The Zhitong Finance App learned that Tianfeng Securities released a research report saying that overall, food and beverage 24Q3 performance grew steadily, growth accelerated month-on-month, and profit flexibility continued to be unleashed. Looking ahead to the whole year, the bank believes that demand may be stable, mass consumption continues to recover, and profit flexibility may be released under a downward trend in costs. The bank suggests focusing on 3 main lines: 1) Strong stability in performance: Haitian Wei (603288.SH), Angel Yeast (600298.SH); 2) or enjoy reform dividends: Fuling Mustard (002507.SZ); 3) enjoy the remodulation dividends: Tianwei Foods (603317.SH).

Tianfeng Securities's main views are as follows:

Q3 revenue grew steadily, and the profit growth rate was higher than the revenue growth rate

Performance: Q3 revenue growth accelerated month-on-month, and profit growth was higher than revenue growth. The condiment industry's 24Q3 revenue and net profit to mother were 16.415/2.578 billion yuan respectively, up 9.55%/15.25% year on year, respectively. The growth rate was +3.34/+9.44pct compared with 23Q3. Among them, 24Q3 revenue growth increased 4.85pct month-on-month.

Expenses: 24Q3 fees have shrunk, and the competitive trend has subsided. The 2024Q3 condiment industry sales expense rate/management expense rate/financial expense ratio were 7.77%/3.55%/-0.40%, respectively, -0.15/-0.23/+0.47pct. The 24Q3 sales expenses rate declined year-on-year and month-on-month. It is expected that major condiment companies' sales expenses will shrink, and the competitive trend may subside.

Profitability: Continued interpretation of downward cost logic, 24Q3 profit margin increased. The gross margin and net margin of the condiment industry in 2024Q3 were 33.06%/15.92%, respectively, +1.30/+0.85pct year-on-year. As the prices of raw materials such as soybeans, cooking oil, and white sugar continued to decline, the gross margin of the 24Q3 condiment industry maintained an upward trend.

Reduced costs bring about profit flexibility, focus on health and the remodelling circuit

Demand: Catering is still on the growth channel. The growth rate is slower than in 24Q2. Consumer demand is still growing weakly (customer unit price falling). In particular, popular restaurants are growing significantly faster than high-end restaurants. The bank believes that industry competition still exists, and structural opportunities still exist in the context of mass consumption recovery.

Costs: Looking at the whole year, the overall price of raw materials is expected to drop compared to 2023, and profit flexibility is expected to be released. Industry characteristics: 1) Purchasing channels are diversified, and online channels are growing faster. Major condiment companies are growing faster online than offline, and their layout is becoming more and more comprehensive. 2) Deliciousness is still the highest demand, and health needs are gradually being reflected. 3) Convenience and deliciousness resonate, and complex mixing/meal sauces are on the rise.

Investment advice: Overall, the 24Q3 performance grew steadily, growth accelerated month-on-month, and profit flexibility continued to be released. Looking ahead to the whole year, the bank believes that demand may be stable, mass consumption continues to recover, and profit flexibility may be released under a downward trend in costs. The bank suggests focusing on 3 main lines: 1) Strong stability in performance: Haitian flavor industry and Angel Yeast; 2) or enjoy reform dividends: Fuling mustard; 3) enjoy remodulation dividends: Tianwei Foods.

Risk warning: risk of declining industry sentiment; risk of fluctuating raw material prices; risk of increased industry competition; market risk; food safety risk, etc.