**Introduction**: Chief Securities Analysts' View on Consumption: Clear Direction for Valuation Repair of Consumer-Oriented Listed Companies

The capital market is ever-changing, and industrial dynamics often tug at the market's nerves. Insights from chief securities analysts often become market vane, influencing market trends and investment decisions. China Fund Report specially launches the "Chief Securities Analysts Look at Industries" column to deeply analyze current popular and potential industries, presenting new trends in high-quality economic development and new drivers for the development of new productive forces.

Boosted by policy expectations and a significant stock market surge, the consumption atmosphere this National Day has rapidly improved. During the 7-day holiday of the 2024 National Day, 765 million domestic trips were made nationwide, with a total expenditure of 700.817 billion yuan by domestic tourists, showing a clear increase compared to the same period of the previous year and compared to 2019.

Several chief securities analysts have indicated that under a series of policies aimed at expanding domestic demand and promoting consumption, the National Day holiday consumption market has been full of highlights, with domestic demand continuing to recover. The direction for the valuation repair of consumer-oriented listed companies is clear, and with opportunities such as the overseas expansion of domestic brands, consumer sub-sectors highlight better investment value.

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National Day consumption data is eye-catching, and the investment value of industry leaders is highlighted.

With policy reinforcement and the festive atmosphere igniting consumer enthusiasm, holiday consumption demand continues to be released. According to estimates from the Data Center of the Ministry of Culture and Tourism, during the 7-day National Day holiday in 2024, 765 million domestic trips were made nationwide, a year-on-year increase of 5.9% at comparable levels, and a 10.2% increase compared to the same period in 2019; the total expenditure by domestic tourists was 700.817 billion yuan, a year-on-year increase of 6.3% at comparable levels, and a 7.9% increase compared to the same period in 2019.

In addition to the overall growth, there are also many structural highlights: the overall trend of tourism shifting from sightseeing and leisure to vacation culture is obvious; destinations overall show a trend of diversification and decentralization, with more tourism resources being rapidly discovered under the new media environment; the increase in demand has further driven the improvement of the supply side, such as hotels and transportation facilities.

Under the influence of a series of policies aimed at expanding domestic demand and promoting consumption, the potential for commodity consumption demand has also been rapidly released.

According to the monitoring of business big data by the Ministry of Commerce, during the festival, the sales volume of key retail and catering enterprises nationwide increased by 4.5% year-on-year at comparable levels, and the passenger flow in key cultivated pedestrian streets and business circles increased by 12.5% year-on-year. Data from the State Taxation Administration's value-added tax invoices show that the average daily sales revenue of industries related to consumption during the National Day holiday increased by 25.1% year-on-year, showing strong vitality in the consumer market.

Ouyang Yu, the chief analyst of food and beverage at Huachuang Securities, said that the consumption atmosphere during the just-ended National Day holiday has been boosted, and the direction for the valuation repair of food and beverage listed companies is clear. The cash flow creation ability of industry leaders is prominent, setting an example for listed companies to increase dividend payout ratios and enhance investors' sense of gain, further highlighting their investment value. Liu Yue, the chief analyst of commerce, retail, and social services at Guotai Junan Securities, said that the rise of service consumption and the trend of brand going global are clear, with a focus on service consumption such as tourism and local life, as well as the internationalization process of consumer goods. Investment opportunities in consumer sub-industries have also attracted industry attention. Wang Liping, the chief analyst of the textile and apparel industry at Shenwan Hongyuan Securities Research Institute, said that as an important part of optional consumption, the textile and apparel industry is also expected to release elasticity.Wang Liping believes that the domestic demand continues to recover, and the differentiation in clothing consumption is intensifying, so it is necessary to grasp the direction of prosperity. Since 2020, the textile and apparel industry has experienced significant external changes. Domestic demand consumption is still in the process of recovery, and clothing retail faces pressure but also has elasticity. There were two rounds of rebound in 2021 and 2023, and in the first half of 2024, the consumption environment was relatively weak, and clothing retail tended to be stable. At the same time, consumer demand has become more segmented, and the performance between sub-segments and brands has become more differentiated.

The direction of leading food and beverage companies, and the overseas expansion of domestic brands are the directions that securities chiefs are more optimistic about. Looking at specific consumer segmentation fields, food and beverage leaders, service consumption such as tourism and local life, sportswear, and the overseas expansion of domestic brands are the directions that securities chiefs are more optimistic about.

Hua Chuang Securities Ouyang Yu believes that as the macro environment shifts from rapid expansion to high-quality development, capital places more emphasis on free cash flow and shareholder returns in the pricing of consumer goods. Food and beverage leaders remain the evergreen tree of value investment.

Ouyang Yu analyzes that as the macro environment shifts from rapid expansion to high-quality development, basic categories of food and beverage such as dairy, meat, beverages, and alcohol have shifted from incremental to stock and even reduced volume. Leading companies are gradually entering an era of medium and low-speed growth, and replacing development speed with development quality is the way to long-term development. At the same time, the investment logic of the capital market will inevitably shift from growth-based pricing to certainty-based pricing, and consumer goods investment will pursue more sustainable free cash flow and dividend returns based on this.

The experience of overseas consumer goods leaders also shows that after the slowdown in growth, most food and beverage leaders adopt capital strategies such as increasing dividends or increasing buybacks, and the PE valuation indicator actually decreases first and then increases.

In addition, Ouyang Yu added that the food and beverage industry will continue to breed new structural growth opportunities. Under the long-term trend of consumption, the food and beverage industry has recently cultivated a series of new high-growth tracks, such as snack bulk business formats, standardization of Chinese meal supply chains, coffee, sugar-free tea, and other new segmented business formats and tracks, bringing great opportunities for industrial investment.

Guotai Junan Securities Liu Yue Nan said that service consumption such as tourism and local life, as well as the internationalization process of consumer goods, will face many positive catalysts in policy, demand, and supply in the future. Leaders with scale, efficiency, and brand advantages in segments such as hotels, OTA, local life, catering, and education will benefit from the improvement of the pattern and the recovery of demand, entering a stage of improved profitability and increased shareholder returns.

Shenwan Hongyuan Securities Wang Liping said that as the industry's growth rate tends to be stable, competition between brands intensifies, and cost-effectiveness and differentiated positioning become more and more important. Domestic brands, with their cost-effectiveness advantages and localization operation capabilities, are accelerating to catch up with international brands.

Based on the current development trend of the textile and apparel industry chain, Wang Liping suggests paying attention to the following three directions: First, sports and outdoor are growth directions with prosperity in the domestic clothing industry, and the opportunities for industry expansion and brand growth are optimistic.

Second, domestic demand consumption has bottomed out, and domestic clothing brands have opportunities. In the process of recovery, the trend of increasing concentration of leading brands is optimistic.Thirdly, there is an opportunity to be optimistic about the shift from overseas production capacity to overseas products and then to overseas branding. In terms of overseas production capacity, the globalization of textile manufacturing capacity is expected to grow in the sports manufacturing sector. Regarding the export of goods, cross-border e-commerce is a pioneer in going global. In terms of brand export, it has become an essential path for the development of domestic brands, with even greater potential in the future.