Policy "gift package" assistance, the catering sector's rise momentum is unstoppable.

Recently, the concept stocks of the catering sector in the Hong Kong stock market have experienced a significant increase, like a long-awaited rainfall. On September 28, the catering sector of the Hong Kong stock market rose by 13.62%, becoming the second strongest sector after the elderly care concept, internal house stocks, and real estate agency stocks. Among them, HELENS (09869) surged by 75.82%, XIABUXIABU (00520) rose by 36.59%, attracting attention. JIUMAOJIU (09922) and HAIDILAO (06862) also recorded increases of over 15%, making the entire sector's performance impressive. It is worth mentioning that the surge in the catering sector may be related to the epic policy "gift package". It is reported that the Shanghai government recently decided to issue "Enjoy Shanghai" service consumption vouchers in the catering, accommodation, film, sports, and other four areas, with a total investment of 500 million yuan of municipal financial funds. Among them, the catering sector accounts for 360 million yuan, showing the significant policy support. The distribution of vouchers can directly stimulate consumers' willingness to consume in the catering sector, increase the customer traffic and revenue of catering businesses, and have a significant boost effect on the catering industry. It also shows the local government's positive measures to promote consumption and drive the recovery of the catering industry, thereby boosting industry recovery confidence. In addition, on September 24, the State Council Information Office held a press conference to introduce the situation related to financial support for high-quality economic development. The press conference announced a package of policies involving monetary supply, capital markets, real estate, and other areas. The unprecedented policy strength demonstrates the country's determination to support economic development. Some institutions pointed out that this policy will strengthen consumers' confidence in economic growth, increase consumers' willingness to consume, and boost overall consumption. Under various favorable policies, does it mean that the "most difficult" first half of the year for the catering industry has passed, and what development opportunities are hidden in the future? "Most difficult" first half of the year for the catering industry: increasing revenue but not profitability, price cuts sweeping through For the catering industry, the first half of 2024 was not easy - the number of companies leaving the market was almost the same as those entering, and the phenomenon of increasing revenue without increasing profitability was prevalent. Based on data. According to the data from the National Bureau of Statistics, the national catering revenue in the first half of the year was 26.243 trillion yuan, a year-on-year increase of 7.9%, a significant decrease compared to the over 21% growth in the same period of 2023; the revenue of catering units above the quota was 719.2 billion yuan, a year-on-year increase of 5.6%. Looking at the regions, the catering market in Beijing and Shanghai directly contracted. According to local statistics, in the first seven months of this year, Beijing's catering revenue was 74.42 billion yuan, a year-on-year decrease of 4.2%. During the same period, the retail sales of accommodation and catering industry in Shanghai was 84.052 billion yuan, a year-on-year decrease of 4.2%. In the first half of 2024, the total profit of catering companies above scale in Beijing was 180 million yuan, a year-on-year decrease of 88.8%, with a profit margin as low as 0.37%. It was found that the data for the same period last year was around 1.6 billion yuan. At the same time, in the first half of this year, the number of companies leaving the market was almost the same as those entering. According to Tianyancha data, the number of new registered catering-related companies in the first half of the year reached 1.346 million, while the number of cancellations and revocations was 1.056 million. In 2023, the total number of canceled and revoked catering companies was 1.359 million, and the cancellation and revocation data in the first half of this year is approaching the full year data of last year. Various data indicate that the catering industry experienced significant challenges in the first half of this year. Reflecting on performance, the tough times for catering companies were even more evident. According to Wind data statistics, in the first half of the year, among the 10 catering concept stocks listed in Hong Kong, there was a widespread phenomenon of increasing revenue without increasing profitability. Among them, 3 concept stocks saw a decline in revenue year-on-year, 3 recorded a net loss, and 6 experienced a year-on-year decline in net profit. Of particular note, the "hot pot first stock" XIABUXIABU Group suffered the biggest decline, with a net loss of 270 million yuan, compared to a net profit of 212 million yuan in the same period last year. It is not only the case for Hong Kong-listed catering concept stocks, but also for many A-share catering concept stocks. For example, Xi'an Catering, a well-known catering company in Shaanxi (000721.SZ), saw a year-on-year revenue decline of 7.93% to about 349 million yuan in the first half of the year, with a net loss of 59.6463 million yuan, a decrease of 29.53% year-on-year; China Quanjude, a favorite of Beijing residents, also showed a slight increase in revenue and net profit by 2.87% and 5.08%, respectively. In addition, the old brands Tongqinglou Catering Corporation and Jinling Hotel Corporation saw a year-on-year decline in net profit of 44.4% and 25.6%, respectively in the first half of the year. From a decline in