Fundamentals are expected to improve, and the decline of the Brand 100 Index has narrowed

Every reporter: Liu Mingtao Every editor: Peng Shuiping

Last week, the A-share market continued to fluctuate, last Thursday the stock index bottomed out, although the Shanghai Composite Index failed to regain 2,900 points, but the three major stock indexes fell significantly narrower weekly, and the brand 100 index fell only 1.22%.

Industry insiders believe that as the index gradually stabilizes, the market counteroffensive horn may sound at any time.

As of the close of trading on January 12, the Shanghai Composite Index fell 1.61% for the week, the Shenzhen Component Index fell 1.32% for the week, the ChiNext Index fell 0.81% for the week, and the Brand 100 Index fell 1.22% for the week

The tone of fiscal policy has been positively strengthened

With the improvement of fundamental expectations, A-shares gradually bottomed out last week, and the Shanghai Composite Index fell below 2,900 points again. Specifically, the Shanghai Composite Index fell 1.61% to close at 2881.98 points, the Shenzhen Component Index fell 1.32% to close at 8996.26 points, the ChiNext Index fell 0.81% to close at 1761.16 points, and the Brand 100 Index fell 1.22% to close at 795.31 points. The weekly decline narrowed month-on-month.

From a policy perspective, at the beginning of 2024, the tone of fiscal policy will be actively strengthened. Recently, the regulatory authorities have pre-issued the 2024 pre-approved special bond quota to the local government, which will be accompanied by the pre-approved general bond quota. The China Development Bank, the Export-Import Bank of China, and the Agricultural Development Bank of China have recently added 350 billion yuan in net new collateral supplementary loans (PSL), the third highest in PSL's history, reflecting the further role of structural tools.

On the macro front, the financial data in December 2023 has not changed much from the marginal in November, the effective demand needs to be repaired, and the macro pricing environment with weak expectations of micro entities remains unchanged. In the short term, there is a possibility that easy money will land, and from the perspective of long-end government bonds hitting 2.5%, optimistic expectations have been sufficient. Follow-up attention will be paid to whether the policy of "promoting stability through progress" will be further strengthened after the resumption of PSL, so as to improve the earnings expectations of A-shares.

Looking ahead, although most broad-based indices continued to fall last week, the weighted index Shanghai Composite 50 has seen multiple daily and weekly "bottom divergences" and triggered a rebound, and the growth index has also fought back strongly after the initial stabilization of the weighted index.

The above signs indicate that after a round of sell-off in early 2024, the market has come out of the dilemma of unilateral decline and has gradually begun to repair the technical form. From a valuation point of view, the current cost performance of the white horse growth sector is gradually highlighted.

The prosperity of the service industry continued to recover

Since 2000, the food and beverage industry is currently at the tail end of the fourth round of development cycle, and the stock price will continue to fall in 2021~2023. From the perspective of valuation, the food and beverage sector has continued to decline in the past three years, and the "bubble" has been completely removed. The relative valuation of the beer and beverage dairy sector is at a 10-year low, and the liquor sector is at a 10-year median. From the perspective of holdings, liquor continues to be overweighted, although the institutions are "grouped" obviously, but the margin has been "loosened", and the holdings of public goods have fallen in many quarters, and the proportion of heavy positions is close to the lowest level since 2010.

Recently, the relevant departments of the mainland have actively introduced a number of monetary, fiscal, real estate and other heavy policies to promote economic recovery; weak investment and consumption have indeed led to the problem of capital idling, but the central bank has also attached great importance to this problem, emphasizing "keeping the scale of social financing and money supply in line with the expected targets of economic growth and price levels."

On the real economy side, the new policy has already achieved certain results in promoting real estate transactions, promoting consumption and promoting the development of the service industry, such as the year-on-year growth rate of commercial housing transaction area in first-tier cities and the total amount of zero in mainland China has been expanding month by month, and the Caixin China service PMI (purchasing managers' index) continued to rise month-on-month in December 2023, indicating that the service industry continues to recover.

