类别:行业 机构:国泰君安证券股份有限公司 研究员:Zi Meng/Zhang Rui 日期:2020-06-29


      Economic growth fell in 1Q20 due to the coronavirus epidemic. In Q2,we recommend the cosmetics, snack food and education sectors, whichhave strong growth potential, as well as the supermarket sector, whichcontinues to benefit from CPI inflation.


      Investment advice: China’s economic growth experienced a slowdownin 2019 and further declined in 1Q20 due to the epidemic outbreak. InQ2, online consumption is one of the most important growth factors.

      Brands are stepping up online marketing efforts, and platforms areramping up efforts to drive traffic, including live streaming and subsidies.

      Domestic cosmetics and snack food brands are expected to be keybeneficiaries. Risk appetite is unlikely to pick up in the short-term as theglobal epidemic continues to fester and uncertainty on economicrecovery remains. In the consumer sector, staples are still of toppreference. Furthermore, more aggressive policies are expected tostabilize the economy and promote consumption. Recommendallocation on cosmetics, snack food and education sectors with stronggrowth potentials, as well as the supermarket sector benefiting from CPIinflation. Our picks include: Yonghui Superstores(601933.SH),Jiajiayue(603708.SH), Three Squirrels(300783.SZ), Bestore,Proya(603719.SH), Onechance(603605.SH), Marubi(603983.SH),Green Pine(300132.SZ), Lanxum(300010.SZ), etc.

      In 1Q20, economic growth fell due to the COVID-19 outbreak.

      Growth in total retail sales in 2019 slipped 1ppt YoY to 8%. Meanwhile,growth in retail sales, excluding autos, was stable at 9%. In a sign ofsteady growth in staples consumption, the retail sales of grain, oil &foodstuff, daily necessities and cosmetics above designated size increased by 12.0%, 17.5% and13.9%, respectively, in 4Q19. Hit by the COVID-19 outbreak, the consumer market has been sluggishsince the beginning of 2020. Retail sales of consumer goods declined 19% YoY in Q1. In March, YoYgrowth in retail sales rose by 4.7ppts MoM, suggesting that a recovery is on the way. For most  consumer categories, growth is down in 2020, however, consumption remains resilient in grain, oil,food and daily necessities.

      By sector, supermarkets showed steady growth, cosmetics saw limited impact, anddepartment stores and gold jewelry took a huge hit.

      1) Supermarkets: The sector was resilient due to its staples nature. In 2019, the sector had revenuegrowth of 11.61% YoY, up 1.59ppts. In 1Q20, revenue grew by 18.2% YoY. At the same time, theearnings midpoint continued to move higher, with net profit excluding one-off items up 10% YoY.

      2) Cosmetics: The sector maintained strong revenue growth of 17% YoY in 2019. In 1Q20, thesector declined, albeit slightly, due to COVID-19, with revenue and net profit excluding one-off itemsdown 8% and 18% YoY, respectively.

      3) Department stores and gold jewelry: The impact was huge given the dominance of the offlinechannel and the discretionary nature of the business. In 1Q20, the department store sector registereda revenue growth of -45% and reported a net loss excluding one-off items. Meanwhile, the goldjewelry sector saw its revenue fall by 10.6% due to the COVID-19 outbreak, compared with growth of8.6% in 2019.

      Looking at positions, mutual funds hold heavy positions in cosmetics, supermarket andsnack food companies. At the end of 1Q20, the retail sector represented 1.78% of fund holdings,0.24ppt higher than at end-4Q19 but 0.75ppt lower than the standard weight.

      Supermarkets: Yonghui Superstores and Jiajiayue saw increase in fund overweight positions.

      Cosmetics: Onechance and Proya both saw increase in fund overweight positions.

      Snack foods: Yankershop and Three Squirrels saw increase in fund overweight positions.

      Gold jewelry: Chow Tai Seng saw increase in fund overweight positions.

      In terms of valuation, Chongqing Department Store (department stores), Chengdu Hongqi Chain(supermarkets), Lao Feng Xiang (gold jewelry), Chow Tai Seng (gold jewelry) and Shanghai Jahwa(cosmetics) were undervalued among their peers.

      Potential Risks: economic slowdown and increased industry competition.