabrication, with logical demand and high growth momentum. Dining chain: The industry as a whole is under pressure, but the trend of concentration and chain operation is still the growth point. From a medium-to-long-term perspective, the leading supply chain companies that seize the opportunities early are expected to fully benefit from the growth dividend of the industry.
"Relatively essential" has entered the mainstream and the penetration rate is continuing to rise against the trend.
Low-alcohol drinks: The consumer group and scenario continue to expand, and the transformation of drinking habits and scenarios among contemporary young people promotes the healthy development of the industry. Large category health products: The epidemic and aging drive consumer health awareness, and the potential demand is strong. If the policy side is liberalized, the supply and demand will run in both directions, with the possibility of achieving a two-level jump, replicating the growth path of functional labeled foods in Japan. Pets: Under the trend of aging and decreasing number of children, the pursuit of spiritual enjoyment drives the continuous expansion of the number of pets and the improvement in penetration rate. In the medium-to-long term, the domestic pet market still has the logic of both quantity and price increase. Natural food ingredients: The health iteration and upgrade of raw materials is one of the main lines of development in the current industry, which brings opportunities for counter-cyclical penetration rate improvement for supply chain enterprises such as natural sweeteners and cream.
"Relatively essential" products adapt to the new needs of current consumers, and the penetration rate is expected to achieve high growth against the trend. At the same time, against the background of the increase in flexible consumer budgets, there may be more high-end and featured products launched to attract consumers to try new things, drive product upgrades, and achieve both quantity and price increases for the category.
The fundamentals of mature industries are resilient and in a state of both attack and defense.
The feasibility of food and beverage and upstream and downstream industry chain going abroad is high.
Taking a cue from neighbors, brand internationalization is a process that should be done sooner rather than later, and it is a process of "ten years of sharpening a sword." The international catering market is rebounding rapidly from the impact of the pandemic. With its cultural attributes, Chinese catering has an increasing market share. The acceleration of domestic catering going abroad may stimulate the expansion of the supply chain. And outbound capacity is the second stage of enhancing competitiveness and consolidating global markets in the process of brand internationalization. It can hedge against geopolitical trade risks, flexibly respond to macroeconomic environment changes, and invest in response to supply-demand conflicts in the global industry chain.
Investment advice
Currently, the valuation of baijiu is low, and the growth targets of leading companies have strong certainty. It is recommended to focus on the layout of oversold stocks and the certainty of semi-annual reports, with a focus on Kweichow Moutai (600519.SH), Wuliangye Yibin (000858.SZ), and Shanxi Xinghuacun Fen Wine Factory (600809.SH) for baijiu, and Tsingtao Brewery (600600.SH), and Beijing Yanjing Brewery (000729.SZ) for beer. For the dining industry, focus on Sichuan Teway Food Group (603317.SH), Anjoy Foods Group (603345.SH), Qianwei Yangchu (001215.SZ), and Tongqinglou Catering Corporation (605108.SH).
Among the relatively essential product categories, focus on Bairun Investment Holding Group (002568.SZ) for low-alcohol drinks, Inner Mongolia Yili Industrial Group (600887.SH) for large-scale health products, and Yantai China Pet Foods (002891.SZ), Petpal Pet Nutrition Technology (300673.SZ), Yiyi Shares (001206.SZ) for pet industry. Focus on Hai Road Food Technology (300915.SZ), Li gao Food (300973.SZ), Nanqiao Food (605339.SH), and Bai Longchuangyuan (605016.SH) for health raw materials and additives. From the perspective of brand and production capacity going overseas, it is recommended to focus on Angel Yeast Co., Ltd. (600298.SH) and Jialian Technology (301193.SZ).
Risk Warning: Macro-economic fluctuations affecting consumer levels, food safety risks, policy risks, and distributor funding chain problems that lead to product dumping and damage to brand reputation, and the risk of large fluctuations in raw material costs.