The Zhitong Finance App learned that CICC released a research report saying that since 2023, the recovery of the social services sector has been divided, but valuations in various sectors are already at a low level. Looking ahead to 2024, the industry will maintain a steady recovery. It is optimistic about cost-effective brands and changes in experience-oriented consumer habits. At the same time, it is recommended to focus on investment opportunities for racetracks and companies that replicate the long-term logic of expansion and refined management.

▍ The main views of CICC are as follows:

Since 2023, the recovery of the sub-sector has been divided; valuations in various sectors are already at a low level.

Since 2023, there has been a clear recovery in scene consumption. The recovery slope for social services is greater than product consumption, but there is some differentiation in the sub-sector: hotels and high-quality tourist destinations stand out; tax exemptions are affected by factors such as consumption power, and sales performance lags behind passenger flow performance; food and beverage consumption is more local, continuing a steady recovery trend, and same-store revenue is not as high as in the same period in '19.

Judging from the valuation level, after experiencing a correction since the beginning of the year, the overall valuation level of the social service sector is currently at its lowest level since 22, and the valuation is already cost-effective.

2024 investment strategy: quality-price ratio and focus on experience are long-term trends, and companies with excellent business models and excellent management are expected to cross the cycle.

The following trends and long-term logic are worth paying attention to: 1) The cost performance route is more resilient during the gradual recovery of consumption power. Since this year, we have observed a relatively leading trend of cost-effective route categories and brands returning to a relatively leading trend in the domestic restaurant and hotel sector, and there was also this rule after the overseas epidemic (the fast food industry in Japan and the US recovered ahead of other business formats such as meals), and consumers are probably not simply looking for low prices, but cost performance under a certain level of quality assurance.

2) For essential travel business formats & business formats related to strong travel (represented by hotels and high-quality tourist attractions), focus on experiencing or changing consumption habits as sustainable.

3) It is recommended to focus on a circuit with the ability to replicate and expand. The chain rate and concentration of the Chinese hotel and catering industry may continue to increase; companies with strong comprehensive product, operation, and brand strength and flexible iteration can still continue to increase market share. Furthermore, refined management and cost reduction and efficiency are expected to bring about sustainable profitability improvements; and continuous price reduction promotions or trigger clear supply, and strong leaders are expected to usher in competitive landscape optimization; it is worth noting that some outstanding leading companies are shifting to value stocks, or paying more attention to shareholder returns.

It is recommended to focus on investment opportunities for companies that adapt to long-term trends and have excellent business models and management capabilities.

1) Catering: The valuation is highly attractive, and the competitive track and the operational resilience of high-quality management companies are highlighted. 2) Hotels: Leading companies have both growth and a stable competitive position, and the advantages of high-quality brands have expanded.

3) Personnel service: Demand is picking up or bringing about performance elasticity, and seizing the growth potential of leading companies. 4) Tourism: The industry as a whole is facing a high base of 23 years, focusing on the short-term performance elasticity and long-term growth potential of high-quality leaders. 5) Tax exemption: Focus on the improvement process of daily sales and how the 25-year Hainan customs closure policy has been implemented.

risks

The recovery of consumption power was weaker than expected; the competitive landscape deteriorated; and enterprises failed to improve management to cope with changes.