Core view
Market review: the fluctuation was obvious in March, and the sector fluctuated downward. In March, the A-share food and beverage sector fell 15.1%. The sub sectors differentiated significantly, and meat products increased the most (+ 2.3%); Non dairy drinks fell the most (- 15.2%).
In March, the demand and cost of the mass food sector were significantly under pressure. Since Q1, there have been frequent outbreaks all over the country, which has had a certain impact on the recovery of the demand side of the sector. Meanwhile, the prices of raw materials and packaging materials have risen rapidly recently, bringing cost pressure to the industry. However, from an extended perspective, with the accumulation of experience in epidemic prevention and control and the refinement of control measures, consumer demand will be gradually weakened by the epidemic. The rise of raw material prices is the short-term imbalance between supply and demand caused by emergencies. Leading enterprises can expand their share against the trend by means of product price increase, supply chain efficiency improvement and raw material price locking. When the cost falls, it is more likely to release the performance elasticity.
The first quarter report performance Outlook: the performance has improved month on month, and the differentiation of subdivided sectors has intensified. ① Beer: the transmission of price increase is smooth as a whole and is expected to be fully reflected in Q1 statement; From January to February 2022, beer production increased by 3.6% year-on-year and recovered well. However, the current drinking scene has been greatly impacted since March, and the sales volume of the beer industry is expected to be under pressure. ② Condiment: the 21q4 industrial price increase has brought incremental income, but the price transmission is obviously differentiated. The Foshan Haitian Flavouring And Food Company Ltd(603288) price transmission is smooth, and other brands are still in the transmission stage. At the same time, the repeated epidemic has caused obvious damage to the catering industry, and the superimposed cost continues to rise. It is expected that the profitability of 22q1 industry is still under great pressure. ③ Quick frozen food: the pressure under the high base is still on, but the dealers are active in replenishing inventory after the Spring Festival. Under the influence of the epidemic, the demand improves month by month, but the rising cost drags down short-term profits. ④ Snack food: the terminal sales of Spring Festival are in good condition. After entering the off-season, the epidemic broke out in China. Although the blockade in some areas stimulated home consumption, it also had a certain impact on the delivery rhythm. At present, the prices of raw materials and transportation rates have further increased, and the pressure on the cost side is obvious.
Investment suggestion: after early correction, the valuation of the sector has entered a reasonable range, and the apparent growth rate of Q2 performance will recover significantly. It is necessary to pay close attention to the inflection point of demand and cost. Different from 2020, this year’s epidemic benefited from limited varieties, and the cost exceeded expectations, and the upward profit end will continue to be under pressure. However, after the early correction, the current sector valuation has entered a reasonable range. At the same time, after Q1, the apparent growth pressure of popular products has been effectively released with the decline of the base. We believe that we should actively pay attention to the leading targets whose valuation has fallen to a reasonable range and outstanding long-term competitive advantage. Based on the above investment main line, we recommend Tsingtao Brewery Company Limited(600600) , Chongqing Brewery Co.Ltd(600132) , with steady progress in the high-end process; Inner Mongolia Yili Industrial Group Co.Ltd(600887) , the cheese leader with large market space Shanghai Milkground Food Tech Co.Ltd(600882) ; Among condiments, Qianhe Condiment And Food Co.Ltd(603027) , Chongqing Fuling Zhacai Group Co.Ltd(002507) ; The leader of stable growth of high-quality track Ligao Foods Co.Ltd(300973) , Fu Jian Anjoy Foods Co.Ltd(603345) ; Yanker Shop Food Co.Ltd(002847) and others that are expected to gradually show the effectiveness of the reform.
Risk tip: the macro economy does not meet expectations, the epidemic continues to repeat, and food safety problems
