Tianfeng Securities released research reports stating that overall, the csi sws food & beverage index showed steady growth in Q3 2024, with accelerated growth compared to the previous quarter, and continued release of profit elasticity.
According to the website of Wise News, Tianfeng Securities released research reports stating that overall, the csi sws food & beverage index showed steady growth in Q3 2024, with accelerated growth compared to the previous quarter, and continued release of profit elasticity. Looking ahead to the whole year, the bank believes that demand may remain stable, mass consumption continues to recover, under the trend of cost reduction, profit elasticity may be released. The bank recommends focusing on 3 main themes: 1) Performance with strong stability: Foshan Haitian Flavouring and Food (603288.SH), Angel Yeast Co., Ltd. (600298.SH); 2) Enjoying the reform dividend: Chongqing Fuling Zhacai Group (002507.SZ); 3) Enjoying the recovery dividend: Sichuan Teway Food Group (603317.SH).
Tianfeng Securities' main points are as follows:
Stable growth in Q3 revenue, with profit growth rate higher than revenue growth rate.
Performance: Q3 revenue growth has accelerated compared to the previous quarter, with profit growth rate higher than revenue growth rate. The condiment industry's revenue and net income attributable to the parent company in Q3 2024 were 16.415/2.578 billion yuan, representing year-on-year growth rates of 9.55%/15.25%, higher than +3.34/+9.44 percentage points compared to Q3 2023, with revenue growth rate in Q3 2024 increasing by 4.85 percentage points compared to the previous quarter.
Expenses: In Q3 2024, expenses contracted, and competitive situation somewhat converged. The sales expense ratio/management expense ratio/financial expense ratio of the condiment industry in Q3 2024 were 7.77%/3.55%/-0.40%, with year-on-year changes of -0.15/-0.23/+0.47 percentage points. Both the year-on-year and quarter-on-quarter sales expense ratios in Q3 2024 declined, with the expectation that major condiment enterprises reduced sales expense investments, leading to a possible convergence in the competitive situation.
Profitability: The logic of cost reduction continued, with a profit margin increase in Q3 2024. The gross margin and net margin of the condiment industry in Q3 2024 were 33.06%/15.92%, with year-on-year changes of +1.30/+0.85 percentage points. As prices of raw materials such as soybeans, edible oil, and white sugar continued to decline, the gross margin of the condiment industry in Q3 2024 maintained an upward trend.
Cost reduction brings profit elasticity, focusing on the health and condiment track.
Demand: Dining is still in a growth channel, with the growth rate slowing down compared to 24Q2, and consumer demand is in a weak growth state (due to lower unit prices), especially mass dining growing significantly faster than high-end dining. The industry believes that competition still exists, and there are structural opportunities under the background of mass consumption recovery.
Costs: Looking at the whole year, overall raw material prices are expected to decrease compared to 2023, and profit elasticity is expected to be unleashed. Industry characteristics: 1) Diversified purchasing channels, with online channels growing rapidly, and major condiment companies' online growth rates faster than offline growth rates, with a more comprehensive layout. 2) Delicious taste still tops the demand, while the demand for health is gradually emerging. 3) Convenience and deliciousness resonate together, and the trend of complex flavours/rice condiments is on the rise.
Investment recommendations: Overall, looking at the stable growth of 24Q3 performance, with growth accelerating month-on-month and profit elasticity continuing to be unleashed. Looking ahead for the whole year, the industry believes that demand may remain stable, mass consumption continues to recover, and with the trend of falling costs, profit elasticity may be released. The industry recommends focusing on three main themes: 1) Strong performance stability: Foshan Haitian Flavouring and Food, Angel Yeast Co., Ltd.; 2) Benefiting from reform dividends: Chongqing Fuling Zhacai Group; 3) Enjoying the trend of complex flavours: Sichuan Teway Food Group.
Risk Warning: Risks of declining industry prosperity; risks of fluctuating raw material prices; risks of intensified industry competition; market risks; food safety risks, etc.
