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[International Finance Research] Huabao Foods ETF Investment Value Analysis: Huabao Foods ETF subscription will start soon

Release Time:2021-05-04 Topic:Is there an ETF fund for food and beverage? Reading:60 Navigation:Stock Liao information > Gourmet food > [International Finance Research] Huabao Foods ETF Investment Value Analysis: Huabao Foods ETF subscription will start soon phone-reading

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Guojin Securities Research Institute

Financial Product Center

On December 1, Fortune CSI subdivided the food and beverage industry themed ETF (fund abbreviation "food ETF", subscription code: 515713, transaction code: 515710), which was officially issued by the China Securities Regulatory Commission and was the first food in the market. Beverage ETF. The fund is a passive index fund, tracking the underlying index to make it similar to the underlying index's risk and return characteristics. The fund subscription period is from December 14, 2020 to December 18, 2020.

Investment value analysis of the food and beverage industry

Over the past 15 years, it has risen 32 times and the long bull trend leads the market: The China Securities Subdivision Food and Beverage Industry Thematic Index has risen 32.2 times since the base date on December 31, 2004, and the CSI 300 has risen 5.1 times over the same period. The certificate 500 rose 6.5 times. Among Shenwan's 28 first-level sub-sectors, food and beverages have led the market in 15-year cumulative growth.

ROE leads the market and creates a strong brand moat: Food and beverage ROE has long been greater than 20%, and the long-term barriers to competition or scale advantages built by food leaders have a self-reinforcing trend. The brand moat will become more stable and bring continuous surpassing The ability of the industry's average profitability. The food and beverage sectors generally have the characteristics of light assets, good competitive landscape, high asset quality, and abundant cash flow. They are a hotbed of long-term bull stocks. Leading food segments have grown rapidly, with strong endogenous growth drivers: mainstream food leading companies have achieved strong performance growth, and their net profit compound growth has been able to maintain a double-digit growth rate since their listing. Food leaders continue to build capital, channels and brand strength, and their business has experienced strong endogenous growth.

Consumption upgrades & rising inflation drive growth: The consumer market has a solid foundation under the guidance of continued income growth, the restoration of consumer confidence, and consumption boost policies. Under the trend of geographical extension of consumption and upgrading of consumption levels, more and more food companies will continue to grow and develop through product innovation and brand upgrades. Under the macro background of consumption upgrades and rising inflation rates, the fundamental improvement of the food industry and price hikes have been significantly driven. Driven by the huge domestic demand, the leading food industry with a good competitive landscape, high asset quality, strong profitability, steady growth in performance and abundant cash flow will have better comparative advantages and room for growth in the medium and long term.

Analysis of the characteristics of the China Securities Subdivision Food and Beverage Index

Prefer the leader in the food and beverage sub-industry, presenting the style of market capitalization: sub-food index is composed of sample stocks of large-scale and relatively liquid companies in sub-industries such as food manufacturing, and the weighted average total market value of the index constituent stocks It is 618.199 billion yuan, showing the style of the market.

In the Shigekura liquor, dairy products and condiments sector, the coverage of Lu Stock Connect reached 84%: the index mainly Shigekura liquor, dairy products and condiment sectors, accounting for 58.0%, 14.5% and 13.6% respectively, top ten Shigekura The stock concentration is relatively high, at 75.3%. Chongcang's Wuliangye, Yili, Guizhou Moutai, Haitian Flavour, and Luzhou Laojiao are favored by foreign investors as core assets. Among the 49 constituent stocks of the subdivision food index, 41 are Land Stock Connect, and the coverage of Land Stock Connect reaches 84%. As of December 6, 2020, the market value of the subdivision food index Lu Stock Connect has reached 379.41 billion yuan, and the weighted average stock market value accounts for 13% of the free float market value.

Strong profitability and high growth: The CSI Subdivision Food and Beverage Index has strong profitability and excellent growth. Its ROE is 22.79%, the net profit attributable to the parent has a year-on-year growth rate of 14.71%, which is outstanding in the major market indexes.

Outstanding profitability and moderate volatility: The index has yielded 77.4%, 143.0% and 330.7% in the past 1 year, 3 years, and since the release date. The short-term and long-term returns are higher than those of the main market indices in the same period. Outstanding ability; from the perspective of volatility, the long-term volatility of the index is comparable to that of the CSI 500.

Risk warning: The risk of large market volatility brought about by the uncertainty of the development of the epidemic may affect the return of the fund.

On December 1, Fortune CSI Subdivided Food and Beverage Industry Theme ETF (fund abbreviation "Food ETF", subscription code: 515713, transaction code: 515710) formally obtained the approval of the China Securities Regulatory Commission, becoming the first food in the market Beverage ETF. The fund is a passive investment stock index fund, which mainly adopts a portfolio replication strategy to track the underlying index so that its risk-return characteristics are similar to the risk-return characteristics of the market portfolio represented by the underlying index. The fund subscription period is from December 14, 2020 to December 18, 2020.

