中国食品与饮料行业展望：看好谈判能力强的领导者

1、16 January 2020 Equity Research ReportChinaEquitiesConsumer & RetailChina Food and Beverage2020 Outlook: Prefer leaders with strong bargaining powerThe consumption upgrade story is alive and well, while rising inflation means we like companies that can lift pricesWe believe the strong will get stron

2、ger and favour high-end leaders in the baijiu, beer, condiment and catering sectorsWe prefer Kweichow Moutai, Wuliangye, Yanghe, Jonjee and Budweiser APAC (all rated Buy)Recommend leaders with strong bargaining power: Chinas food and beverage companies are trading at relatively high valuations, so w

3、e expect limited space for an industry-wide valuation increase. However, we see two themes playing out in 2020 that will likely benefit the leaders: 1) the consumption upgrade story is well under way as the consumer remains in relatively healthy shape, and 2) with inflation at the highest level sinc

4、e 2013, we recommend leaders with strong brands and those that can raise prices.Strong to get stronger: We are positive on premium baijiu makers Kweichow Moutai (Buy) and Wuliangye (Buy), given their high growth visibility and strong brand image. For Yanghe Brewery (Buy), we believe its valuation ha

5、s priced in the expectations of a short- term correction and, as such, will improve marginally in 2020. In the beer sector, where market competition is centred on premiumization, we expect brands offering superior bottles to garner more market share. We prefer Budweiser APAC (Buy) the most profitabl

6、e brewer in the region; given it is under competitive pressure in South Korea, we lower our revenue estimates and target price. Condiment companies have not raised their prices for three years, so we see a rising possibility of price increases this year as costs go up. In this sub-sector, we prefer

7、soya sauce maker Jonjee High-Tech (Buy), which is trading at a relatively attractive valuation and could see a better organisational structure.Major share price catalysts: accelerating SOE reforms, stronger-than-expected tax cut policy, a further decline in raw material prices, and better mix upgrad

8、es. Key downside risks: slower-than-expected SOE reforms, a sharp increase in raw material prices, macro uncertainties, food safety risks, reduced demand due to extreme weather conditions, and rising industry-related tax rates.Katharine Song* (S1700517120001) Head of A-share Consumer Research HSBC Q

9、ianhai Securities Limited HYPERLINK mailto:kathy.l.h.song kathy.l.h.song+86 21 6081 3807Joseph Zhou* (S1700118040012) AssociateShenzhenEmployed by a non-US affiliate of HSBC Securities (USA) Inc, and is not registered/ qualified pursuant to FINRA regulationsExhibit 1. Summary of ratings and target p

10、ricesCompany TickerMkt Cap ADTV PriceNewTargetOld TargetRating (all PE (x) PB (x) unchanged)ROE (%)EV/EBITDA (x)EPS CAGR PEGPricePrice2020e 2021e 2020e21e2020e 2021e2020e2021e2019-21e 2020eK. Moutai600519 CH201,514 533 1,113 1,317.001,317.00Buy7.431.330.118.415.814.42.1Wuliangye 000858 CH

11、74,788 367134159.65159.65Buy24.020.46.05.327.027.615.612.823.91.0Yanghe002304 CH25,79186119125.36125.36Buy19.023.924.412.911.010.01.9Jonjee*600872 CH4,474523950.1950.19Buy5.420.822.122.617.724.71.3Bud APAC 1876 HKSource: Wind, HSBC Qianhai Secu41,846532632.00ities estimates. Not

12、e: Data as at 10 January 2033.0020; market cap anBuyd ADTV are in U36.9SDm. *Non-recu30.8rring earning3.7s are used3.4in the calc10.5ulations abo11.5ve. Bud APA16.8C in HKD an14.3the remaining c13.8ompanies in RM2.7B.rdDisclosures & DisclaimerThis report must be read with the disclosures and the ana

13、lyst certifications in the Disclosure appendix, and with the Disclaimer, which forms part of it.Issuer of report: HSBC Qianhai Securities LimitedView HSBC Qianhai Securities Research at:https: HYPERLINK / /Investment summaryWe see a solid consumption growth story for 2020 with the premiumization the

14、me continuingAmid rising inflation we prefer F&B leaders that can raise prices and, therefore, behave like a defensive hedgeWe are positive on F&B leaders Kweichow Moutai, Wuliangye, Yanghe, Jonjee and Budweiser APAC, all rated Buy, in 2020Baijiu, beer, condiments and cateringThe consumption upgrade

