1. The trend of the sector showed a V-shaped reversal this week, and the rebound was obvious in the second half of the week. Most of the primary sectors fell to varying degrees this week, with the food and beverage sector falling 3.63%, 1.85 percentage points lower than the Shanghai Composite Index (- 1.77%). In the fine molecule industry, only health products increased by 3.75%, while meat products, soft drinks and beer decreased by 6.30%, 5.20% and 5.01% respectively. This week, the sector trend showed a V reversal. Early week, foreign investment outflows and epidemic events repeatedly affected the sector. But on Wednesday, the State Council Kim Dong Wei and other positive signals were released. The market rebounded significantly. On March 16-18, the SW food and beverage index was +3.56%/+2.64%/-0.18% respectively. Among them, the health products, Baijiu and dairy products rebounded by more than 6%, and the rebound of most other sectors was over 5%. In terms of individual stocks, this week, Qinghai Spring Medicinal Resources Technology Co.Ltd(600381) led the rise (+ 40.43%), followed by Xiwang Foodstuffs Co.Ltd(000639) (+ 4.43%), Cabio Biotech (Wuhan) Co.Ltd(688089) (+ 4.11%), Juneyao Grand Healthy Drinks Co.Ltd(605388) (+ 4.06%) and Shanghai Milkground Food Tech Co.Ltd(600882) (+ 2.37%).
2. Since February 18, the northward capital outflow of the food and beverage sector has been about 17.1 billion. The outflow of foreign capital has led to the sharp decline of the sector. The policy in the middle of the week released positive signals and the damaged mood has been repaired. The first half week’s sector callbacks are mainly influenced by the pessimism of the interior and exterior: on the one hand, foreign capital continues to flow out. Since February 18th, the food and beverage sector has been running out of funds to North Korea for about 17 billion 100 million (of which 7 billion 900 million have been released this week), while the Baijiu sector has been out of about 16 billion 200 million (about 7 billion 400 million this week), and the core faucets such as Kweichow Moutai Co.Ltd(600519) , Wuliangye Yibin Co.Ltd(000858) , Inner Mongolia Yili Industrial Group Co.Ltd(600887) , Shanxi Xinghuacun Fen Wine Factory Co.Ltd(600809) and so on, with a net outflow of about 10.5 billion, 38 billion, 1.8 billion and 1.4 billion respectively; The outflow of foreign capital also led to the irrational reduction of some funds, resulting in the decline of the sector. On the other hand, the epidemic situation has become more severe this week, the number of new cases has been rising, and all unnecessary flows have been stopped in some regions; In addition, events such as the new data of social finance in February 2022 were less than expected also affected the market sentiment. However, on Wednesday, the financial stability Commission of the State Council made a positive statement in view of the current economic situation and the capital market, and then the Ministry of Finance (stating that “it does not have the conditions to expand the pilot cities of real estate tax reform within this year”) and other institutions also responded one after another. The damaged sentiment in the market was repaired, and the outflow of foreign capital narrowed (about 6.5 billion from Monday to Tuesday, and only about 1.1 billion from Wednesday to Friday), The food and beverage sectors also rebounded from + 64% / + 18.3% to + 18.3% respectively.
3, the short term continues to be optimistic about the overall restoration opportunities of Baijiu sector. In the long term, the upward trend of the industry will not change, and the future is still structured. This week, some Baijiu companies continue to issue annual reports in 2021, performance forecasts or 1-2 months’ business data report in 2022. Anhui Kouzi Distillery Co.Ltd(603589) , Anhui Yingjia Distillery Co.Ltd(603198) , Jinhui Liquor Co.Ltd(603919) and other four quarter results are lower than market expectations, while Moutai’s price fixing downwards, causing market concerns. We have previously made judgments on the wholesale price, and the decline of the wholesale price is normal and reasonable. Now we reiterate our view: the rise and fall of Maotai wholesale price has nothing to do with the ex factory price, which is mainly affected by the relationship between supply and demand, and will continue to decline steadily in the future. In the first half of 2021, the situation of unpacking sales and reluctant sales through channels led to the imbalance between supply and demand, price distortion, and the price of Xiangmao rose all the way (it once hit 3800 yuan in July 2021); However, in the second half of the year, affected by the increased delivery in the Mid Autumn Festival, the accelerated delivery in the Symposium and the marginal relaxation of the unpacking policy, the price trend of box flying fell back, and the Spring Festival in 2022 returned to the level of about 2800 yuan; As the company continues to increase in 2022, it is expected that the price of box grass will continue to decline and the price difference between box and bulk grass will be further narrowed. On the whole, in recent years, the performance of Maotai’s wholesale price and stock price has been gradually decoupled. In the long run, Maotai’s brand value and business model determine that it is still a very scarce deterministic high-quality target in the market; We expect that the price of sanfei will continue to fall to about 2500 yuan, so there is no need to worry too much. Recently, the Baijiu sector has been callback for short term by the outflow of foreign capital, repeated epidemic and overall callback, and adjusted the overall elastic space. But the industry is in the off-season, and the pressure of epidemic and cost is relatively small. The probability of the industry in 2022 is still a structural market. Individual stocks should be preferred from the perspective of fundamentals, valuation and expectation, and continue to be optimistic about high-end liquor Kweichow Moutai Co.Ltd(600519) , Luzhou Laojiao Co.Ltd(000568) and regional sub high-end leaders (such as Jiangsu King’S Luck Brewery Joint-Stock Co.Ltd(603369) , Jiangsu Yanghe Brewery Joint-Stock Co.Ltd(002304) , Shanxi Xinghuacun Fen Wine Factory Co.Ltd(600809) , etc.).
