The COVID-19 peak infection period in China has passed, and people prefer pre-consumption

The COVID-19 infection rate has peaked in major Chinese cities (such as Beijing, Shanghai, Guangzhou, Shenzhen, and so on.) The number of COVID-19 infections has begun to fall from a high level. What is the progress of the current consumer market recovery now?

How to grasp the investment opportunities in the consumer sector in 2023?

Infections in various places are reaching their peaks one after another, exceeding previous expectations, and consumer recovery is expected to advance. From the recent data, the data of subway travel in North, Guangzhou, and Shenzhen, inbound and outbound traffic at major airports nationwide, and movie box office have all bottomed out in the past week. With the infection reaching its peak, social activity also significantly improved, and the pace of consumption recovery was ahead of the improvement. Meanwhile, the Central Economic Work Conference placed consumption at an unprecedented height, emphasizing the protection of employment for young groups and a multi-channel increase in income for urban and rural residents, with policies expected to help revitalize consumption. In our December 1 report, "Three stages of consumer goods investment at this stage," we previously highlighted that the valuation repair of undervalued stocks would start ahead of schedule as the epidemic optimization accelerates. Considering that the pessimistic expectations of liquor open door have been more than adequate response, the current high-end liquor and real estate wine leading back to the average price to carry out, low valuation liquor to become the focus of configuration.

(1) Short-term valuation repair focus on the allocation of low-valuation underlying.

(2) Medium-term with the economic recovery focus on allocating flexible subjects.

(1) Beer and other low alcoholic beverages certainty improvement if the adjustment of firm layout :

(2)Restaurant supply chain shows resilience:

Lushang Health Industry Development divested the real estate business for 5.9 billion yuan, and cash payment is conducive to the listed company to return to the capital, real estate dragging factors to solve, and focus on the layout. It is recommended to pay attention to the new product trend of each brand company, as well as the layout opportunity brought by the share price retracement.

(1) Management, organization, and other advantages highlighted fully benefit from the optimization pattern and significant single product-driven profitability into the upside.

(2) Benefit from the efficacy of skin care dividend, which is expected to continue to grow at a high rate of effectiveness of skincare brands.

(3) Lower valuation and marginal improvement are expected.

Property policy changes, furniture engineering end of the first to benefit, furniture retail end of the weak reality is expected to follow the policy is substantial. Property supply-side policy thinking from "to ensure the project" to "to ensure the main body" change, to ensure delivery policy effect will be more significant, 2023 completion growth rate certainty turned positive, engineering business has taken the lead to the fundamental inflection point. Property demand-side restrictive measures will be released, and the pace of recovery of residential sales will be divided; the optimistic scenario is that the retail furniture end corresponding to the growth rate of potential new housing renovation demand area will grow in 2023. The current fundamentals of the retail end are still on the left side due to the decline in customer traffic, but the weak reality is expected to follow the policy to strengthen. Historical review shows residential sales volume and price rise stage furniture companies have significant excess earnings. If the residential sales area growth rate inflection point in 2023, then the furniture sector is expected to achieve extra profits.

High pulp prices & weak paper prices are expected to ease the constraints on the earnings of paper companies. On short-term factors, European inventory pulp stocks are rebounding, and the year-on-year growth rate of shipments to China from the world's 20 major pulp-producing countries is improving; On longer-term factors, the imminent launch of new production capacity of Arauco MAPA 1.56 million tons in Chile and UPM 2.1 million tons in Uruguay will impact broadleaf pulp supply, and pulp prices are expected to enter a downward phase in 2023. Specialty paper enterprises usually adopt a direct sales model and sell their products at more stable prices, so their profitability is inversely related to pulp prices, and gross margin repair is expected to be reflected in the 23Q2 statement end. The market will reflect profit improvement expectations in advance. Bulk paper enterprises are located at the bottom of the historical valuation range, concerned about the economic recovery is expected to paper prices in the peak season phase up may.

