Post-pandemic consumption value depression

　　If one type of asset is selected in the A-share market to describe the results of economic development, then high-quality consumer stocks may be the most suitable – consumer goods are closely related to people’s lives, and the company’s performance is relatively transparent and stable. Another important reason for investors’ preference for consumption is that high-quality consumer goods companies naturally have “long slopes and thick snow”, with high moats and long industrial cycles. When they are discovered in the early stage of their outbreak and held for a long time, they have a greater chance of gaining compared to other industries. Long-term performance and valuation double-rising returns.
　　Consumption can also encounter headwinds at times. The new crown epidemic has entered its third year. The once hot consumer sectors such as liquor, home appliances, catering, tourism, and duty-free have been labeled as “epidemic-damaged sectors”. In the past three years, the share prices of consumer stocks have also experienced great ups and downs. .
　　Squeezed by the epidemic, will consumption be sluggish for a long time? Not necessarily. Even in 2020, when the epidemic broke out, consumer stocks still performed a big market. Looking at various national economic data in the second quarter of 2022, it seems that consumption, which is greatly affected by the epidemic, is better than market expectations. As a representative of bulk durable goods and highly sensitive to income, automobile consumption has accelerated driven by policies. In particular, the sales of new energy vehicles have repeatedly exceeded market expectations, and even exceeded the scope of explanation driven by policy subsidies, showing endogenous growth momentum. . So, what is behind the consumption, and where are the consumption investment opportunities after the epidemic?
Digest the disturbance of the epidemic and fill the value depression

　　In the face of difficult and obscure high-tech and dazzling business model innovation, consumer stocks seem more like “popular lovers” that conform to most people’s aesthetics. The adjustment logic of consumer stocks since 2021 is also very clear: one is excessive valuation, and the other is flat performance under the disturbance of the epidemic.
　　In the big bull market of 2019-2020, in the process of overseas capital entering A shares, the valuations of many leading consumer companies have been raised very high, such as high-end liquor companies, which have been raised from 25 times the valuation center to 40 times. , the condiment company raised from 40 times to 60 times. With the high performance of “track stocks” in high prosperity in 2021-2022, funds will continue to flow out of the consumer sector, and many leading stocks of consumer goods will return to a reasonable level.
　　The epidemic that has lasted for nearly three years has suppressed the growth of many sub-sectors in consumption. In particular, the repeated epidemics in first-tier cities this year have dug a big hole in the economy in the first half of the year, affecting consumer demand and scenarios.
　　Affected by the above-mentioned epidemic and funds, many consumer sub-sectors have experienced double-kills in fundamentals and valuations in the past two years, and the risk of falling has been fully released. In the next few quarters, if the epidemic situation does not worsen than expected, the consumer sector is expected to fill the value depression in the past two years, driven by the low base year-on-year effect and the healthy organic growth in the medium and long term.
What supports consumption in the long run