Investors' lack of confidence in the effectiveness of policy implementation has also led to sluggish trading in the stock market. However, with the passage of time, the mentality of consumers and investors will gradually relax, and the consumption power will rebound, and investor confidence will also increase.

Taking liquor as an example, from a macro perspective, the liquor industry has been consolidating for more than two years, and with the warming of the economy, it is expected to remain stable in the future. From the micro level, the output of liquor above designated size has reached an inflection point, and the growth rate will turn positive in September 2023, and the year-on-year growth rate of the output of the liquor industry in September ~ November 2023 will be 12.6%, 2.5% and 7.1% respectively. At the performance level, due to the strong bargaining power of famous wine companies on the channel, the performance may be misaligned with the dynamic sales. Looking ahead to 2024, changes in the performance of wine companies may be an important variable in stock price changes.

Food and beverages bottomed out last week

Judging from the performance of the constituent stocks of the brand 100 index last week, the overall food and beverage market bottomed out, with China Resources Beer and Tsingtao Beer rising by 3.77% and 3.1% respectively, Yili shares also rising by 2.41% weekly, and Kweichow Moutai and Wuliangye although adjusted, but the weekly decline was within 2%, and the stabilization signal appeared.

According to the data, in 1993~2016, in the stage of "horse racing", China Resources Beer completed the national layout in a rhythmic manner according to the "mushroom strategy", "coastal strategy along the river" and "national strategy". With the support of capital, it has achieved rapid expansion through "mergers and acquisitions + self-built factories", with a growth rate far exceeding the industry average, and the sales scale has reached and ranked first in the country for a long time. Subsequently, the competition logic of the beer market was switched, emphasizing high-end and improving operational efficiency. In 2017, the company put forward the "3+3+3" strategy, and implemented the goal of "production capacity optimization + high-end development" in stages, with the ROE (equity net profit margin) increasing higher than that of other companies, and the proportion of high-end continued to increase, becoming a domestic beer leader.

Since 2021, China Resources Beer has begun to diversify its liquor layout. The company currently has three liquor companies: Jingzhi, Golden Seed and Jinsha (consolidated). Due to historical problems, these three companies are not operating well in the market at this stage, but they have deep brand accumulation, high-quality product strength, and abundant production capacity. Through years of deep cultivation in the beer market, China Resources has obvious advantages in sales talents, experience, market resources and other dimensions, which is expected to make up for the shortcomings of these three liquor companies and rejuvenate the brand growth momentum.

In 2023, despite the pressure on the external environment and the slowdown in the growth rate of some categories such as milk powder due to intensified competition in the industry, Yili's leading position and medium and long-term growth space remain unchanged. In terms of liquid milk, there is still considerable room for improvement in the per capita milk consumption and the penetration rate of high-end categories, while in terms of milk powder, with the liquidation of small and medium-sized enterprises, the market share of leading enterprises remains unchanged, and other cheese and fresh milk businesses are expected to still have broad room for development. In terms of cost and pattern, the price of raw milk has been stable and decreasing, the competitive situation has tended to ease, and the trend of profitability improvement is clear. At the current point in time, the company's valuation has been at a low level in 10 years after continuous correction, considering the dividend rate of more than 70%, the valuation is cost-effective.

Wuliangye Company will achieve high-quality and steady development in 2023 through four efforts: product, brand, innovation, and governance. In 2024, in the face of the in-depth adjustment of the industry and the intensification of competition, the company will continue to adhere to the general tone of seeking progress while maintaining stability, and plan to fight the "five major battles", namely "image improvement, share improvement, market expansion, quality and efficiency improvement, and profit improvement", seize the opportunity, face the challenge, and further enhance the brand value of Wuliangye. At present, the valuation of Wuliangye has a margin of safety, and the group intends to increase its holdings of the company's shares by 400 million ~ 800 million yuan, further demonstrating its confidence in long-term development, and the price and value may continue to return to the leading position in the future.

National Business Daily