15、 story remains a key investment theme for the food and beverage industry in China. Many are prepared to pay more for better quality goods: from high-end spirits to hot pot restaurants. Consumer confidence is at high levels and our economists expect it to remain strong. However, heading further into

16、2020 it is not all plain sailing as inflation has reached the highest level in seven years, with consumers feeling the squeeze and slowing their spending on certain products and services. For investors (and the focus of this note), the key going forward is identifying which segment leaders are able

17、to pass on cost pressures by lifting prices or upgrading their product mix, thereby improving their profits. We focus on four sectors:Baijiu: High-end leaders to see double-digit growthWe expect double-digit sales growth for high-end baijiu leaders, such as Kweichow Moutai (600519 CH, RMB1,112.50, B

18、uy) and Wuliangye (000858 CH, RMB133.62, Buy), given their high growth visibility and strong brand image; however, we expect performance to diverge among less prestigious and cheaper baijiu producers as a result of intensifying competition.Beer: Premiumization to drive sector growthWe believe the be

19、er sector still has ample room to upgrade its product mix and, as such, raise product prices. Given we expect beer sales volume growth to fluctuate between -2% to 2% in 2020, product improvement is key. Beer is cheaper in China than in most of other countries, considering the purchasing power of mon

20、ey, and, therefore, we think going forward small price increases of different stock-keeping units (SKUs) in different channels will become the norm. Combined with product mix upgrades, we expect a 5% annual ASP increase for the beer industry, helping lift profits.Condiments: A sector that can pass o

21、n price hikesDemand for condiments like the flavourings that go into a hot pot broth should remain stable as leading companies gain market share quickly, driven by higher sales volume and a better product mix. Historically, condiment companies raised prices every 2-3 years to pass on various cost pr

22、essures and it has been three years since the last industry price increase, so we see an increasing possibility of price increases in 2020.Catering: Growth still outpacing total retail sales growth, despite tougher competitionChinas catering industry sales are growing quickly, becoming a major drivi

23、ng force for consumption. With numerous independent restaurants and rapidly changing consumer tastes, competition will likely remain fierce. The rising costs of food ingredients, mainly meat, should pressure companies, but we see leading companies controlling their costs and, in turn, gaining market

24、 share by opening more stores and relying on strong supply chains.Highlights of the reportWe think the strong will get stronger and highlight that the revenue contribution by the leading players to the whole industry is increasing.We prefer F&B leaders capable of raising prices and discuss the ongoi

25、ng consumption upgrade, cost trends, and historical price hikes in the sub-sectors.Though the A-share F&B sector outperformed the market for a fifth consecutive year in 2019, we see limited space for an industry-wide valuation increase, though opportunities remain for the leaders in 2020, in our vie

26、w.Exhibit 2. Our preferred names vs market consensus in 2020e 2020e Revenue 2020e Net profit Company NameCurrencyHSBC Qianhai estimatesMarket consensusDifferenceHSBC Qianhai estimates Market consensusDifferenceK. MoutaiRMBm98,782102,942-4%46,31550,137-8%WuliangyeRMBm60,03759,6091%21,64621,4771%Yangh

27、e BreweryRMBm27,54627,4540%9,4139,4490%JonjeeRMBm5,6785,5772%9368984%Budweiser APACUSDm7,1067,0990%1,1791,265-7%Source: Wind, Bloomberg, HSBC Qianhai Securities estimatesWe are positive on the following leading F&B companiesKweichow Moutai (600519 CH, Buy, TP RMB1,317)We see high earnings visibility

28、 for baijiu maker Kweichow Moutai in 2020. While the companys 2019 net profit growth of c15% y-o-y was slightly below consensus, its full-year revenue target was met and its 2020 revenue growth guidance is 10%. We still believe the company will maintain solid profitability as well as balanced supply

29、 and demand in 2020. We maintain our target price of RMB1,317 and our Buy rating on the company as it is the top baijiu maker in China with what is considered to be the strongest brand.Key downside risks: changes to consumer preferences, policy risk, food safety risk, competition risk, patent protec

30、tion risk, and corporate governance issues.Wuliangye (000858 CH, Buy, TP RMB159.65)For Wuliangye, another high-end baijiu maker, the company expects its revenue came in at RMB50bn in 2019 and the volume growth target for 2020 is 5-8%. Following the launch of the new generation of its flagship produc

31、t, Wuliangye further enhanced its status in the high-end baijiu market by introducing a QR code system and a more optimised profit-sharing system for better channel management. Using new technologies as well as strengthening its differentiation and competitiveness in the high-end baijiu market shoul