　　It should be noted that there may be deviations in consumer investment from a macro perspective. First, because the consumption sector in stock market investment is not equivalent to the consumption demand in GDP by expenditure method, for example, companies that export consumer goods or to-B companies in the consumer goods industry chain are also part of large-scale consumption investment; Second, because the consumer industry has a large market span, many sub-categories, and some brands have obvious regional market characteristics, this means that consumer stocks mainly rely on bottom-up analysis, and top-down macro analysis is more suitable as an auxiliary bottom-up analysis. The cross-validation of the stock selection is not the dominant investment decision in the consumer sector.
　　However, perhaps investors still have doubts about the consumption momentum after the epidemic. We might as well go back to the most basic economic data to understand the resilience of consumer demand.
　　According to the National Bureau of Statistics of China, the real GDP in the first half of 2022 increased by 2.5% year-on-year, and the second quarter increased by 0.4% year-on-year. A series of data such as industry, investment, and capacity utilization are generally lower than market expectations. In the first half of the year, the per capita disposable income of the national residents was 18,463 yuan, a nominal increase of 4.7% over the same period of the previous year, and the growth rate was significantly slower than the 12.6% growth rate of the same period of the previous year. In June, the national urban survey unemployment rate was 5.5%, which was in line with the government’s target, but the 19.3% unemployment rate of the 16-24-year-old youth population survey, which is a new consumer force, hit a new high since the data was released.
　　Consumption, as reflected in the survey data of depositors released by the People’s Bank of China, does not seem optimistic either. According to the results of the survey of depositors conducted by the People’s Bank of China in the second quarter of this year, the resident income index for the quarter was 44.5%, a decrease of 3.7 percentage points from the previous quarter. In the second quarter, the resident employment index was 35.6%, a decrease of 6.9 percentage points from the previous quarter. The price expectation index was 60.4%, up 1.7 percentage points from the previous quarter. 23.8% of residents tend to consume more Residents investing in “more investment” decreased by 3.7 percentage points from the previous quarter.
　　However, against the backdrop of headwinds in the national economy and resident employment income, the nominal value of retail sales of consumer goods in June increased by 3.1% year-on-year, a significant improvement from the previous value of -6.7%, which was better than market expectations. This has to make investors reassess the resilience of consumption.
　　Referring to the experience of global economic development, when the per capita GDP of an economy exceeds 10,000 US dollars, the per capita consumption level will enter a stage of rapid rise. The economic implication behind this is that when an economy is in the early stage of development with scarce capital, the return on investment is also higher, so people restrain their desire to consume and use more of their total output for investment and reproduction. When an economy has formed a large amount of capital accumulation through long-term fixed asset investment, capital is no longer scarce, and the return on investment decreases, which is manifested as a slow decline in long-term interest rates. At this time, because the return on investment in reproduction has become lower, the opportunity cost of consumption has also declined, and people are more willing to spend their income on consumption, and people who have gradually become rich have a higher pursuit of material enjoyment and spiritual experience.
　　In 2021, China’s per capita GDP will be 80,976 yuan, equivalent to 12,551 U.S. dollars. At the same time, we have also seen a downward trend in China’s long-term interest rate center, and the prerequisites for a rise in macro-level consumption levels have been met.
　　Even taking into account the impact of the epidemic, the overall growth rate of my country’s economy and residents’ income is still not low, which has become the basis of consumption. According to data from the National Bureau of Statistics, China’s total labor productivity in 2021 will be 146,380 yuan per person, an increase of 8.7% over the previous year and 8.0% higher than the GDP growth rate. Higher production efficiency means that economic growth is based on quality and growth. effectively obtained. In 2021, the per capita disposable income of national residents will be 35,128 yuan, an actual increase of 8.1% over the previous year, which is in line with the GDP growth rate and faster than the per capita GDP growth rate.
　　Income growth and spending power alone are not enough. Consumers do not necessarily know what they want, but they will be “planted” by merchants, and some consumers will “fall in love at first sight” after experiencing high-quality products and services. Therefore, the willingness to consume also needs to be stimulated by enterprises with high-quality supply. China is an economy with the most complete industrial categories and industrial chains in the world. It has a broad economic depth and market, and has a profound cultural heritage. Enterprises have abundant resources to create high-quality products and services to meet consumer demand. In recent years, under the guidance of the digital transformation of the economy, corporate research and development have had stronger technical and data support, and intelligent terminal products have continued to iteratively upgrade, prompting the emergence of new sales channels and communication and interaction methods, providing opportunities for cultivating and expanding new types of consumption. Rare opportunity.
　　Therefore, corresponding to China’s current development stage, consumption is not only the starting point for steady growth in 2022, but also the main engine of the domestic and international economic dual cycle, which is encouraged and subsidized by policies. It is also the most direct reflection of the people’s yearning for a better life. If you choose to use a class of assets to characterize the achievements of China’s transformation and upgrading, then consumer stocks with good quality are undoubtedly very competent “spokespersons”.
Cars sell well after the epidemic

　　Passenger cars are a typical example of domestic consumption, but the investment opportunities brought about by the expansion of automobile consumption demand may lie in parts companies or even upstream suppliers of parts companies, not necessarily in vehicle companies.
　　According to data from the China Passenger Car Association, the sales figures of the auto market in June 2022 have increased significantly than expected. In June, the retail sales of the passenger car market reached 1.943 million units, a year-on-year increase of 22.6% and a month-on-month increase of 43.5%. The month-on-month growth rate of retail sales in June was the highest in the history of the same period in the past six years. As a bulk durable consumer goods, the market demand for automobiles has been released under the stimulus of policies, which also shows that the consumption power of middle and high-income groups is limited by the impact of the epidemic. Historical data shows that the incentive policy for automobile consumption has impulse characteristics, but even so, its driving effect on the upstream and downstream industrial chains will continue to be released.
　　The new energy passenger vehicle market hit a record high in June. In June, the wholesale sales of new energy passenger vehicles reached 571,000 units, a year-on-year increase of 141.4% and a month-on-month increase of 35.3%. In June, the wholesale penetration rate of new energy vehicle manufacturers was 26.1%. With the multi-line simultaneous product launch of independent car companies on the new energy route, the market base continues to expand. There are 16 companies with wholesale sales of more than 10,000 vehicles (an increase of 3 from the previous month and an increase of 11 from the same period last year), accounting for the proportion of new energy passenger vehicles. 85% of the total car usage. The China Passenger Transport Association said that the improvement in supply and the expectation of rising oil prices have brought about a booming market. The rise in oil prices and the lock-in of electricity prices have led to a boom in electric vehicle orders.
　　The sales data of new energy vehicles in June also showed that the previously worried car purchase subsidy policy had less impact on new energy vehicles than the market expected. This means that consumers are more accepting of new energy vehicles. In addition to paying attention to the price of the car, consumers should also consider the driving experience and the comprehensive cost of using the car.
　　In the era of fuel vehicles, the core components of joint venture car companies that have the right to speak in the market are also mainly foreign-funded companies. In the new energy vehicle industry chain, the rise of domestic car companies is accompanied by the localization of components. Domestic component companies are competitive in multiple dimensions such as response speed, price, and innovation capability, which determines that localization is an inevitable direction. A high-quality parts company with large space for import substitution, large investment in R&D, and competitive products.
　　In terms of risks, first, the resumption of work and production in the supply chain and consumption scenarios still face the potential impact of the epidemic, but the extent is not expected to exceed that in the second quarter of 2022. Second, if the policy of stabilizing growth is less than expected and drags down purchasing demand, corporate earnings are expected to be under pressure. Third, the risk of stagflation in Europe and the United States continues to rise. In addition, whether the Russian-Ukrainian conflict will escalate is an unpredictable black swan risk.