Key investment points
Market Review
In March, CS commerce and retail industry fell by 4.24%, while it rose by 1.19% in the same period last year. The market performance was significantly weaker than that in the same period last year, but outperformed the market by 3.59pct In terms of sub sectors, most of the sub industries showed a decline, and the top three were supermarkets and convenience stores, professional market operation and comprehensive business forms, with an increase of 3.23%, – 0.83% and – 1.72% respectively. Most industry stocks fell. The PE valuation level of the industry as a whole increased, but fluctuated greatly in the middle of the month. It hit the bottom and rebounded after falling near the 75X valuation line in the middle of the month, and the PE level of all sub sectors fell during the month.
Industry monthly data tracking
CPI rose steadily year-on-year and expanded slightly month on month. In February, CPI rose by 0.9% year-on-year, the same as last month, and the year-on-year increase was generally stable. Among them, food prices decreased by 3.9%, with a decrease of 0.1pct over the previous month, and non food prices increased by 2.1%, with an increase of 0.1pct over the previous month Under the combined influence of the expansion of the decline in food prices and the year-on-year increase in the price of gasoline and diesel for industrial consumer goods, the year-on-year increase in February was flat. In terms of structure, the decline in food prices is mainly affected by the expansion of the decline in pork prices, while the price of industrial consumer goods driven by transportation and communication continues to rise.
The recovery of the consumer market was accelerated, and the retail growth of upgraded commodities was good. The growth rate of total retail sales of social goods was slightly higher than that expected in the two years from January to February 2021, with an average growth rate of 8 pct%. China’s epidemic prevention and control measures have been continuously optimized, and the consumption promotion policies have been put into effect one after another. The consumption of Spring Festival and Winter Olympics has been significantly driven, the recovery of market sales has been accelerated, the consumption of basic daily necessities has maintained steady and rapid growth, the demand for upgrading consumption has been continuously released, and the driving role of online retail has continued to appear.
Online sales continued to drive consumption growth, and the penetration rate increased year-on-year. From January to February, the online retail sales of physical goods increased by 12.3% year-on-year, 0.3pct faster than the whole year of 2021, accounting for 22.0% of the total retail sales of social consumer goods, with a year-on-year increase of 1.3pct.
Offline retail sales increased steadily, and physical store consumption continued to improve. It is estimated that from January to February, the retail sales of consumer goods in physical stores increased by 5.2% year-on-year, 3.4pct faster than that in December 2021 The retail sales of supermarkets, convenience stores, department stores, specialty stores and specialty stores in retail units above the designated size increased by 3.0%, 12.8%, 2.1%, 10.3% and 5.3% respectively year-on-year, faster than the average growth rate in 2021. The Spring Festival and Winter Olympics have played an obvious role in promoting residents’ consumption. With the support of accurate prevention and control, residents’ enthusiasm for shopping and entertainment has increased.
Industry news
Pinduoduo’s revenue in 2021 was 93.95 billion and the number of annual active users was 869 million; Ding Dong buys vegetables and launches the prefabricated vegetable brand “fresh fresh fresh food” to enter the b-end market; Liu qiangdong stepped down and Xu Lei, CEO of Jingdong group, took over.
Investment strategy
Affected by the multi-point spread of the epidemic in China, the epidemic prevention and control situation in first tier cities such as Beijing, Shanghai and Shenzhen has not been stable, and consumption, travel and logistics are limited. Due to the superposition of base effect, social gathering consumption is expected to be under pressure in April, and online consumption will also slow down. Under the continuous impact of the epidemic, the performance of mandatory consumption is slightly stronger than optional consumption. It is suggested to pay attention to the new retail mode of extended coverage in multiple scenarios such as community group purchase and real-time retail. At the same time, April is in the period of centralized disclosure of annual report and first quarter report. It is suggested to pay attention to the leaders who can still maintain stable annual performance and good Q1 terminal retail performance under the impact of the epidemic, and focus on the beauty and gold jewelry sectors, focusing on the following main lines: 1) domestic brands are close to consumer demand and accelerate the sinking and penetration, and leading enterprises continue to increase market share through new media marketing: Proya Cosmetics Co.Ltd(603605) , Yunnan Botanee Bio-Technology Group Co.Ltd(300957) ; 2) Jewelry consumption tends to be daily, the demand of low-level cities rises and channels are encrypted. There is a wide space for new diamond track: Chow Tai Seng Jewellery Company Limited(002867) , Shanghai Yuyuan Tourist Mart (Group) Co.Ltd(600655) ; 3) The value of offline channels is reshaped and physical enterprises are overweight. Even for retail, the current valuation is close to the bottom: Yonghui Superstores Co.Ltd(601933) .
Risk tips
Macroeconomic growth slowed down; The effect of consumption upgrading is less than expected; Diversion of new business forms and intensification of market competition; China’s epidemic spreads in many places, affecting consumer confidence and willingness