profitability to a closing speed faster than last year, what happened to the catering industry in the first half of this year? In recent years, with the popularity of online terms such as "budget travel," "sinking market," and "special forces" reaching the consumer side, this reflects the reduction in the frequency of consumers eating out, streamlining consumption, and other phenomenon of consumer downgrading, indicating that "consumer downgrading" has already affected the dining level. In order to attract more customers, catering companies have also launched a trend of price cuts. According to industry data, in June of this year, XIABUXIABU, HAIDILAO, Cuntou, and Banu's average prices per customer dropped by 1%, 2%, 5%, and 9% respectively compared to the same period last year. Not only in the hot pot market, but also in the new tea market, there has been a collective decline towards the "10 yuan price range": CHABAIDAO for 3 yuan, Guming for 4 yuan, Shuyi for 6 yuan, and Xicha for 15 yuan, buy one get one free. For the above phenomenon, the China Cuisine Association analysis indicates that price wars, homogenized competition, and increasing cost pressures are the main factors leading to the current phenomenon of "increasing revenue but not increasing profitability" in the catering industry. Therefore, it is not difficult to see that multiple pressures from consumer demand changes, rent, raw material costs, etc. have led to...Below, how to seek a delicate balance between cost control and quality improvement is already a difficult challenge that many companies cannot avoid in their current development.With the help of the policy "big gift package", the opportunity for rebound is just around the corner? Behind the downgrading of consumption in the catering industry, it is obvious that consumers' consumption confidence urgently needs a "strong stimulant". Therefore, the policy "big gift package" is timely and will directly boost confidence. It is worth noting that in addition to the aforementioned consumption policy favors, since 2024, policies to boost the catering industry have been continuously introduced. In March, the Ministry of Commerce and 9 other departments jointly issued the "Guiding Opinions on Promoting the High-Quality Development of the Catering Industry", proposing 22 specific policy measures from seven aspects such as improving catering service quality, innovating catering consumption scenarios, and strengthening organizational support, to promote the high-quality development of the catering industry. In May, the State Administration for Market Regulation and 8 other departments issued the "Implementation Opinions on Further Optimizing Government Services, Enhancing Administrative Efficiency, and Promoting 'One Efficient Process'". In June, the National Development and Reform Commission and 5 other departments issued the "Measures to Create New Consumption Scenes and Cultivate New Growth Points in Consumption", proposing to cultivate new consumption scenes in the catering industry and develop the catering consumption subdivision fields. Behind the introduction of a series of favorable policies, it can be seen that the country is making every effort to create a good business environment for the catering industry. At the same time, with the holiday effect, demand in the catering industry is likely to experience a strong recovery. Currently, consumption is entering the peak season of "Golden September and Silver October", and as the National Day holiday approaches, many consumers will choose to travel, and the demand for catering consumption is expected to be concentrated and released. Anxin International pointed out that the catering industry is sensitive to changes in consumer expectations. If expectations improve, performance is expected to rebound significantly. However, it should be noted that although the positive effects of policies are evident, due to fierce competition and serious internal competition in the catering industry, some securities institutions have expressed the view that the industry is expected to be in a mild recovery trend and that price pressures will continue. Zheshang said that considering the monthly net store opening growth rate on the supply side, it is expected that the issue of high-base problems for catering companies above the quota will gradually ease in Q4 2024. However, the problem of intensified industry competition still needs time to be digested, so it is expected that price pressure for the industry will continue. Through the above content, it can be seen that although there are still uncertainties in the rebound opportunities for the catering industry, it is certain that the industry's rebound is getting closer under the favorable policies. Therefore, investors may consider following the following two routes to focus on investment opportunities in catering concept stocks: First, starting from brand strength, focus on companies with strong brand strength and management capabilities, such as Haidilao and Yum China, because under the halo effect, these companies are expected to stabilize prices earlier. Second, starting from consumer sentiment, in the prevailing trend of spiritual consumption, focus on companies like Luckin Coffee and KFC, which are good at creating emotional value through joint ventures, as these companies are more likely to stand out. As the saying goes, "There is no winter that cannot be overcome". Although the first half of 2024 was difficult for the catering industry, it is constantly adjusting and innovating. The catering industry already has great growth potential to adapt to the new market environment, and is expected to achieve improvements and growth in performance in the future, attracting more attention and capital inflows from investors.