4. The risk aversion in the market is high, and the opportunities in the mass products sector need to wait for the landing of two major uncertain factors. At present, the popular goods sector is facing two major uncertainties: 1) the scene damage caused by the epidemic and the decline of consumption intention. Since the beginning of March, China’s epidemic has suddenly erupted on a large scale, affecting 27 provinces and cities. The number of confirmed and asymptomatic infections in a single day has exceeded 1000, and epidemic prevention and control measures have been upgraded in many regions. On the one hand, it affects the consumption scenes related to catering and travel, on the other hand, it also has a negative impact on Residents’ income and Consumption Willingness, and there is no clear inflection point signal at present. 2) The cost is rising rapidly, and the future trend is not clear. Due to the conflict between Russia and Ukraine, the cost side commodity prices remain high. Since January 1 this year, the price of ice oil distribution futures has increased by 35.5%, and the price of CBOT soybean futures has increased by 35.28% since November 30 last year. The latest report released by FAO of the food and Agriculture Organization of the United Nations on March 11 shows that the conflict between Russia and Ukraine has suppressed trade and reduced future harvests, and the global food price may rise by another 8-20% at the current record level. The price rise of bulk commodities has put great pressure on the costs of food packaging, transportation and production. Especially when the demand side is weak, the cost pressure is more difficult to transmit. Therefore, at present, the opportunities for mass products need to wait. It is suggested to select stocks with high performance certainty from bottom to top, such as Inner Mongolia Yili Industrial Group Co.Ltd(600887) (the data from January to February have been determined, and the operation is good), Angel Yeast Co.Ltd(600298) (the demand is rigid, and the cost risk transfer ability is strong), Chacha Food Company Limited(002557) (the Spring Festival dynamic sales are good, the price increase is conducted smoothly, and the impact of the off-season is small), Chongqing Fuling Zhacai Group Co.Ltd(002507) (the price of green vegetables is determined to decline, and the profit elasticity is high), etc. In the medium and long term, it is suggested to focus on sectors with large development space, low penetration, or rapid increase in industry concentration, such as Shanghai Bairun Investment Holding Group Co.Ltd(002568) , Ligao Foods Co.Ltd(300973) , Fu Jian Anjoy Foods Co.Ltd(603345) , etc.
5. Update of industry and company views:
(1) Shanxi Xinghuacun Fen Wine Factory Co.Ltd(600809) : expand the original wine production and energy storage project to lay a solid foundation for the “road of rejuvenation”. This week, the company announced that based on the medium and long-term development strategy, the overall plan of the 14th five year plan and its own situation analysis, the company plans to invest 9.102 billion yuan to build and implement the expansion project of original wine production and storage of Fenjiu 2030 technical transformation (phase I). After the completion of the project, it is expected to increase the annual output of 51000 tons of original wine and 134400 tons of original wine storage.
Since taking office, the new management has fully demonstrated a pragmatic style and open attitude, will maintain the continuity of the company’s strategy and team, and will continue to deepen reform in the future. We believe that Fen Liquor enjoys the double price dividends of sub high-end and high-speed bottled liquor at the same time, and the original liquor production and energy storage project will also lay a solid foundation for the company’s future development; We look forward to the continuous improvement of the company’s operation and management and the accelerated release of brand potential energy. At the same time, we still need to continue to support the overvalued value with performance in the future.
6, industry rating and investment strategy: Overall, the trend of steady and steady improvement of Baijiu industry is maintained. The price increase of popular products has brought marginal improvement to the performance of the sector. In the long run, the market share is expected to continue to focus on leading enterprises. After the valuation falls, the investment value of leading enterprises is highlighted. Based on this, we maintain the rating of the food and beverage industry as “recommended”.
Baijiu: Kweichow Moutai Co.Ltd(600519) (recommended), Anhui Kouzi Distillery Co.Ltd(603589) (recommended), Jiangsu King’S Luck Brewery Joint-Stock Co.Ltd(603369) (recommended), Jiangsu Yanghe Brewery Joint-Stock Co.Ltd(002304) (attention), Luzhou Laojiao Co.Ltd(000568) (recommended), Anhui Gujing Distillery Company Limited(000596) (attention), Shanxi Xinghuacun Fen Wine Factory Co.Ltd(600809) (recommended), Wuliangye Yibin Co.Ltd(000858) (recommended), Xinjiang Yilite Industry Co.Ltd(600197) (recommended), Sichuan Swellfun Co.Ltd(600779) (recommended), Anhui Yingjia Distillery Co.Ltd(603198) (attention), and recommended (etc.) The popular goods: Hongda Xingye Co.Ltd(002002) 568 (recommended), etc.
Short term recommendation Kweichow Moutai Co.Ltd(600519) , Xinjiang Yilite Industry Co.Ltd(600197) , prefabricated vegetable sector, etc.
7. Risk tips: 1) the recovery of catering channels affected by the epidemic is lower than expected; 2) Macroeconomic fluctuations have hindered 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 company’s performance or less than expected; 6) Food safety incidents, etc.
