Key investment points:
1, 2021 officially ended, mass products demand pressure sharply callback, Baijiu after the shock performance basically unchanged from early 2021. Food and beverage fell 4.65% last week, underperforming the Shanghai Composite Index (+ 0.60%) by 5.25 percentage points. Subdivision plate, meat products, health products, soft drinks rose by 1.31%, 1.18%, 1.13%, respectively, Baijiu fell 5.93%. At the same time, the market officially ended in 2021. The food and beverage sector fell by 6.0% throughout the year, outperforming the Shanghai Composite Index (+ 4.8%) by 10.8 percentage points, ranking 27th in the SW Tier-1 sub industry (a total of 31 Tier-1 sub industries). In the fine molecule segment, soft drinks (+ 14.9%), beer (+ 8.5%) and health products (2.7%) increased positively throughout the year; Condiments, meat products, dairy products and Baijiu fell by 30.5%, 26.3%, 6.3% and 2.6% respectively.
2, Baijiu: 2022 continue structural market, the second highest is still the biggest opportunity.
(1) Resumption of trading in 2021, the sector went out of the structural market, and the excess return of the third tier secondary high-end was significant. From the plate trend, the Baijiu plate in 2021 experienced two rounds of callbacks, but after that, the SW Baijiu index was restored rapidly, and the SW liquor index fell 2.6% throughout the year. Specifically, it can be divided into six stages: 1) before the Spring Festival, the peak sales are expected to be realized in advance, the fund holding mood reaches the peak, and the sector valuation rises from 52X on January 1 to about 63x. 2) after the Spring Festival, the first callback was experienced in mid March. Due to the anticipated early selling of Baijiu Spring Festival, the market style switched, the group was loosened, and the plate fell sharply (the value was adjusted from 63X to 45X). 3) From mid March to early June, the sector rebounded sharply due to the positive impact of spring sugar and the catalysis of the annual report and the first quarterly report (the valuation rebounded again from 45x to 63x). 4) from mid June to the end of August, due to the high base number of the Mid Autumn Festival, the hot plate of liquor sauce and the new energy sector were highly sought after. The market was also concerned about Baijiu consumption tax and tightened industrial policy. The plate continued to kill valuations (from 63X to 34X). 5) From the end of August to the middle of November, the plate fluctuated slightly after sideways trading, with little overall fluctuation, and the valuation rose slowly from 34x to 38x. 6) After the middle of November, due to the basic digestion of valuation pressure, the slowdown of policy pressure, the year-end valuation conversion + plate fundamentals remained stable, the market expected a good start to the Spring Festival in 2022 + the catalysis of positive events (Chairman Maotai took office, Luzhou Laojiao Co.Ltd(000568) equity incentive landing, leading price increase, etc.), the plate ushered in the year-end market, and the valuation was raised from 38x to 48x. From the performance of individual stocks, the order of growth of each segment in 2021 is the third tier secondary high-end (+ 69.1%) > local wine (+ 18.0%) > high-end wine (- 4.1%) > regional secondary high-end (- 6.2%). Among them, the third tier secondary high-end such as Shede Spirits Co.Ltd(600702) , Sichuan Swellfun Co.Ltd(600779) , Jiugui Liquor Co.Ltd(000799) achieved high elastic growth due to secondary high-end capacity expansion bonus + investment distribution and cost adjustment, with significant excess return, Shede Spirits Co.Ltd(600702) (+ 153.0%) ranked first in the annual increase plate; The performance of high-end liquor is slightly lower than expected, which is mainly affected by the high performance base and the market’s expectation of tightening regulatory policies, but its dynamic sales are actually better than the performance of the statement end; The performance of regional sub high-end leaders was flat, Shanxi Xinghuacun Fen Wine Factory Co.Ltd(600809) with the highest increase (+ 21.6%); Local wine is mainly driven by Anhui Yingjia Distillery Co.Ltd(603198) (+ 103.4%).
