According to the Futu Securities app, Central China Securities released research reports stating that in 2024, based on the market innovation vitality of emerging categories, Central China Securities recommended focusing on sectors such as health products, soft drinks, baking, snacks, and other types of liquor. In addition, benefiting from the continuous decline in sugar prices, the profit margins of yeast processing will be significantly restored, recommending a focus on the yeast sector; pay attention to the rebound of the baijiu sector dominated by interest rate cut expectations; finally, focus on the improvement in the fundamentals of meat products brought about by the rebound in pork prices.

The main viewpoints of central China Securities are as follows:

In October 2024, the csi sws food & beverage index fell by 9.22%, after a brief rebound in September, the sector turned down again. The rebound trend lacks logical support and is ultimately proven false. From January to October 2024, the csi sws food & beverage index accumulated a decline of 4.13%, except for soft drinks, beer, dairy products, and snacks, all other sub-sectors experienced declines.

From January to October 2024, apart from the food & beverage and csi sws health care index, primary industries in the secondary market all recorded positive growth. Primary industries in the consumer sector, such as household appliances, autos, and media, increased by 35.5%, 24.47%, and 9.31% respectively, showing relatively good performance, but the good returns mostly came from the significant rebound in the market in September.

As of October 30th, the csi sws food & beverage index had a valuation of 18.46 times, a decrease of 63.43% from the high point in 2020, and a decrease of 9.81% month-on-month from the end of September. After a brief rise in valuation in September, the sector's valuation turned downwards again in October. As of October 30th, among 31 primary industries, the valuation of the csi sws food & beverage index was lower than 18 industries and higher than 12 industries, with the sector's valuation converging towards cyclical sectors such as banks, securities, oil and coal.

In October 2024, individual stocks in the sector continued their downward trend, with the largest decline reaching 21.09%. According to IFIND data, among 127 listed companies, 31 stocks recorded an increase, while 96 stocks recorded a decrease; the proportion of stocks rising was 24.41%, while the proportion of stocks falling reached 75.59%.

From January to September 2024, the fixed asset investment in the domestic food manufacturing industry accumulatively increased by 23.5% year-on-year, a 16 percentage point increase year-on-year; during the same period, the fixed asset investment in the liquor, beverage, and tea manufacturing industry grew by 20.1%, a 16 percentage point increase year-on-year. In September, the fixed asset investment in the food and beverage manufacturing industry continued the high growth trend of the previous 8 months.

From January to September 2024, the production of wine, beer, and dairy products continued to decline, while fresh meat, baijiu, and edible oil production maintained low growth. Since 2024, the import quantities of commodities such as corn, wheat, soybeans, and edible oil have seen a decline in growth rates, maintaining at low levels; imports of nuts and fish oil have grown relatively significantly, with fish oil imports turning positive. Beer imports decreased, while wine imports shifted from negative to positive growth.

Investment recommendation: In 2024, based on market innovation vitality in emerging categories, we recommend focusing on sectors: health products, soft drinks, baking, snacks, and other alcoholic beverages; additionally, benefiting from the continuous decline in sugar prices, yeast processing profits will see a significant recovery, recommending focus on the yeast sector; focus on the rebound of the baijiu sector dominated by rate cut expectations; finally, pay attention to the improvement in the fundamentals of meat products due to the rebound in pork prices.

Risk warning: If the recovery of household income and domestic market consumption falls short of expectations, it could lead to a decline in sales; if overseas market orders fall short of expectations, it could result in a slowdown in export growth; the overall increase in gross margin in the first half of the year is mainly due to the decline in costs rather than internal reasons, hence the need to be cautious of the risk of rising raw material prices.