[Abstract]
htmlOn November 7, the State Council’s Joint Prevention and Control Mechanism issued the "Notice on Further Optimizing Epidemic Prevention and Control Measures". The "New Ten Measures" for optimization of prevention and control measures are expected to be fully unblocked. Looking ahead to 2023, the optimization of epidemic control has been relatively clear, but from the determination of control policies to the basic return of consumption to normal, it basically takes 3-4 quarters to go through a cycle ranging from 3-4 quarters according to overseas experience. Therefore, the impact and impact of the epidemic on consumption.
Travel chain recovery is still one of the very clear main configuration lines in the consumer industry. By sorting out the experience of the full liberalization of the United States and Southeast Asian countries, we found that duty-free and catering have the strongest restoration power, which is worthy of investors' attention.
1. Fully open up the travel chain and pay attention to: duty-free + catering
On December 7, 2022, the State Council’s Joint Prevention and Control Mechanism issued the "Notice on Further Optimizing Epidemic Prevention and Control Measures". The core points of this "New Ten Articles" for the optimization of prevention and control measures include: 1) Optimizing the requirements for nucleic acid testing of ; 2) Adjusting the isolation methods for asymptomatic and mild cases; 3) Emphasizing precise prevention and control and "quick sealing and quick release" in high-risk areas; 4) Requirement that non-high-risk areas shall not restrict the flow of people; 5) Accelerate the promotion of vaccination for the elderly.
We believe that the "New Ten Regulations" comprehensively optimize the control of nucleic acid testing, infection isolation, and personnel flow in non-high-risk areas, effectively reducing residents' travel concerns and travel resistance; emphasizing the precise division of risk areas, and effectively promoting the recovery and development of industries such as hotels/catering/scenic areas. With the rapid implementation of the "New Ten Measures" for optimized prevention and control measures, the operating conditions of travel-related industries are expected to recover quickly.
Looking ahead to 2023, the epidemic control tends to be optimized has been relatively clear, but from the determination of control policies to the basic return of consumption to normal, according to overseas experience, it basically takes a cycle of 3-4 quarters. Therefore, the impact and impact of the epidemic on consumption will still exist in 2023, especially in the first half of the year. The overall performance of consumption in 2023 will still be mainly driven by the pace of the epidemic evolution and the trend and expectations of economic development. Dilemma reversal is still the main logic. Overall, it is recommended to pay attention to the epidemic and dynamic configuration. In terms of direction, the service industry with the most obvious elasticity of post-epidemic repair is allocated.
Sitting to look for recovery after the epidemic overseas, and move from repair to recovery. After analyzing the post-epidemic consumption recovery situation in major overseas countries and regions, we found that the growth of residents' actual income, the control policies themselves, and the actual situation of the epidemic have a key impact on the rhythm and degree of consumption recovery. Common characteristics of the recovery of consumption after the epidemic in overseas markets include:
(1) The cancellation or relaxation of epidemic control policies will make consumption recover rapidly overall: (2) The recovery of necessary consumption is faster than optional consumption, but optional consumption is more flexible after the impact of the epidemic is completely eliminated: (3) Local or short-distance traffic is the core of commodity sales, local consumption, short-distance travel, etc., will recover faster, and the flow of long-distance travel, especially overseas business travelers. For airlines, hotels, etc., customers rely more on, the recovery of passenger flow is relatively lagging, but generally reflects strong price elasticity, and revenue recovery is also better;
(4) In the retail channel, supermarkets and stores have a large decline in customer flow, while grocery stores, convenience stores, etc. with deeper community penetration have a better recovery; (5) Continuous rising inflation will affect consumer confidence and suppress the release of consumer demand, and areas with stronger economic growth will recover more. After the overseas epidemic control policy has been clearly relaxed, consumption basically went through 3-4 quarters from the beginning of recovery to the full recovery, which is divided into three major stages: gradual relaxation of control to clear relaxation, opening up coexistence with the virus and experiencing the peak of the epidemic, and completely returning to normal.
Travel chain recovery is still one of the very clear main configuration lines in the consumer industry.Different from the B-style segmented track configuration that focuses on logical deduction in the past three years, we now believe that clarifying the rhythm of recovery and performance elasticity of A is more critical. Therefore, it has become particularly important for the review of overseas recovery paths and the calculation of domestic travel companies to reflect the overseas market. The initial leisure demand will be relaxed to promote the resurgence of passenger flow and price. During the epidemic, companies that have strengthened their operating advantages will be given an additional market value of premium by the market. The recovery of the travel chain is still one of the very clear main lines of allocation in the consumer industry.
