2023.05.22 20,000 points to be the resistance

In April, the total retail sales of consumer goods in China reached CNY3.49tn, +18.4% YoY, which was lower than the market’s expectation of 21.9%. The retail sales of consumer goods excluding automobiles were CNY3.13tn, +16.5% YoY. In 4M23, the total retail sales of consumer goods reached CNY14.98tn, +8.5% YoY, and the retail sales of consumer goods excluding automobiles were CNY13.57tn, +9.0% YoY. In April, retail sales reached CNY3.12tn, +15.9% YoY, and catering revenue was CNY375.1bn, +43.8% YoY. In 4M23, retail sales were CNY133.95tn, +7.3% YoY, and catering revenue was CNY1.59tn, +19.8% YoY.

In 4M23, the total online retail sales in China reached CNY4.41tn, +12.3% YoY. The online retail sales of physical goods were CNY3.72tn, +10.4% YoY, accounting for 24.8% of the total retail sales. In 4M23, the national real estate development investment was CNY3.55tn, +6.2% YoY. Among that, residential investment was CNY2.71tn, -4.9% YoY. In 4M23, the sales of commercial properties was 376.36mn square meters, -0.4% YoY, and the sales value of commercial properties reached CNY3.98tn, +8.8% YoY. The sales value of residential properties increased by 11.8% YoY. As for the Hong Kong market, since it lacks upward momentum, we expect HSI to trade between 18,500-20,000 points.

In terms of industry, due to the low base last year, the consumer sector has recovered faster this year, and investors are recommended to pay attention to consumer-related companies.

Budweiser APAC (1876.HK) reported revenue of US$1.70bn in 1Q23, +12.9% YoY whereas total volume sold was 9.1% higher YoY to about 22.1mn hl, mainly driven by the recovery in the China market and continuous growth in South Korea and India. The company’s volumes and revenue in China increased by 7.4% and 10.9% respectively, all grew to above pre-pandemic levels.

In 1Q23, the company’s normalized EBITDA increased by 10.4% YoY to US$580mn. The results came in slightly above the consensus. South Korea and India saw double-digit growth in both volumes and revenue, and the Mgt expect the strong momentum in South Korea and India to continue with increasing demand and premiumization. Despite an 11.1% YoY incremental increase to the company’s gross profit to US$854 mn in 1Q23, GPM had been eroded further by another 81 bps to 50.2% (vs 51.0% for 1Q22 and 52.8% for 1Q21), as the cost of sales rose by 14.8%. The Mgt remain highly optimistic on the premiumization potential of the Asian market in the longer term. It is recommended to buy at HK$20.2, target at HK$23.5, and stop loss at HK$19.3.

Vinda International Holdings Limited (3331.HK) posted a record high 1Q23 revenue of almost HK$5.00bn (+9% YoY, +16% YoY at constant FX rates) where contribution from China reached HK$3.93bn (+13% YoY, +22% at constant FX), mainly driven by the phenomenal growth in the E-commerce channel, which contributed to about HK$2.08bn in revenue with a 34% growth rate.

In Q1, Vinda’s tissue sales went up by 11% YoY to HK$4.07bn whereas sales for personal care products came in steady at HK$898mn. Per the mgt, Vinda’s premium tissue now accounts for about 43% of total tissue sales, up by 5% YoY or translating into a revenue growth of 25%. However, the growth of the high-hoped personal care products was weaker than expected. GPM was up 3 pct QoQ thanks to lower pulp prices. Vinda’s Q1 GPM edged up by 3 pct QoQ to 25.2%, benefiting from the pulp price drop. The mgt expects that the cost will continue to drop in the next three quarters if pulp price continues its downward trend. It is recommended to buy at HK$20.1, target at HK$23.4, and stop loss at HK$19.3.