20220408-招银国际-China_Consumer_Staples_2021_results_wrap-up__taking_out_Feihe_from_our_top_picks_on_soft_1H22_outlook_2页_456kb

China Consumer Staples Summary

Core Content

This report provides an analysis of the 2021 results and outlook for several China consumer staples companies, highlighting performance, key challenges, and future expectations. It also includes the current investment ratings and financial metrics for these companies.

Main Points

2021 Results Overview

• Out of 9 companies covered, 2 beat expectations, 1 was in-line, and 5 missed.
• Misses were primarily due to systematic risks such as the pandemic-driven demand drop and high input costs, which negatively impacted margins.
• Market reactions were negative, but shares gradually recovered due to guidance indicating steady earnings through price hikes and cost controls.

Key Companies and Performance

• CR Beer: Strong beat due to premiumization progress, which supported ASP uplift and APAC-east business turnaround. Management expects 20%–25% premium growth in 2022 and a RMB1.5–1.6b raw material cost inflation.
• Mengniu: Effective cost control brought 2H21 results in line with market expectations, but high raw milk costs still dragged on GPM. The company aims for low-teen top line growth and 30–50bps OPM expansion.
• Yili: Financial data for 2021 is estimated. Its GPM trajectory is expected to be similar to Mengniu's.
• Feihe: Guided for a slight sales decline in 1H22 due to channel inventory control and a high y-y comparable base, and a flattish GPM trend for 2022E. Due to softer guidance, Feihe is removed from the top picks.
• Nongfu: Non-water beverage sales beat expectations, but PET price hikes offset the performance, leading to a flattish GPM. The company is expected to have low-teen revenue growth for the year.
• E-cigarettes: Regulatory reforms have set a clearer path for industry evolution, but production hiccups are expected in the near term. Smoore and RLX are expected to see worst-case scenarios pass, but operation economics are not expected to improve immediately.

Investment Thesis

• Habitual consumption patterns, ongoing premiumization, and effective cost pass-through are structural strengths for F&B players in the face of cost inflation.

Key Information

Investment Ratings

Financial Metrics

Outlook

• CR Beer and Mengniu are preferred for their pricing power and cost control.
• Budweiser is incrementally interesting due to regional business turnaround.
• Feihe is removed from top picks due to softer guidance.
• E-cigarettes industry is expected to stabilize, with Smoore and RLX showing recovery potential.

Conclusion

The report emphasizes the resilience of consumer staples companies in navigating cost inflation and demand fluctuations, with a focus on premiumization, cost pass-through, and operational efficiency. Despite challenges, companies like CR Beer, Mengniu, and Budweiser are highlighted for their strong performance and growth potential, while Feihe is downgraded due to uncertain guidance. The e-cigarettes sector is expected to recover in the long term, though short-term production issues remain a concern.