The Zhitong Finance App learned that according to a research report published by Tianfeng Securities, according to a 100+ sample collected by the Tianfeng Food team that went deep into the Shenzhen Sugar and Liquor Fair site, most of the respondents' companies achieved a year-on-year increase in sales revenue, yet there were still quite a few companies whose sales revenue did not return to pre-pandemic levels. In response to the future trend of consumption power recovery, the vast majority of respondents believe that consumption power is expected to return to pre-epidemic levels or even surpass pre-pandemic levels, accounting for over 80%. The bank believes that snack food: the space is vast, and the segmentation of the racetrack nurtures new opportunities. At present, the market size has exceeded trillion dollars, showing long-term steady growth. Under the wave of channel transformation, brands that actively embrace change are expected to explore incremental space. Dairy products: From a total volume perspective, with the industry maintaining steady growth, dairy product sales are expected to continue the double-quarter trend and further improve.

Questionnaire background: 1) This questionnaire was collected from October 12, 2023 to October 15, 2023; 2) The questionnaire received a total of 100+ valid questionnaires.

Tianfeng Securities's main views are as follows:

1. Summary: Some companies' sales levels have returned to pre-epidemic levels, and respondents are generally optimistic about the recovery of consumption power

A total of 100+ questionnaires were collected, of which 33/4/2/27/21/14 were for snack foods/baking/prepared dishes/dairy/alcohol/others, of which snack food accounted for 33% and dairy products accounted for 27%; according to the types of jobs of the respondents, the largest number of respondents worked in marketing and sales, 57%. According to the main sales regions, the largest number of respondents in this survey came from the North China region, accounting for 40%.

The recovery in sales revenue compared to before the pandemic: Unlike over 90% of companies that reported an increase in sales over the previous year in '22, only over 70% of respondents reported that their company's sales had maintained an increase compared to '19. By industry, sales levels lower than before the pandemic were mainly concentrated on dairy products and alcohol.

Prospects for the recovery of consumption power: Over 40% of respondents believe that “in the short term, consumption capacity is still weaker than pre-pandemic levels, but will gradually return to pre-pandemic levels,” which is the most mainstream view in the sample; the number of respondents who think “they are not optimistic about the long-term recovery of consumption capacity, and consumption downgrades will prevail” accounted for only 16%. It shows that most of the respondents are optimistic about the recovery in spending power.

2. Snack food: There is a clear trend of recovery on the revenue side, and profitability is gradually recovering

Sample situation: Companies with annual sales of 0 to 1 million yuan account for 19%, 1-10 million yuan account for 38%, 10 million yuan to 100 million yuan account for 8%, and more than 100 million yuan account for 36%.

Revenue recovery: There is a clear recovery trend, with larger businesses recovering faster. 1) Compared with 2022, more than 95% of enterprises achieved positive year-on-year growth; the recovery of more than 100 million enterprises was even more obvious. 2) Compared with 2019, about 13% of enterprises have not yet recovered to the same period in 2019; among them, enterprises with a scale of 100 million to 100 million have recovered the slowest.

Profitability recovery situation: The profitability of most companies is gradually recovering. Gross margin is generally concentrated at 15-30%, with a year-on-year increase of 0-10pct the most, about 40%, and a year-on-year decline of about 20%. Looking at the horizontal comparison, the trend is similar for enterprises of different sizes.

Consumption expectations for the future market: In the short term, enterprises of different sizes are generally confident that short-term consumption will return to pre-pandemic levels; in the long run, medium and large enterprises are concerned about the downward trend in long-term consumption.

3. Dairy products: Overall revenue growth has been achieved, and gross margin has entered a recovery path

Revenue recovery situation: Compared with last year, most companies achieved growth, but there are still a small number of enterprises that have not recovered to pre-pandemic levels. The sales scale of the respondent's company is generally over 10 million, accounting for 89%. Judging from the recovery situation, 89% of respondents reported that their company's sales this year had increased compared to last year; however, compared with 2019 before the pandemic, the revenue situation of some companies declined, accounting for 30%. Profitability recovery situation: The gross margin of most companies recovered compared to last year, and those that have not recovered are mainly concentrated in North China and South China. The gross margin level of the respondent's company was basically concentrated in the range of 30-50%, accounting for two-thirds. Judging from the year-on-year changes, over 80% of companies achieved an increase in gross margin; feedback on the decline in gross margin came mainly from North China and South China, accounting for 80%.

Product sales and growth: Room temperature products are still mainstream, and the growth rate of low-temperature white milk is still at the forefront this year. According to the overall score, the top four main selling products of the respondents this time were room temperature white milk, room temperature yogurt, low temperature yogurt, and low temperature white milk; judging from the growth situation, the top four categories with growth this year were room temperature yogurt, low temperature white milk, room temperature white milk, and low temperature yogurt, while the growth rate of niche cheese has improved, surpassing milk drinks.

4. Investment advice

Snack food: 1) The space is vast, and the segmented track nurtures new opportunities. At present, the market size has exceeded trillion dollars, showing long-term steady growth. There are many categories. Among them, Western-style snacks such as candy, chocolate, puffed food, and cookies, etc., foreign investment intervened early in the formation of leading brands, and the pattern is difficult to disrupt; traditional Chinese categories such as nuts and brine products have not formed a leading monopoly, or have opportunities to nurture new brands, and focus on leading companies with product innovation genes. Focus on recommending Yanjin Store, Ganyuan Food, Jinzai Food, etc.

2) Under the wave of channel transformation, brands that actively embrace change are expected to explore incremental space. Focus on producers that actively grasp industry trends, lay out snack channels, and have a strong supply chain. Focus on recommending stores in Yanjin and Liangpin, and recommend paying attention to Wanchen Biotech.

Dairy products: From a total volume perspective, with the industry maintaining steady growth, dairy product sales are expected to continue the double-quarter trend and further improve. The bank suggests focusing on Mengniu Dairy, a leading company with barriers to the supply of high-quality milk sources. Currently, the results corresponding to 2024 are only 13-14x (wind consensus forecast data).

On the cost side, the price of raw milk is at a phased bottom and has fallen below the cost line. The overall low price is expected to drive the supply of milk to be cleared, inefficient, and even the early elimination of reserve cows. The bank suggests focusing on a new dairy industry that maintains high revenue growth and benefits from low raw milk prices and improved gross margin.

Looking at other dairy products tracks, cheese consumption is still in the cultivation stage, and there are broad prospects for future growth. The bank suggests paying attention to leaders in the cheese industry, Miacolanduo, which has outstanding ability to innovate new products, etc.

Risk warning: 1. Food safety risk; 2. Dairy farming epidemic and natural disaster risk; 3. Environmental risk; 4. Sample deviation value and sample representative risk.