2. Duty-free continued consumption recovery long logic
Since duty-free belongs to the tourism retail industry, the repair of basic passenger flow is the basis for the rebound of the duty-free business format. We selected two representative overseas duty-free industry listed companies Dufry and Lagardere as analysis samples. Since Dufry and Lagardere are very extensive in the regional distribution of tourism retail income, the income level is highly correlated with the degree of global tourism recovery. We find that the pace of income recovery is more consistent with the pace of overseas travel recovery.
Both companies' tourism retail revenue bottomed out in Q2 2020. From Q3 to Q3 2021, overseas epidemic control is still relatively strict, especially cross-border travel. Therefore, tourism retail revenue is at a low level, and then follows the changes in the epidemic and control policies (especially Europe and the United States are leading in the time of relaxation of epidemic control), showing a clear recovery trend.
Under the influence of the epidemic, especially outbound tourism consumption has dropped sharply. From 2020 to 2021, Chinese consumers' personal luxury goods consumption was in the range of 450-500 billion yuan, a significant decline compared with the scale of more than 700 billion yuan in 2019. However, the epidemic has boosted consumption backflow, and luxury goods consumption in China has shown a breach of trend growth. According to Bain's calculations, the sales of personal luxury goods market in China in 2020, increased by 48% year-on-year, and Bain expects the growth rate of to be 36% year-on-year in 2021. Although
has an impact on overall domestic consumption, the Chinese people's demand for high-end consumption has not been significantly impacted, and the growth rate of the domestic personal luxury goods market remains at a high level. Bain also predicts that the proportion of Chinese people in the global personal luxury goods market in 2025 is expected to reach about 42% (vs. about 21%-23% in 2021), and the proportion of Chinese people in the global personal luxury goods market in the global personal luxury goods market is expected to reach about 25%-27% (vs. about 21% in 2021). The duty-free sector is based on the long-term logic of the growth of Chinese luxury consumption and the return of consumption, which has not been changed due to the epidemic.
3. Catering: It is estimated that revenue will rapidly increase to pre-epidemic
US catering customer flow has basically recovered, and revenue has returned to the pre-epidemic growth track. With the increase in the rate of vaccine vaccination, the United States began to gradually abolish epidemic prevention and control policies in Q1 2021. In March 2021, retail and food services showed explosive sales growth, with a year-on-year growth rate of as high as 54.6%. As of July 1, 2021, 50 states across the United States have fully opened consumption scenarios such as restaurants, bars and non-essential stores.
US catering revenue began to catch up after the relaxation of control in March 2021, and its growth rate was basically the same as commodity retail starting from mid-2021. In August 2022, retail sales in the United States increased to 136% in August 2019, while catering sales increased to 140% in August 2019. Excluding price impact, catering revenue still increased from the pre-epidemic level and was consistent with the monthly growth rate before the epidemic.
Southeast Asia, Singapore's catering industry has recovered to the pre-epidemic level (the actual performance in July 2022 was +0.9% compared with July 2019). Among them, the performance of the sub-track is differentiated, and fast food with more diverse and flexible consumption scenarios and lower unit prices has recovered the fastest and achieved a positive growth rate. Before spring 2021, Vietnam's epidemic prevention and control was relatively strict. Its domestic hotel and catering industry was less disturbed by the epidemic, and the overall recovery speed was relatively fast. By January 2021, it achieved complete recovery compared with the same period before the epidemic.
Domestic, the entry threshold for the catering industry is relatively low, the pattern is scattered and competition is sufficient, so the market self-regulation is rapid and sufficient.Demand and industry supply were recovered simultaneously and rapidly in the first half of 2020, but demand has been relatively weak due to the disturbances of the epidemic since the second half of 2021, and the supply growth rate is also lower than the pre-epidemic level. Taking the leading listed companies as an example, the store exhibition has accelerated significantly from 2020 to 2021, but the pace of opening stores has slowed to varying degrees since the end of 2021 and the beginning of 2022.
Store opening of domestic key catering brands
Source: CITIC Securities, Jiufang Financial Research Institute
Reference:
20221206-CITIC Securities-Theme Strategy 2023 Investment Strategy
This report is organized by the research assistant and written by the investment consultant. Investment Advisor: Cheng Wei (Registration No.: A0740618080004) Researcher: Yang Yaohua (Registration No.: A0740122030025)
