Cathay Securities and Haitong Securities: Under the supply-demand mismatch, leading food and beverage companies are actively adjusting, and the sector is expected to welcome a rebound from the bottom

According to the Zhitong Finance APP, Guotai Junan released a research report stating that from 2019 to 2022, the industry experienced high prosperity, and the market assigned high valuations. Since 2023, the prosperity has declined, and performance has come under pressure, leading to pessimistic expectations, with sector valuations gradually declining, currently oscillating around a PE of about 20 times. The firm believes that the long-term development logic of the industry remains solid, the growth ceiling for leading companies is still large, and they are actively adjusting and seeking incremental growth. If there is an unexpected performance realization in the end, the sector is expected to welcome a rebound from the bottom. Meanwhile, in 2024, sector capital expenditures are expected to begin to turn downward, significantly improving free cash flow and enhancing shareholder returns in the sector. Guotai Junan's main points are as follows: Demand under pressure, long-term space still large Against the backdrop of weak consumption recovery, the revenue growth rate of the catering industry from 2019 to 2024 has significantly slowed to low single digits, leading to a noticeable pressure on the demand side of the frozen food industry. The performance of listed companies in the sector has also shown a significant slowdown or even decline in the past two years, with no clear turning point in sight. As a result, the market's expectations for the long-term development space of the industry and the growth ceiling of leading companies are relatively pessimistic. The firm believes that the driving force for industry development remains, and the trend of food freezing is irreversible, with ample long-term development space for the industry, while the market share of leading companies still has significant room for improvement. Supply-demand mismatch, active adjustment In the past two years, the performance of the sector has been under pressure, not only due to unfavorable external conditions but also related to the substantial supply brought about by aggressive capacity expansion in previous years under optimistic industry expectations. Weak demand, increased supply, and a fragmented landscape have intensified competition, while mainstream manufacturers' demand for market share remains higher than profit, directly leading to increased promotional discounts and expenditure, resulting in a decline in capital return rates in the sector. In 2024, capital expenditures in the sector are expected to significantly turn downward, and the total number of employees in the sector has also begun to slow down in growth, indicating that the industry has recognized the contradiction of supply-demand mismatch and has begun to actively adjust. Breaking the internal competition, seeking incremental growth The firm also observes that some companies in the sector are actively seeking breakthroughs by launching new product categories, promoting new products, and expanding into emerging channels to find new growth. ① Anjoy Food: As a leading player in the frozen food sector, the company has strong operational resilience, and its performance in recent years has significantly outperformed competitors. Under the trend of rational consumption and fragmented channels, product strength has become increasingly critical. The company emphasizes product-driven growth by 2025, increasing the push for new products, while new products are tilted towards the C-end to enhance profit margins. ② Qianwei Yangchu: The company has a higher proportion of catering, facing greater short-term performance pressure, but has been continuously increasing its R&D and sales personnel in recent years, improving its channel strength in both large B and small B ends. Additionally, the company is embracing new retail channels and expanding into dish and baking categories to seek incremental growth. Risk Warning: Weak consumption recovery; intensified competition; rising costs; food safety incidents, etc