32、d help its brand image, in our view.Therefore, we maintain our Buy rating on the company.Key downside risks: macroeconomic slowdown, changes in consumer preference, policy risk, food safety risk, limited ASP growth, and corporate governance risk.Yanghe Brewery (002304 CH, Buy, TP RMB125.36)Yanghe Br

33、ewery enjoys solid brand awareness as both a regional leader (Jiangsu Province) and a national leader in the high-end baijiu market. Amid increasingly intense competition, the company has started limiting production and made adjustments to its sales channels since mid-2019, and we expect its destock

34、ing to be completed before 3Q20. The wholesale price of the companys main products increased q-o-q, boosting the retail price. Distributor inventory turnover in Jiangsu Province declined to 1.5 months, marking the lowest quarter ever. With the upcoming peak season the Western New Year and the Chines

35、e New Year we expect consumption to recover. We believe the current valuation reflects the markets consensus that short-term growth is slowing, though we see plenty of potential for long-term growth; as such, we maintain our Buy rating.Key downside risks: macroeconomic slowdown, changes in consumer

36、preferences, policy risk, food safety risk, and lower-than-expected sales of high-end products.Jonjee High-Tech (600872 CH, Buy, TP RMB50.19)Jonjee High-Tech is a leading food flavouring manufacturer by market share and is the second largest soya sauce maker in terms of soya sauce production. Benefi

37、ting from stable demand as well as volume and price increases amid the consumption upgrade theme, the company has delivered stable results. The revenue contribution from its core soya sauce business is declining, but its expansion into other flavour categories is well on track. By region, Jonjees re

38、tail strategy uses a marketing model thats called “Distributor sales first, direct sales second”. We maintain our Buy rating, because we believe the company can boost its efficiency and earnings growth.Key downside risks: macroeconomic slowdown, food safety risk, rising raw material costs, reform pr

39、ogress coming in below expectations, stricter real estate regulations, channel network expansion affected by slower growth of the catering industry, and a high pledge rate by major shareholder.Budweiser APAC (1876 HK, Maintain Buy, TP HKD32.00 (from HKD33.00)Budweiser APAC was the largest beer compa

40、ny in Asia Pacific by retail sales value in 2018 with a market share of 13.8%. Through combinations, acquisitions, and divestitures over the years, the company has acquired many breweries and brands that are embedded in the local culture. In 2018, the companys sales revenue was USD6.7bn, implying 7.

41、4% organic growth y-o-y. We believe Budweiser APACs premium product mix and well-established production capacity and distribution channels will help it to benefit from the premiumization trend in the beer industry, improving its earnings in 2020. As a result, we maintain our Buy rating.Key downside

42、risks: slow recovery in Chinas nightlife channel, deteriorating competitive position in South Korea, and a potential write-down of goodwill and intangible assets.Exhibit 3. Valuation comparison of covered companiesCompanyTickerMkt CapADTVPrice TargetRatingUpside/ PE (x) PB (x) ROE (%) EPSPEGPriceCAG

43、R (%)(USDm)(LC)(LC)Downside 2020e 2021e 2020e 2021e 2020e 2021e 2019-21e 2020eBaijiuKweichow Moutai600519 CH201,514533 1,112.5 1,317.0Buy18%7.431.3Wuliangye000858 CH74,788367133.6159.7Buy19%24.020.46.05.327.027.623.91.0Yanghe002304 CH25,79186118.7125.4Buy6%19.023.924.

44、410.01.9Luzhou Laojiao000568 CH19,11411690.597.5Buy8%23.319.76.05.327.528.624.41.0Swellfun600779 CH3,7463253.250.0Hold-6%26.522.011.310.244.748.726.91.0BeerBudweiser APAC1876 HK41,8465325.5532.00Buy25%36.910.511.513.82.7Tsingtao Brewery Co-H168 HK9,3411250.0048.41Hold-3%2.99.810

45、.416.41.9Tsingtao Brewery Co-A600600 CH9,9974051.3244.83Hold-13%34.99.810.416.42.1Beijing Yanjing Brewery 000729 CH2,703116.656.18Hold-7%91.6 14.3CondimentYihai International1579 HK6,9091651.2541.53Hold-19%53.242.014.311.130.329.830.31.8Jonjee Hi-Tech600872 CH4,4745238.9