(2) Looking forward to 2022, the plate will continue the structural market, and the secondary high-end is still the biggest opportunity. We are optimistic about Maotai + regional secondary high-end leader. Considering that in 2021, all the leading enterprises have spare power at the statement end, and the current payment collection rhythm is good, it is expected that the leading liquor enterprises will probably make a good start in 2022, and the upward trend of the whole year is more clear, but it is still a structural opportunity. After years of growth, the high-end price base has gradually increased, and the probability will return to steady growth in the future. Expectations should be appropriately reduced, long-term configuration can be made, and Maotai should be focused on, mainly based on the company’s space and strength to raise prices at any time, and the release of management dividends will be accelerated. Meanwhile, we have repeatedly stressed that the Baijiu industry is transforming from the first growth stage to the second growth stage, and the secondary high-end will achieve elastic growth at the high-end. It is suggested that we should focus on the high-end high-end trend and continue to focus on solid and constantly upgrading regional leaders.
3. Popular products: marginal improvement, focusing on the inflection point of performance in 2022
(1) Looking back on 2021, the popular products sector experienced a double kill of performance and valuation. The share prices of sub sectors mostly showed a trend of continuous decline in the first half of the year, stabilization or recovery in the second half of the year. The Q1 plate follows the adjustment of the Baijiu plate, which has fallen from the high point at the end of 2020. Q2 due to the high base in 2020, high channel inventory, community group purchase impact and other factors, the performance of Volkswagen products company began to be lower than expected, and the stock price also fell; Q3 demand continued to be weak, the superimposed cost further rose, the performance of a large number of companies was lower than expected again, and the share price of the sector continued to fall. Starting from Q4, leading companies took the lead in raising prices to deal with cost pressure. The industry set off a wave of price increases. At the same time, the base fluctuation factor subsided, the impact of group buying by external communities weakened and the competition for new consumption slowed down, which all brought about marginal improvement in the industry. The sector ushered in valuation repair and the stock price hit the bottom.
(2) In terms of individual stocks, the overheated demand for compound condiments, staple foods and instant foods caused by the epidemic in 2020 returned to normal. After the performance slowed down in 2021, most of them fell back. Five of the top 15 decline in the whole year were condiment enterprises. The market began to look for new logic, so the new shares and sub new shares performed well in 2021. The top five increases in the whole year were Eastroc Beverage (Group) Co.Ltd(605499) (175.0%), Zhengzhou Qianweiyangchu Food Co.Ltd(001215) (157.3%), Zhe Jiang Li Zi Yuan Food Co.Ltd(605337) (142.8%) and Suzhou Weizhixiang Food Co.Ltd(605089) (130.9%), all of which were newly listed stocks in 2021 or 2020.
(3) Looking forward to 2022, although the epidemic situation is still uncertain and the overall opportunities of the sector still need to wait for the real recovery of demand, the worst time point has passed, and sub sectors and individual stock opportunities can be screened from bottom to top. We suggest that the popular products sector mainly focuses on three main lines: 1) leading companies with reasonable valuation and pricing power. It is expected that the transmission of price increase will be smooth, and the performance is expected to usher in an inflection point in 2022, such as Angel Yeast Co.Ltd(600298) , Foshan Haitian Flavouring And Food Company Ltd(603288) , Chacha Food Company Limited(002557) . 2) The company expects to maintain high growth in the sub industry with large space and low penetration rate. For example, yeast industry chain leader Angel Yeast Co.Ltd(600298) , low alcohol beverage industry Shanghai Bairun Investment Holding Group Co.Ltd(002568) , energy beverage industry Eastroc Beverage (Group) Co.Ltd(605499) , freeze baking industry Ligao Foods Co.Ltd(300973) , etc. 3) The high-end trend is determined, and the profitability of the industry is expected to improve. For example, beer and dairy industries, it is recommended to pay attention to Tsingtao Brewery Company Limited(600600) , Chongqing Brewery Co.Ltd(600132) and Inner Mongolia Yili Industrial Group Co.Ltd(600887) .
