Ping An View:
In the face of the epidemic, the food segments show differentiation due to the differences of consumption scenes and channels: the impact of the epidemic on the food sector mainly affects the sales volume by affecting the consumption scenes, and the sub sectors show differentiation due to the differences of consumption scenes and channels. Resume the performance of the whole 2020, the share price of the food sector basically shows the trend of damage / benefit – recovery – sharp rise – consolidation.
The first round of strict control period (January 22, 2020 to March 28, 2020): the impact of the epidemic is the most serious at this stage, and social activities are basically suspended. Dairy products were the hardest hit due to the lack of gift giving scenes during the Spring Festival, with the share price in the sector falling 10.4%. Although the catering side of condiments was damaged, the family hoarding demand can make up for the impact of the catering side to a certain extent. At this stage, it showed a strong defensive attribute, and the share price in the sector rose by 5.21%. Although at this stage, snack food is subject to the closure of offline stores, it has regained its vitality in the home scene, and the share price of the sector has increased by about 14%. The home scene where quick-frozen food benefited most from epidemic control became the biggest winner at this stage, and the share price of the sector rose 39.4%.
Relaxation period (March 28, 2020-may 10, 2020): at this stage, with the performance of control, the economy gradually recovers from a large-scale shutdown and the consumption scene recovers slightly. Dairy products benefited from the epidemic, improved residents’ health awareness, liquid milk appeared compensatory consumption, the overall sales volume of the industry improved, and the share price of the sector increased by 2.68%. As the seasoning sector continued to recover, the share price of the catering sector began to rise by 12.67%, while the stock price of the catering sector continued to rise. With the relaxation of epidemic control over snack food, the offline store channels represented by Juewei Food Co.Ltd(603517) began to recover. At the same time, residents’ demand for snack food remained unchanged, and the share price in the sector rose by 9%. The scene of fast-frozen food catering has recovered, which is good for b-end sales. At the same time, consumers’ willingness to store goods at home continues to be strong. The demand of BC end jointly pushes up the prosperity of the industry, and the share price of the sector continues to lead the rise, with an increase of 18.5%.
The second round of strict control period (2020.5.112020.9.2): the epidemic broke out regionally at this stage, and the impact of control on social economy decreased compared with the first strict control period at the beginning of the year. The consumption demand of dairy products has gradually increased, and the movable sales of the industry have recovered rapidly. Although the cost of raw milk has increased greatly, the head company has thickened the profit by improving the fee investment efficiency, and the share price of the sector has performed well, with an increase of 45%. The consumption attribute of condiments is prominent. Although the hall food scene is damaged regionally at this stage, the takeout scene and home scene can make up for some losses. The stock price performed well, and the sector rose by about 69%. Snack varieties dominated by supermarkets in snack foods continued to recover, while enterprises dominated by offline chain stores also began to turn losses into profits, and the share price in the sector rose by about 38%. At this stage, the catering scene of quick-frozen food has recovered, and there are common channels for resuming work and logistics recovery. In addition, the epidemic has accelerated the cultivation of household consumption habits of quick-frozen food. The demand has significantly improved the profitability of the sector, and the share price of the sector has increased by about 69%
Recurrent period (2020.9.2-202012.31): as China enters the recurrent period of the epidemic, the epidemic prevention and control has entered the normalization stage, and the impact on the real economy has weakened. Although there was little change in the demand side of the dairy industry, the rise in the price of raw milk in the second half of the year put pressure on the overall profit of the industry, and the share price in the sector increased by 3.60%. The demand for condiments at the C-end slowed down as consumers’ willingness to hoard goods decreased compared with the previous three quarters; The catering consumption scene continued to recover, but the growth rate slowed down, which was difficult to support the stock price to continue to rise, and the stock price in the sector fell by 5.91%. Due to the weak rigid demand attribute of snack food, after the improvement of epidemic control, consumers’ willingness to hoard goods decreased, and the demand returned to normal. In addition, the business overload flow decreased, and the share price in the sector fell by 19.34%. The willingness to store goods at home at the C-end of quick-frozen food decreased, and the demand decreased significantly; The b-end consumption scenario has recovered, but the growth rate has slowed down, and the share price in the sector has decreased by about 11%.
Investment suggestion: with the normalization of epidemic prevention and control, the demand side of food enterprises has basically returned to the normal level. After the subsequent price increase transmission, it is expected to thicken the performance, and the overall prosperity of the industry is upward. It is recommended to recommend leading dairy products, condiments and snack foods Inner Mongolia Yili Industrial Group Co.Ltd(600887) , Foshan Haitian Flavouring And Food Company Ltd(603288) , Juewei Food Co.Ltd(603517) , and Chongqing Fuling Zhacai Group Co.Ltd(002507) , Fu Jian Anjoy Foods Co.Ltd(603345) .
Risk tips: 1) the price of raw materials continues to rise sharply. If the subsequent price continues to rise, the current price increase can not effectively digest the cost pressure, and the profitability of the industry will be under pressure again. 2) Industry competition intensifies. At present, the food and beverage industry has the problem of intensified competition. Beware of the adverse effects of price war and fleeing goods caused by the deterioration of competition. 3) Food safety risks. Food safety is the red line. Once food safety problems occur, they will have a great negative impact on the industry. 4) The risk of epidemic aggravation. With the aggravation of the epidemic, the consumption scene is reduced, which may have an impact on the prosperity of the food industry.