46、550.19Buy29%5.420.8Fuling Zhacai002507 CH2,8664725.1826.02Hold3%26.523.4CateringHaidilao6862 HK24,3181735.3037.64Buy7%44.135.615.842.71.0Source: Wind, Bloomberg, HSBC Qianhai Securities estimatesNote: Priced as at 10 January 2020. Non-recurring e

47、arnings are used in the calculations above.Valuation and risks for our preferred stocksValuationKey downside risksKweichow Moutai 600519 CHCurrent price:RMB1,112.50Target price:BuyRMB1,317.00Upside:18%Wuliangye 000858 CHCurrent price:RMB133.62Target price:BuyRMB159.65Upside:19%We continue to use a D

48、CF model to value the stock. We maintain our target price of RMB1,317, corresponding to a 2020e PE of c36x and implying upside of 18% from the current share price. Moutai enjoys a leading brand position and profitable sales channels. In our view, with the increasing contribution from direct sales, M

49、outai can further improve its profitability and, as a leader in baijiu with relatively high visibility of future earnings, Moutai deserves a valuation premium; as a result, we maintain our Buy rating. Our unchanged key assumptions under our DCF model include a 4.0% perpetual growth rate, a 9.6% WACC

50、, a 2.5% risk-free rate, a 6.5% market risk premium, and a 1.1 beta.Katharine Song* | HYPERLINK mailto:kathy.l.h.song kathy.l.h.song | +86 21 60813807 HSBC Qianhai Securities LimitedWe keep our earnings estimates unchanged and continue to use a DCF model to value this stock. We maintain our target p

51、rice of RMB159.65, corresponding to a 2020e PE of c29x, implying upside of 19% from the current share price. As we expect high-end baijiu products will be in short supply and to stay at high retail prices, the companys revenue will likely continue to rise; we maintain our Buy rating. We keep our ass

52、umptions unchanged, including a perpetual growth rate of 3.0%, a risk-free rate of 2.5%, a risk premium of 6.5%, a beta of 1.26, and WACC of 10.7%.Changes in consumer preference; policy risk; food safety risk; competition risk; patent protection risk of counterfeit products; and corporate governance

53、.Macroeconomic slowdown; changes in consumer preference; policy risk; food safety risk; limited ASP growth; and corporate governance.Katharine Song* | HYPERLINK mailto:kathy.l.h.song kathy.l.h.song | +86 21 60813807 HSBC Qianhai Securities LimitedYanghe Brewery 002304 CHCurrent price:RMB118.69Target

54、 price:BuyRMB125.36Upside:6%We keep our earnings estimates unchanged and continue to use a DCF model (key assumptions unchanged) to value this stock. We keep our assumptions unchanged, including a perpetual growth rate of 2.0%, a risk- free rate of 2.5%, a risk premium of 6.5%, a beta of 1.22 and a

55、WACC of 10.4%. We maintain our target price of RMB125.36, corresponding to a 2020e PE of c20 x and a 3% 2020e dividend yield. Our target price implies upside of 6% from the current share price; we maintain our Buy rating, as we are optimistic about Yanghes brand position in high-end baijiu, and its

56、channel adjustment is expected to lay the foundation for future healthy development.Macroeconomic slowdown; changes in consumer preference; policy risk; food safety risk; and lower- than-expected sales of high-end products.Katharine Song* | HYPERLINK mailto:kathy.l.h.song kathy.l.h.song | +86 21 608

57、13807 HSBC Qianhai Securities LimitedJonjee High- Tech600872 CHCurrent price:RMB38.95Target price:BuyRMB50.19Upside:29%We keep our earnings estimates unchanged and continue to use a sum-of- the-parts (SOTP) approach to value the stock. We assign a RMB4.40bn valuation to the property business, based

58、on average land prices in Zhongshan City in 2018, and continue to value its condiment business at a 39.7x 2020e PE (0.5 SD above the historical average 12-month forward PE). We maintain our target price of RMB50.19, implying upside of 29% from the current share price. We believe internal reforms can

59、 boost the companys revenue in the long run; therefore, we maintain our Buy rating.Macroeconomic slowdown; food safety risk; rising raw material costs; reform progress coming in below expectations; stricter real estate regulations; channel network expansion affected by slower growth of the catering

60、industry; and a high pledge rate of major shareholder.Katharine Song* | HYPERLINK mailto:kathy.l.h.song kathy.l.h.song | +86 21 60813807 HSBC Qianhai Securities LimitedBudweiser APAC 1876 HKCurrent price:HKD25.55Target price:BuyHKD32.00Upside:25%We continue to use our DCF model to value the stock. W