The Zhitong Finance app learned that Cinda Securities released a research report saying that since the epidemic prevention policy was adjusted at the end of last year, the capital market has gone from being full of expectations to gradually being pessimistic about the consumer sector. However, the bank believes that it is inappropriate to prolong short-term disadvantages; China's consumer industry still has long-term investment value. Continued positive economic data means that the early economic stimulus policy is gradually taking effect and is gradually being reflected in fundamentals. The favorable factors gradually accumulated in a pessimistic market environment are saving energy for the subsequent rebound. In the context of the steady restoration of consumer confidence, consumption capacity, and consumption scenarios, the bank is optimistic that the consumer sector will pick up next year and suggests laying out the 2024 consumer circuit from a definitive perspective.

Focus on: segmented circuit leaders love Americans (300896.SZ), Bettany (300957.SZ), China China Exemption (601888.SH), etc., industry-high quality White Horse Poleya (603605.SH), Songcheng Entertainment (300144.SZ), Wangfujing (), and giant creatures with high growth potential (02367), Jinbo Biotech (832982.BJ), Junting Hotel (301073.SZ). 600859.SH

Cinda Securities's views are as follows:

The consumer industry has long-term investment value. This report will explore the main lines of consumption and industry investment from changes and constants in Chinese consumption.

Since the epidemic prevention policy was adjusted at the end of last year, the capital market has gone from being full of expectations to gradually being pessimistic about the consumer sector. However, the bank believes that it is inappropriate to prolong short-term disadvantages; China's consumer industry still has long-term investment value. On the one hand, against the backdrop of declining export growth and the urgent need to upgrade the domestic industrial structure, the rise of China's economy is inseparable from the development of the domestic consumer industry; on the other hand, the country helps residents “open source” through active policies such as stable employment and tax reduction, focusing on removing the three mountains of “housing,” “medical care,” and “education,” which hinder the domestic cycle, to help residents “save money”, raise residents' disposable income from two aspects, and lay the foundation for the development of the consumer industry. Therefore, there is a need and necessity for the development of the domestic consumer industry. However, when searching for development trends, it is not advisable to blindly copy the historical experience of a single overseas country. Therefore, this report will explore the five main investment lines of China's consumer industry from changes and constants in Chinese consumption.

Main line 1: Consumption upgrades continue to advance, and preferred courses with increased penetration rate x increased concentration.

The increase in national income brought about by macroeconomic growth is the foundation for consumption upgrades. However, since 2018, voices of “consumption downgrade” have increased. The bank believes it is mainly due to: 1) fluctuations in the economic cycle affect residents' marginal consumption tendencies, bringing the illusion of consumption downgradation; 2) China's unique dualistic structure of urban and rural areas has brought about the phenomenon of “consumption classification”. In fact, the size of China's middle class continues to rise, which is one of the main driving forces of consumption upgrading. In the context of consumption upgrading, it is recommended to find a consumer sub-circuit with increased penetration and concentration. Current recommendations focus on: 1) Improving penetration rates on related tracks: medical aesthetics, vision (supply and demand); cosmetics, gold and jewelry, trendy sports, coffee chains (demand driven); restructured collagen (supply driven). 2) Increased concentration on related tracks: hotel chains, gold and jewellery, eyewear retail, outbound travel agencies.

Main line 2: From the low end to the high end, from the rise of domestic goods to the export of domestic goods overseas.

With the rise of China's comprehensive national strength, the supply side is shifting from “Made in China” to “Made in China”. Demand-side cultural self-confidence and national self-confidence continue to rise. Channel-side domestic brands are flexible in physique and good at seizing the dividends of channel transformation, and many factors have helped domestic brands rise rapidly. In the context of improving comprehensive national strength, domestic goods have gone overseas one after another, opening up more room for growth by exporting goods and services through a strong supply chain, a focus on cost performance, and the influence of Chinese culture. Currently, it is recommended to focus on: 1) Tracks related to the rise of domestic goods: cosmetics, recombinant collagen, and sportswear. 2) Tracks related to domestic goods going overseas: cosmetics, chain restaurants, eyesight, trendy games, cross-border e-commerce.

Main line 3: Pursue cost performance and return to product usage attributes.

The overall recovery of domestic consumption since this year has been slower than expected, and the discount industry is on the rise, but this phenomenon is not a downgrade in consumption, but a shift in consumer attitudes: 1) With the advent of the consumption 4.0 era, consumers are unwilling to pay for excessive brand premiums, and the cost performance ratio has gradually become the first choice; 2) The purpose of consumption has changed from “pleasing people” to “being happy with oneself” focusing on the use value of the product itself. It is recommended to pay attention to cost-effective related tracks: discounts on famous products, discount retail/snacks/e-commerce, and restaurants.

Main line 4: The relationship between supply and demand has changed, and consumer demand has become more personalized.

Factors such as the relationship between supply and demand for goods and services determine the actual consumption format. The development of China's consumer industry has gone through a process from short supply to oversupply. The current economic growth has brought rapid development of productivity, oversupply in the consumer market, and more diversified consumer choices of goods and services. At this time, manufacturers need to strive to provide differentiated consumer goods to meet the actual needs of various types of consumers, and the consumer market will also appear more personalized. It is recommended to focus on personalized consumption-related tracks: hotel chains, tourism, entertainment, department stores.

Main line 5: Changes in consumer age structure bring about changes in consumer demand.

Currently, the consumer consumption structure has been steadily upgraded, but the population structure is facing prominent problems such as aging and declining birthrate. However, China's consumer market is huge and complex, meaning that the overall consumption scale and segmentation of consumption scenarios still have great potential, while changes in population structure may nurture new investment opportunities. It is recommended to focus on racetracks related to changes in age structure: old-age care, pet economy, fertility promotion, prepared food, human service, and vocational education.

Risk factors: risk of macroeconomic growth falling short of expectations; risk of increased industry competition; risk of weak terminal demand; risk of rising raw material prices.