Haitong Food Industry Special Report: Demand under pressure in the first half of the year, with structural differentiation

Haitong released a research report stating that due to the overall slowdown in domestic consumption growth, the decline in raw milk prices, and the oversupply in the dairy market, the total revenue of the industry in the first half of 24H1 has declined. With the clearance of inventory in some dairy channels and the gradual improvement in supply and demand balance upstream and downstream, the outlook for the liquid milk market in the second half of the year is expected to improve, driving the overall performance of the sector for the whole year. In 24H1, benefiting from good stocking demand during the Spring Festival, the performance of the leisure food sector's revenue was relatively good. However, in 24Q2, due to weak daily demand after the Spring Festival and the high base of the same period last year, the overall outlook of the sector declined slightly. Additionally, in terms of profitability, the change in channel structure and the increase in some raw material prices led to a decrease in the profit margin level of the sector. Haitong's main points are as follows: Seasoning sector: Weak demand in 24Q2 and increased investment affecting profit margins In 24H1, the total revenue/non-recurring net profit attributable to mothers of listed companies in the seasoning sector increased by +5.92%/+7.11% year-on-year to 30.777/5.35 billion yuan. Looking at the quarterly figures, the revenue growth rates in 24Q1 and 24Q2 were 6.61% and 5.15% respectively, and the non-recurring net profit growth rates were 10.82% and 2.51% respectively. In 24Q1, benefited from the peak sales season during the Spring Festival, the revenue of the sector achieved stable growth, while in 24Q2, due to weak off-season demand, the revenue growth rate weakened compared to Q1. In terms of profitability, in 24Q2, although the gross profit margin has been restored somewhat due to cost reduction, the increase in market investment has led to a significant increase in sales expenses, resulting in a slight decrease in the overall non-recurring net profit margin. Looking at the performance of various sub-sectors in 24Q2, the soy sauce sector's revenue was under pressure, with only Haitian achieving positive growth; Hengshun also saw slight growth due to the low base of the same period last year; the day-earlier and custom-made 2B companies, such as Jichen and Baoli, achieved rapid growth due to the recovery of downstream large B customers; Anqi achieved rapid growth due to the eye-catching growth overseas; and pickled vegetables were under pressure due to weak demand and inventory clearance. Dairy sector: Total revenue declined in 24H1, with single season profit pressure in Q2 Affected by factors such as the overall slowdown in domestic consumption growth, the decline in raw milk prices, and the oversupply in the dairy market, the total revenue of the industry in 24H1 has declined. In terms of profitability, benefiting from the decline in raw milk prices, the net profit attributable to mothers increased by 13.55% year-on-year in 24H1. However, the net profit attributable to mothers decreased by 39.09% year-on-year in 24Q2, which may be related to fierce industry competition and further market demand contraction. Looking ahead to the second half of 24, Haitong believes that with the clearance of inventory in some dairy channels and the gradual improvement in supply and demand balance upstream and downstream, the outlook for liquid milk in the second half of the year is expected to improve, driving the overall performance of the sector for the whole year. In 24H1, the total revenue/mothers' net profit of listed companies in the dairy sector decreased by -8.54%/+13.55% year-on-year to 87.481/8.393 billion yuan. In 24Q2, the single season figures decreased by -13.68%/-39.09% year-on-year to 41.142/2.051 billion yuan. Leisure food sector: Overall revenue under pressure, performance of single-product companies more stable In 24H1, the total revenue/mothers' net profit of listed companies in the leisure food sector increased by +19.90%/+14.17% year-on-year to 19.785/1.437 billion yuan, with single-season figures in 24Q2 increasing by +3.94%/-6.58% year-on-year to 7.616/0.352 billion yuan. In 24H1, benefiting from good stocking demand during the Spring Festival, the revenue performance of the sector was relatively good. However, in 24Q2, due to weak daily demand after the Spring Festival and the high base of the same period last year, the overall outlook of the sector declined slightly. Additionally, in terms of profitability, the change in channel structure and the increase in some raw material prices led to a decrease in the profit margin level of the sector. Looking at different business models, in 24H1, the revenue of single-product companies/channel-type companies increased by +17.00%/+21.39% year-on-year, with figures in 24Q2 decreasing by -1.73%/+7.51% year-on-year. The performance of single-product companies was relatively stable (mainly benefiting from omnichannel layout), while channel-type companies had internal performance differentiation - Shanghai Laiyifen and Bestore Co., Ltd., which focus on store business, faced greater pressure, while Three Squirrels Inc. and Yanker Shop Food, which actively responded to the rise of e-commerce channels, achieved higher growth. Investment recommendation: Recommend leading companies in the mass-market sector with stronger operational resilience and potential gradual improvement in costs. It is recommended to focus on Foshan Haitian Flavouring and Food (603288.SH), Jonjee Hi-Tech Industrial And Commercial Holding (600872.SH), Inner Mongolia Yili Industrial Group (600887.SH), New Hope Dairy (002946.SZ), Chacha Food (002557.SZ), Jinzai Food Group (003000.SZ), Eastroc Beverage (605499.SH), Zhe Jiang Li Zi Yuan Food (605337.SH), and Jiahe Foods Industry (605300.SH). Risk warning: Food safety risks; intensified market competition; new product, new channel, and new market expansion falling short of expectations; significant fluctuations in upstream raw material costs.