Both companies performed well during the epidemic and are beneficiary targets for post-epidemic recovery. Hongjiu Fruit's annualized growth rate is expected to be 40-50%. Tongcheng-Elong grew in user numbers during the epidemic, with revenue in 2021 exceeding 19 years and profit close to 19 years, and is expected to be highly resilient in this round of restoration.

(1)Retailing: Significant traffic growth after the epidemic's peak in high-end department stores in Beijing, with high resilience. Must-try tends to stabilize.

(2)Travel industry chain: New Year's Day is dominated by short-haul tours, and the number of railroad passengers sent declined to some extent, but considering the recovery of short-haul terms, the data is expected to be ideal this year.

The first direction is the policy-supported areas, including tax exemption, platform economy, education information technology, and human resources in the direction of employment preservation.

(1) From the policy side, the fundamentals of the conduction need a specific time lag; short-term stock price fluctuations do not change the overall valuation repair expectations, which is expected to plate valuation fluctuations upward.

(2) The fundamental perspective: last week, the policy's domestic sales real estate end continued to be introduced; after the epidemic relaxation of consumption gradually rebounded, there is no turning back. The lot of the improvement is now, taking into account the time lag of the policy conduction, is expected that in the second half of next year, the fundamentals will be greater than the first half of the probability of repair, the second half of the repair recovery certainty enhanced. Foreign sales in the United States will be 352 products tariff exemption extension, kitchen small electrical and cleaning appliances sector in the export of a large proportion of U.S. companies are expected to have benefited.

1. Pig prices continue to plunge to production capacity as a catalyst for the layout of breeding stocks at the right time. Pig prices continue to fall below the cost line, pig farming industry, in general loss, the current pig prices, causing the process of production capacity to open, and the industry will again slow down the replenishment rate. We expect the peak of the 23-year pig cycle to continue and the profitability time to be extended. From the valuation point of view, the plate valuation is still low, and the layout of farming stocks is at the right time.

Total passenger cars are not expected to be pessimistic, and structural growth is expected to be significant. For China's passenger car market, which accounts for more than half of the increase and replacement, income expectation is more effective than policy stimulation. With the optimization of epidemic prevention and control policy and improvement of economic expectation, the total passenger car demand in 2023 is not pessimistic; the structural characteristics of market share increase of independent brands, export explosion, and high growth of new energy vehicle market will continue in 2023.

Income & economic expectation improvement is more effective than policy stimulation, and total passenger car demand is not pessimistic in 2023. Passenger car retail sales are expected to increase slightly and wholesale sales to grow slightly in 2022, in line with the judgment we gave after the fuel car purchase tax halving policy was implemented in May: the effect of this round of policy stimulation will be weaker than in 2015. Currently, China's passenger car purchase ratio exceeds 50%, household ownership has increased significantly, and purchase decisions are more influenced by economic & income expectations. Optimizing epidemic prevention and control policies and improving financial expectations, we are optimistic about total passenger car demand in 2023.

The structural growth is expected to be driven by the increase in the market share of autonomous brands, the explosion of exports, and the high growth of the new energy vehicle market, with the market share of independent brands exceeding 50% since September 2022, the explosion of passenger car exports since 2022 and the continuous increase in the penetration of new energy vehicles. In several aspects driven by the medium-term dimension is expected to China's independent brand sales will be from 10 million units to 15 million units, driving the sustained high growth of the performance of the vehicle and parts companies; China's passenger car market differentiation will become more and more prominent.

The brand end: the epidemic reached the peak progress faster, and the pace of consumption recovery is ahead of schedule, continue to recommend A shares of low-valued brand apparel opportunities to make up.

Although high overseas inventory and high inflation problems led to manufacturing orders recently continuing to be sluggish, the "double high dilemma" is marginal relief. On the one hand, the U.S. inflation data for two consecutive months is lower than expected, and the downward trend is established; on the other hand, Nike's latest quarterly inventory decline, as expected, including the inventory of Greater China, has returned to health. We expect 2023Q2 manufacturing end orders are expected to usher in the inflection point, and long-term competitive advantage of manufacturing leaders: