汇丰银行-中国-食品与饮料行业-中国食品与饮料行业2019年展望：借鉴历史谋求稳定-2019.2-57页.pdf

Disclosures&Disclaimer This report must be read with the disclosures and the analyst certifications in the Disclosure appendix,and with the Disclaimer,which forms part of it.Issuer of report:HSBC Qianhai Securities Limited View HSBC Qianhai Securities Research at:https:/ HSBCChinaConference201915-17May,ShenzhenRegister nowEquity Research Report A macro slowdown and demographic change are the key concerns;the focus is on product upgrades and cost control Learning from Japan,we believe that F&B leaders can achieve steady long-term growth despite macro pressures We like companies which can deliver stable earnings growth:Jonjee,Chongqing Brewery,Moutai and Wuliangye(all Buys)Stability the priority in 2019.We think consumer demand will stabilise but could be facing some headwinds,following the economic cycle,a trend that is already being reflected in some sub-sectors.Continued urbanisation should support growth in lower-tier markets,creating opportunities for channel penetration.Industry leaders in condiments,beer and baijiu have greater resilience,helped by their strong brands.We think the market leaders can achieve double-digit revenue growth in 2019e by launching new products,penetrating lower-tier cities,and upgrading their product mix.The Japan experience.Looking at what happened in Japan,we find that leading consumer staple companies can outperform the market index even in hard times.In addition,Chinas demographic structure has many similarities to Japans at the end of the 20th century a low birth rate,an ageing population,and fewer young people of working age to take care of the elderly.The Nikkei 225 index fell more than 60%at one point in the last 10 years of the 20th century.However,companies in the spirits,beer,instant food and meat product sectors recorded relatively stable growth,and sector leaders outperformed the market index despite macro pressures.Product mix upgrades and cost control are the key strategies we like Jonjee,Chongqing Brewery,Kweichow Moutai and Wuliangye.In this report,we update our target prices,but downgrade Haitian to Hold on valuation as the stock is now trading at a 40 x 2019e PE,2sd above its historical mean.Major catalysts:Acceleration of SOE reform,stronger-than-expected tax cut policy,a further decline in raw material prices,better mix upgrade,and M&A opportunities.Major downside risks:A-shares weighting in the MSCI Emerging Markets Index failing to increase to 20%,slower-than-expected SOE reform,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*(1700517120001)Head of A-share Food&Beverage and Pulp&Paper Research HSBC Qianhai Securities Limited +86 755 8898 3142 *Employed by a non-US affiliate of HSBC Securities(USA)Inc,and is not registered/qualified pursuant to FINRA regulations China Food and Beverage Equities China 18 February 2019 Summary of ratings and target prices Company Ticker Currency Price _ TP _ _ Rating _ Old New Old New Upside Jonjee 600872 CH RMB 31.70 30.22 36.44 Buy Buy 15.0%Kweichow Moutai 600519 CH RMB 725.30 819.46 804.95 Buy Buy 11.0%Wuliangye 000858 CH RMB 64.70 77.44 80.62 Buy Buy 24.6%Chongqing Brewery 600132 CH RMB 32.88 35.71 36.05 Buy Buy 9.6%Haitian Flavouring 603288 CH RMB 75.55 76.68 77.40 Buy Hold 2.5%Source:Wind,HSBC Qianhai Securities estimates.Price as of 11 February 2019 2019 outlook:Learn from history,seek stability Equities China 18 February 2019 2 Looking for the stable ones from historical experience According to HSBCs strategy report“Making money from northeast Asian demographics:why old is gold”,23 May 2018,Chinese people tend to save more as they age.As a result,their savings are used more productively to boost the economy.We are confident about the future of Chinas long-term growth,although recent macro data points are causing some concerns.First,while GDP growth in 2018 was still relatively strong,up 6.6%y-o-y,growth slowed down from 6.8%y-o-y in Q1 2018 to 6.4%y-o-y in Q4 2018.Second,the birth rate has been shrinking for two consecutive years,while the proportion of people over 60 years old has reached 17.9%.The population growth rate is declining and the ageing trend is becoming more obvious.To assess what this means for the consumer sector,we look at Japans experience at the end of the 20th century.Back then,Japan encountered similar but more extreme conditions:an economic downturn,a slowdown in population growth,an ageing population,and changes in consumer behaviour.Based on our analysis of over 25 listed companies in Japans F&B industry,we found that even in such tough macro conditions,the performance of companies in the condiments,alcohol,instant food and meat products sectors showed relatively stable growth.Industry leaders can always grow their revenue by launching new products to meet new demand,developing overseas markets,and improving their product mix.In China,we think baijiu and condiments companies can deliver good stock returns even during an economic downturn.In the beer industry,after sales volumes peaked in 2014,brewers expanded their high-end capacity and initiated cost control measures.We expect revenue growth of beer companies to gradually recover.In 2019e,we expect demand for healthy and high-end products to increase,given the demographic changes,and this will drive product mix upgrades.As a result,we believe that the leading companies in condiments,liquor and beer sectors,which already have strong branding power and the ability to control costs,will be able to achieve robust sales even during an economic slowdown.Preferred stocks:Jonjee,Chongqing Brewery,Kweichow Moutai and Wuliangye Jonjee(600872 CH,Buy,TP RMB36.44)According to the earnings alert,Jonjees revenue and net income increased by 15.5%and 33.8%y-o-y in 2018,in line with our expectations.After an equity transfer of its biggest Executive summary History shows that F&B leaders can achieve long-term stable growth Valuation already reflects the slower growth environment We like Jonjee,Chongqing Brewery,Moutai and Wuliangye 3 Equities China 18 February 2019 shareholder and the election of the new board,we expect the companys SOE reform to accelerate and the management to be more market-oriented.Mainly due to rolling forward our valuation base year to 2019 from 2018 in our SOTP model,we raise the TP of Jonjee to RMB36.44 from RMB30.22.Maintain Buy.Chongqing Brewery(600132 CH,Buy,TP RMB36.05)Driven by strong sales of international brands introduced by Carlsberg Group,Chongqing Brewery(CBC)continues to upgrade its products and we expect 5%y-o-y growth in its beer sales volume in 2018 The company is also expanding its“big city”plan to cities other than its base market in Chongqing.We expect cost to be controlled in 2019 and gross margin to be improved by capacity optimization.We also look forward to Carlsbergs asset integration into the company.As we adjust our margin estimates and roll the valuation base year to 2019,we raise our TP to RMB36.05(from RMB35.71)based on our DCF model.Maintain Buy.Kweichow Moutai(600519 CH,Buy,TP RMB804.95)According to Moutais annual results preview,the company recorded 23%y-o-y growth in revenue and 25%y-o-y growth in net income in 2018.We think this good result should help stabilize market confidence.Although the 2019 planned sales volume of Moutai liquor is slightly below our expectation,we still think Moutai is the industry leader.In our view,it will keep expanding its Moutai series and increase the percentage contribution from direct sales.We lower our volume estimates on Moutai liquor and series liquor and in turn reduce our TP to RMB804.95 from RMB819.46 based on our new DCF model.Maintain Buy.Wuliangye(000858 CH,Buy,TP RMB80.62)Sales volume of its Wuliangye(WLY)series is expected to reach 20,000 tons in 2018,and the company plans to sell about 23,000 tons in 2019,up 15%y-o-y.The company will also upgrade its Puwu product with a new scan code system and launch it after May 2019.We expect the company to improve its implied ASP of Wuliangye and have better control over distributors in 2019.We think that company will still benefit from high-end Wuliangyes volume growth and product mix upgrade.We slightly adjust our revenue estimates for 2018-20e by 2%,-2%,and-6%,respectively,and roll forward the valuation base year to 2019,leading to a new target price of RMB80.62(from RMB77.44).Maintain Buy.Rating change Haitian(603288 CH,downgrade to Hold,TP RMB77.40)Haitian will continue to benefit from the consumption and product mix upgrade story.High-end soy sauce products account for over 35%of total revenue,and the percentage is still growing;the company is also venturing into other non-soy sauce products.As the market leader,Haitian has strong cost control abilities and upstream pricing power.Based on our updated DCF model,we slightly raise our target price to RMB77.40 from RMB76.68.However,considering that it is currently trading at around 40 x 2019e PE and around 12x 2019e PB,both of which are around 2 standard deviations above the historical mean,we believe the stock is fairly valued and thus we downgrade the rating to Hold.Exhibit 1.Key metrics of our preferred stocks Company Ticker Mkt cap ADTV Price TP Rating _ PE _ _PB _ ROE(%)Dividend yield(%)EV/EBITDA EPS CAGR(%)PEG (USDm)(USDm)18e 19e 18e 19e 18e 19e 18e 19e 18e 19e 18-19e 18e Jonjee 600872 CH 3,421 26 31.70 36.44 Buy 40.2 32.2 6.8 5.9 18.0 19.5 0.8 1.0 26.2 21.2 24.1 1.3 Moutai 600519 CH 124,224 446 725.30 804.95 Buy 24.9 21.1 7.6 6.3 33.4 32.5 2.0 2.7 15.2 12.3 19.7 1.3 WLY 000858 CH 31,583 295 64.70 80.62 Buy 16.4 13.2 3.5 3.0 22.8 24.6 3.2 4.4 8.9 6.8 27.3 0.6 CBC 600132 CH 2,168 13 32.88 36.05 Buy 39.3 33.4 13.0 12.3 33.0 36.8 2.6 3.0 23.9 20.7 16.9 2.3 Source:Wind,HSBC Qianhai Securities estimates Stock price as of 11 Feb 2019 Mkt cap as of 2018/12/31,ADTV from 2018/1/1 to 2018/12/31;CNY/USD=6.86 Equities China 18 February 2019 4 Valuation and risks for our