Macro and market
Market review – the central bank’s LPR interest rate cut was positive, Hong Kong stocks opened higher and closed up close to the 25000 point mark. The Hang Seng Index closed up 3.4% to 24952 points yesterday, and the state / Science Index closed up 3.8% / 4.5% to 8762 / 5897 points. The market turnover reached 178.37 billion yuan. Tencent (700hk) closed up 6.6%, with a trading volume of HK $13.7 billion, ranking first in the list; Meituan (3690hk) closed up 11.0%, ranking second in trading volume, and Ali health (241hk) closed up 7.6%. Mainland property management stocks strengthened across the board, with Hejing Youhuo (3913hk) / Jinke service (9666hk) / Country Garden Service (6098hk) / Shimao service (873hk) / Xuhui Yongsheng service (1995hk) / rongchuang service (1516hk) up 22.2% / 16.3% / 15.5% / 12.5% / 10.5% / 8.3% respectively. Interior housing stocks also extended the upward trend. Rongchuang China (1918hk) / Hejing Futai group (1813hk) / jiazhaoye group (1638hk) / time China (1233hk) / Shimao Group (813hk) / Longguang group (3380hk) rose 15.2% / 13.7% / 13.3% / 12.1% / 10.1% respectively. Most insurance stocks strengthened, Ping An Insurance (Group) Company Of China Ltd(601318) (2318hk) / China Pacific Insurance (Group) Co.Ltd(601601) (2601hk) / Zhong’an online (6060hk) / AIA (1299hk) / China Life Insurance Company Limited(601628) (2628hk) / China Taiping (966hk) closed up 7.2% / 6.6% / 6.3% / 5.8% / 3.8% / 3.0% respectively. In terms of individual stocks, Ruisheng Technology (2018hk) is expected to decline by 12% – 16% year-on-year due to the company’s comprehensive net profit last year, and the share price fell by 12.7%.
Industry outlook / stock review
China’s mandatory consumption — China Resources beer, Mengniu and Feihe are the first. We found that the profitability of food companies in the fourth quarter was generally healthy and the risk of reduction was relatively low. Although the beer industry has entered the off-season, the sales volume of the industry is also as expected. At the same time, the dairy industry also maintained stable growth. In terms of individual stocks, we reduced the sales volume of China Resources beer by about 1% in the fourth quarter, mainly reflecting the company’s policy of actively abandoning mid-range products. In addition, Budweiser’s management also pointed out that it is expected to usher in healthy growth in the fourth quarter due to benefiting from the low base and the unsealing of major sales cities. Mengniu is also confident to meet the standard, and the core operating interest rate in the second half of the year is similar to that in 2019. Feihe expressed confidence that the whole year will be similar to market expectations. These companies all expressed confidence in maintaining the growth of profitability in 2022 and continuously raising interest rates through price increases or product upgrades. On the contrary, considering the transition period before policy improvement, our profit forecast for smore and fogcore technology in 2022 was reduced by about 11-26%. Before the implementation of the new national standard, e-cigarette merchants are not allowed to promote new products and open new stores. We believe that the growth power mainly comes from existing customers and products. Based on the above adjustments, we adjusted the preference ranking of individual stocks at the same time. In addition to China Resources beer and Mengniu, this time we added flying crane to our first promotion. Considering the preference of American investors for the allocation of undervalued stocks, the double-digit core profit growth of the company, the red interest rate of three points, etc., we think the 10 times P / E ratio of Feihe is very attractive. This is also why we tend to like flying cranes more than farmer springs. (required consumer team)