4. Industry and company perspectives update:
(1) Kweichow Moutai Co.Ltd(600519) : it will end smoothly in 2021 and is optimistic about the acceleration of performance growth next year. On December 31, 2021, the company issued an announcement on production and operation. In 2021, about 56500 / 28200 tons of Maotai Liquor / series base liquor will be produced; It is estimated that the total operating revenue will be about 109 billion yuan, a year-on-year increase of + 11.2% (of which the operating revenue of Maotai Liquor / Series liquor is about 93.2/12.6 billion yuan, a year-on-year increase of + 9.9% / + 26.1% respectively); The net profit attributable to the parent company was about 52 billion yuan, a year-on-year increase of + 11.3%. In 2021q4, the total revenue / net profit attributable to parent company is expected to reach 31.95/14.73 billion yuan, with a year-on-year increase of + 12.4% / + 14.5% respectively, and the growth is accelerated month on month. There is a high probability of performance acceleration next year. On the one hand, the volume increase can bring at least double-digit growth. On the other hand, the company can continue to increase the real price by increasing the proportion of direct sales, improving the product structure and raising the price of non-standard products. At present, the possibility of Feitian’s direct price increase cannot be completely ruled out. The company has the ability and space to increase the price. With continuous improvement of management, strong performance certainty and price increase expectation, we continue to be optimistic about the long-term and steady development of the company in the future.
(2) Jiangsu King’S Luck Brewery Joint-Stock Co.Ltd(603369) : in 2022, the company will speed up. On December 29, 2021, the 2022 Jiangsu King’S Luck Brewery Joint-Stock Co.Ltd(603369) Development Conference of “focusing on high quality and focusing on new leaps” was held. The company achieved high-quality development in 2021, the annual performance is expected to maintain high growth, the product and regional structure are continuously optimized, the management level and marketing service ability are significantly improved, and the “14th five year plan” has made a successful start. In 2022, the company’s marketing work will continue to deepen the “three modernizations strategy” and “four campaigns”. In the future, the company will set the tone of “seeking speed in the best, taking the best word as the first, and being fast as possible”. Considering the strategic appeal of “completing the five-year goal ahead of schedule”, the company’s various measures are expected to accelerate the implementation and realize an overall acceleration in 2022. The company’s product structure is excellent. In the future, it will continue to enjoy the secondary high-end capacity expansion bonus. The good landing of equity incentives will also bring catalysis and continue to be optimistic about the future growth of the company.
5. Recommend stocks: Overall, the Baijiu industry will remain stable and the secondary high-end logic will continue to be fulfilled. The dark hour of popular products has passed, and the price increase has brought about marginal improvement in the performance of the sector, so we can choose the best layout. Based on this, we maintain the rating of the food and beverage industry as “recommended”.
Baijiu: Kweichow Moutai Co.Ltd(600519) , Jiangsu King’S Luck Brewery Joint-Stock Co.Ltd(603369) , Anhui Kouzi Distillery Co.Ltd(603589) , Luzhou Laojiao Co.Ltd(000568) , Jiangsu Yanghe Brewery Joint-Stock Co.Ltd(002304) , Anhui Gujing Distillery Company Limited(000596) , Wuliangye Yibin Co.Ltd(000858) , Shanxi Xinghuacun Fen Wine Factory Co.Ltd(600809) , Sichuan Swellfun Co.Ltd(600779) , Anhui Yingjia Distillery Co.Ltd(603198) , Jinhui Liquor Co.Ltd(603919) .
Popular products: Shanghai Bairun Investment Holding Group Co.Ltd(002568) , Angel Yeast Co.Ltd(600298) , Inner Mongolia Yili Industrial Group Co.Ltd(600887) , Fu Jian Anjoy Foods Co.Ltd(603345) , Ligao Foods Co.Ltd(300973) , Foshan Haitian Flavouring And Food Company Ltd(603288) , Chongqing Brewery Co.Ltd(600132) , Chacha Food Company Limited(002557) etc.
Short term suggestions: Kweichow Moutai Co.Ltd(600519) , Anhui Kouzi Distillery Co.Ltd(603589) , Angel Yeast Co.Ltd(600298) etc.
6. Risk tips: 1) the recovery of catering channels affected by the epidemic is lower than expected; 2) Macroeconomic fluctuations hinder the pace of consumption upgrading; 3) Industry policy changes lead to increased competition; 4) The price of raw materials has risen sharply; 5) Focus on the risk that the company’s future performance is less than expected; 6) Food safety incidents, etc.
