The Zhitong Finance App learned that Guoxin Securities released a research report saying that under the resonance effects of recovering demand, inventory removal, and falling costs, the performance of the food and beverage sector is expected to gradually improve in 2024. At present, the valuation of the food and beverage sector has fallen back to a reasonably low level, and investment in the food and beverage sector already has a strong margin of safety. Still optimistic about investment opportunities in the food and beverage industry.

▍ The main views of Guoxin Securities are as follows:

Looking back at 2023: tortuous recovery, consumption classification.

The scarring effects of the 2023 epidemic are prominent, and the recovery rate of residents' consumption capacity and consumer confidence is slow, falling short of market expectations at the beginning of the year. Demand in 2023 showed obvious structural differentiation characteristics: 1) Due to the weakening of residents' income expectations, consumer consumption behavior is more rational, and the pursuit of a more extreme price-quality ratio ratio, high quality and price ratio products have outstanding performance, such as Wuliangye · Pu Wu, Fenjiu · Blue and White 20, Qingdao Classic, etc.;

2) The recovery in the consumption scenario has led to a rapid recovery in related rigid consumer demand. For example, there is a decrease in the frequency of optional consumption, such as alcohol for banquets. This also led to a marked contrast in the consumption climate during the off-peak season. On the supply side, affected by changes in consumer behavior, the competitive behavior and competitive factors of food and beverage companies have also changed accordingly. For example, liquor companies scan red envelopes to feed back channels, and casual snack companies upgrade supply chains to improve efficiency.

Overall, the trend of the food and beverage sector rose first and then declined in 2023, with a cumulative decline of 15.4% throughout the year, outperforming the Shanghai and Shenzhen 300 Index by 1.4 pct. Due to the disturbance of multiple factors, the valuation of the food and beverage sector has declined sharply. Currently, the valuation cost ratio of high-quality White Horse stocks has been highlighted.

Looking ahead to 2024: demand improvement, supply optimization.

On the demand side, macroeconomic policies have been warm since the second half of 2023, stepping up efforts to support the economy. The direction of improving demand in 2024 is quite clear, and consumer confidence is expected to return steadily. In terms of pace, considering the gradual restoration of industry demand and the gradual easing of base and inventory pressure, it is expected that the food and beverage sector's performance growth rate will be low and high in 2024. In terms of structure, it is expected that scenario-style consumer goods such as alcohol for banquets and gift boxes will continue to lead the recovery in consumption, and the recovery in scenarios such as business banquets is expected to contribute to increased demand.

On the supply side, changes in consumer behavior are expected to disrupt the supply side in the short term. In an environment where consumers continue to pursue high quality and price ratios, the brand traction of some consumer goods may weaken, and channel traffic is shifting to affordable channels at an accelerated pace. It is expected that competitive factors in the industry will change, and the business focus of enterprises will shift to improving supply chain efficiency and strengthening terminal operation capabilities. Enterprises that reform and increase efficiency in a timely manner are expected to reap a rapid increase in market share in the midst of changes.

On the cost side, due to weak global demand, slowing inflation, and increased market supply, the prices of some raw materials may fall, which is expected to increase the profits of food and beverage companies. At the valuation level, on the one hand, leading valuation centers are expected to rise as the US dollar interest rate cut is expected; on the other hand, as the market gradually adapts to the macroeconomic low-speed long-distance running model, investors are re-attaching new importance to the long-term investment value of high-quality consumer goods companies, and it is expected that high-performing White Horse stocks will return to valuation in 2024.

Risk warning:

1. Demand continues to be weak due to insufficient macroeconomic growth momentum; 2. Increased industry competition has led to damage to corporate profitability; 3. Food safety incidents have caused damage to the brand image of consumer goods companies; 4. Systemic market risks have led to a sharp decline in company valuations.