The Zhitong Finance app learned that Zhongyuan Securities released a research report saying that domestic economic indicators showed positive signs of improvement in August and September, and social retail data improved slightly. The above macro-factors all contributed to the growth of the food and beverage sector. The next stage of consumption recovery will reflect the main characteristics of “a long-term decline in the volume of consumer goods for people's livelihood due to saturation, but entertainment and enjoyment consumption is expected to prosper.” In addition, the revenue of listed companies increased steadily in 2023, and operations throughout the year showed the characteristics of “volume increase, price reduction, and profit recovery”. Combined costs have declined significantly, and the profitability of listed companies is expected to further increase.

Snack foods, prepared dishes, liquor, and export companies are recommended in the food and beverage sector. In November's stock portfolios, liquor recommended Wuliangye (000858.SZ) and Shuijingfang (600779.SH); the snack food sector recommended Jinzai Food (003000.SZ); the catering sector recommended Ligao Foods (300973.SZ), Qianwei Yang Chef (001215.SZ), and Yasui Foods (603345.SH); and export-oriented listed companies recommended Angel Yeast (). 600298.SH

The main views of Zhongyuan Securities are as follows:

In October 2023, the food and beverage sector continued its previous month's decline. In the current period, alcohol sectors such as liquor and beer declined significantly, which is the reason for the overall decline in the sector; non-alcoholic sectors such as food processing, snack foods, condiments, and dairy drinks rose. In October, the number of falling individual stocks in the food and beverage sector decreased compared to September, and the number of gains increased accordingly. Market preferences have returned to leading companies, and rising individual stocks are mainly concentrated in compound condiments, industrial condiments, casual snacks, dairy drinks, and export companies. The rapid narrowing of the decline in the non-alcoholic sector and the shift in market style to leading companies are all positive signs that the sector is improving overall.

The valuation of the food and beverage sector has further declined: as of October 30, as of October 30, the sector's static price-earnings ratio was 24.38 times, down 52.63% from the 2020 high, down 14.83% from the high in the first quarter of 2023, and currently 27.85 times lower than the average level since 2014.

In October, fixed investment growth in the food and beverage manufacturing industry boosted significantly month-on-month. According to WIND, in October 2023, fixed asset investment in the domestic food manufacturing industry increased 8.9% year on year, up 1.4 percentage points from September; in September 2023, fixed asset investment in the beverage and wine industry increased by 4.1%, up 0.7 percentage points from August. The growth rate of investment in the food and beverage manufacturing industry showed a significant boost. Food manufacturing increased even more than beverage manufacturing.

From January to September 2023, domestic production growth in basic livelihood categories such as meat products, cooking oil, dairy products, and beer was generally boosted compared to the same period last year, and market demand rebounded. Domestic imports of basic food such as soybeans and wheat and cooking oil increased in a restorative manner year-on-year. Demand for replenishment in the domestic market was strong, and nut import growth changed from negative to positive; beer imports increased, but growth declined in the third quarter; and wine imports contracted further. From January to September 2023, the main trend of upstream commodity prices in the industry was to stop falling and rising, and the decline in some categories that continued to shrink narrowed.

Investment Strategy:

Domestic economic indicators showed positive signs of improvement in August and September, and social retail sales data improved slightly. These macro-factors all contributed to the growth of the food and beverage sector. However, the sector is trending upward, and there is still a need for coordination between consumer consumption data and market capital orientation in the future. The CPI price index for October declined again year on year. Among them, food CPI fell 4% year on year, which was the main drag item; however, service CPI rose 1.2% year on year in the same month. We believe that the next stage of consumption recovery will reflect the main characteristics of “a long-term decline in the volume of consumer goods for people's livelihood due to saturation, but entertainment and enjoyment consumption is expected to prosper.” In addition, the revenue of listed companies increased steadily in 2023, and operations throughout the year showed the characteristics of “volume increase, price reduction, and profit recovery”. Combined costs have declined significantly, and the profitability of listed companies is expected to further increase. Snack foods, prepared dishes, liquor, and export companies are recommended in the food and beverage sector. In November's stock portfolios, liquor recommended Wuliangye and Shuijingfang; the snack food sector recommended Jinzai Foods; the food supply sector recommended Ligao Foods, Qianwei Central Chef, and Yasui Foods; and export-oriented listed companies recommended Angel Yeast.

Risk warning:

The recovery of residents' income and consumption in the domestic market fell short of expectations; removal of inventories from overseas markets fell short of expectations, leading to a slowdown in enterprise export growth; and the prices of some raw materials were at risk of rising.