preferred stocks Valuation Risks Jonjee High-Tech 600872 CH Current price:RMB31.70 Target price:RMB36.44 Up/downside:14.95%We value the company using SOTP.We maintain the valuation of real estate segment and continue to value the condiment segment at 34x 2019e PE(the companys historical average 12m forward PE).As we slightly adjust our 2018e net profit estimates and roll over our valuation on the condiment segment from 2018e to 2019e,our TP is raised from RMB30.22 to RMB36.44,implying 15%upside.We maintain Buy as we expect the company to introduce a market-oriented management mechanism to further unleash the companys growth potential.Key downside risks:Industry risks:Macroeconomic downturn,rising raw material costs,food safety risks.Company specific risks:Stricter real estate regulation,reform progress below expectations,channel network expansion affected by slower growth of the catering industry.Buy Katharine Song||+86 755 8898 3142 Chongqing Brewery 600132 CH Current price:RMB32.88 Target price:RMB36.05 Up/downside:9.64%We continue to use DCF model to value the company.As we raise our gross margin estimates and roll over the valuation base year to 2019,we raise our target price to RMB36.05,implying 9.6%upside.We keep the basic assumptions unchanged,including perpetual growth rate of 2.0%,risk-free rate of 3.0%,risk premium of 7%,and WACC of 9.2%.We maintain Buy on CBC as we expect the company to improve its product mix on the back of Carlsberg Group.Key downside risks:Industry risks:Macroeconomic slowdown,weather risk,higher tax on beer.Company specific risks:Rising raw material costs,slower-than-expected market expansion,and slower-than-expected progress in addressing peer competition issues.Buy Katharine Song||+86 755 8898 3142 Kweichow Moutai 600519 CH Current price:RMB725.30 Target price:RMB804.95 Up/downside:10.98%Our target price is derived using DCF as we believe its solid franchise value and proactive sales channel management will enable the company to gain market share and deliver strong free cash flow.We remain Buy on this stock but lower the TP from RMB819.46 to RMB804.95,as we slightly lower our revenue and net profit estimates for 2018-20e and roll over our DCF valuation base to 2019e.The assumptions of our DCF model are unchanged,including perpetual growth rate of 2.0%,WACC of 10.7%,cost of equity of 10.7%and cost of debt after tax of 3.6%.Of these,cost of equity is based on a risk-free rate of 3.0%,equity risk premium of 7.0%and beta coefficient of 1.1.Our new target price implies 11%upside.Considering Moutais strong brand position and considerable profit margin for distributors,we believe the company can weather economic cycles and maintain stable growth.Therefore,we maintain our Buy rating.Key downside risks:Industry risks:Macroeconomic slowdown larger-than-expected,changes in consumer preferences for baijiu,policy risk,food safety risks.Company specific risks:Competition risk in mid-to-low-end market,any potential corporate governance issues,patent protection risk of counterfeit Moutai.Buy Katharine Song||+86 755 8898 3142 Wuliangye 000858 CH Current price:RMB64.70 Target price:RMB80.62 Up/downside:24.61%We use a DCF model as we think its solid franchise value and proactive sales channel initiatives will help it gain market share and deliver a steady free cash flow.We slightly adjust our 2018-20e estimates and roll over our DCF valuation base to 2019e.Our valuation assumptions include 1.26 beta,2%terminal growth rate,3%risk free rate,and 7%equity risk premium.We maintain the stock at Buy and raise TP to RMB80.62 from 77.44,implying an upside of 25%.Key downside risks:Industry risks:Macroeconomic slowdown larger-than-expected,changes in consumer preferences for baijiu,policy risk,food safety risks.Company specific risks:Competition risk in mid-to-low-end baijiu,any potential corporate governance issues,limited ASP growth,softer-than-expected demand.Buy Katharine Song||+86 755 8898 3142 Priced at 11 Feb 2019 Source:HSBC estimates 5 Equities China 18 February 2019 Valuation and risks for the remainder of our coverage Valuation Risks CR Beer 291 HK Current price:HKD29.50 Target price:HKD30.74 Up/downside:4.20%We use DCF for the valuation and our unchanged assumptions include:2%sustainable growth,8.1%WACC,8.1%cost of equity,2.3%debt cost after tax and 1.02 beta.Our target price is HKD30.74(unchanged),implying a 4.2%upside.We rate its shares as Hold,as valuations appear to have priced in the positive catalyst from the Heineken deal,but we need to wait for the real benefit,i.e.penetrating the high-end market.Key downside risks:Industry risks:Macroeconomic downturn,raising tax on alcoholic drinks,food safety risks,and raw material cost pressure.Company specific risks:Uncertainty regarding the Heineken deal,uncertainty in high-end market expansion.Key upside risks:Quicker progress in Heineken deal,rising ex-factory prices.Hold Katharine Song||+86 755 8898 3142 Tsingtao Brew