1. Investment value analysis of the food and beverage industry

1.1 Food and beverage industry: a cumulative increase of 32 times in fifteen years, and the long bull trend leads the market

The China Securities Subdivision Food and Beverage Industry Thematic Index has increased 32.2 times from the base date on December 31, 2004 to December 6, 2020. In the same period, the CSI 300 rose 5.1 times and the CSI 500 rose 6.5 times. Among Shenwan’s 28 first-level sub-sectors, food and beverage, household appliances, medical and biological, leisure services, and electrical equipment ranked the top five in terms of growth, with cumulative growth rates of 29.4 times, 20.1 times, 14.1 times, 11.9 times, and 8.8 times, respectively. Food and beverages The industry has led the market in 15-year cumulative growth.

Chart 1: The long-term return performance of the CSI subdivided food and beverage index and major market indexes (as of 2020.12.6)

Source: wind, China National Financial Securities Research Institute

Chart 2: 2004.12.31-2020.12.6 subdivided food index and the cumulative return multiple of the first-level industry range of Shenwan

Source: wind, China National Financial Securities Research Institute

ROE leads the market and creates a strong brand moat

Since 2014, the ROE of the food and beverage industry has been maintained at more than 15%, and for 18 years, it has maintained more than 20%. Its profitability and profitability are far ahead of other industries. The reason for the long-term high level of ROE in the food and beverage industry is that the long-term competitive barriers or scale advantages built by food leaders have a self-reinforcing trend, and the market share and profitability can maintain long-term stability or increase, which in turn promotes the continuous rise of performance and stock prices. The moat will become more and more stable, which will lead to the ability to continuously exceed the industry's average profitability. The quantification of financial indicators for the moat is the long-term continuous high ROE. The food and beverage sectors generally have light assets. Food leaders generally have the characteristics of maintaining a high ROE for a long time, a good competitive landscape, high asset quality, and abundant cash flow. Therefore, the food and beverage industry has always It has been a hotbed of long-term bull stocks.

Chart 3: Since 2014, the breakdown of the food index and the ROE of the first-level industry in Shenwan has been broken down

Source: wind, China National Financial Securities Research Institute

The food segment leader is growing rapidly, and the endogenous growth driver is strong

The performance of leading mainstream food products is growing strongly, and the compound growth rate of net profit has been able to maintain a double-digit growth since its listing. In the liquor sector, Kweichow Moutai and Kouzijiao have achieved a compound net profit growth rate of 30% since their listing. Leading liquors such as Yanghe, Laobaigan and Wuliangye have maintained rapid growth of more than 15%; in the dairy products sector, Yili shares and The compound net profit growth rate of Mengniu Dairy since its listing has been 26.1% and 18.6% respectively; in the condiment segment, the compound net profit growth rate of Fuling mustard has reached 30% since its listing, QianheThe flavor industry and Haitian flavor industry have maintained growth of more than 20%; in other food sectors, such as Bairun and Zhujiang Beer, the compound net profit growth rate has maintained strong growth. Food leaders continue to build capital, channels and brand strength, and their business has experienced strong endogenous growth.

Chart 4: The compound annual growth rate of net profit of leading food companies since listing (as of 2020.12.6)

Source: wind, China National Financial Securities Research Institute

Consumption upgrade & upward inflation drive growth

According to data from the National Bureau of Statistics, my country's per capita GDP has exceeded US$10,000. Under the guidance of continuous income growth, the restoration of consumer confidence, and the policy of boosting consumption, the consumer market has a solid foundation. With the increase of residents’ marginal propensity to consume, changes in consumption concepts, and diversification of consumer demand have led to an expansion of total demand, economic growth has shifted from investment-driven to consumption-driven, and consumption upgrades have entered an accelerated stage: under the trend of geographical expansion of consumption and upgrading of consumption levels , The era of consumption upgrade is coming. In the wave of consumption upgrades, more and more food companies will continue to grow and develop through product innovation and brand upgrades. In addition, with the recovery of the macro economy, inflation expectations have risen. Under the macro background of consumption upgrades and rising inflation rates, the fundamental improvement of the food industry and price hikes have been significantly driven. Driven by the huge domestic demand, the leading food industry with a good competitive landscape, high asset quality, strong profitability, steady growth in performance and abundant cash flow will have better comparative advantages and room for growth in the medium and long term.

1.2 Analysis of subdivided areas of the food and beverage industry

In the food and beverage industry, the performance of the liquor sector is outstanding, and the upgrading of the industrial structure and the upgrading of consumption have driven the continued prosperity of the liquor industry. In addition to the liquor sector, the overall performance of mass consumer products in the food and beverage sector is stable, the demand is still booming, and the development trend of the first-line leaders is stable and positive.

1.2.1 Liquor: High-end liquor has both certainty and growth, and the sub-high-end performance has strong elasticity

In the first quarter of 2020, although various industries have been significantly affected by the epidemic, the liquor industry has shown strong resilience, and the overall revenue and net profit of listed liquor companies have achieved positive growth. Entering the second and third quarters, the liquor industry has gradually got rid of the impact of the epidemic, and sales have improved significantly, and the liquor and drink market has gradually entered the right track. The overall net profit of the liquor industry in 2020Q3 is 9.57% year-on-year. In the context of consumption upgrades, demand continues to recover, and high-end liquor brands have further strengthened during the epidemic. At present, high-end liquor prices remain strong, Moutai's approved price has maintained a steady rise and stood at 2800+, and Wuliangye's approved price has risen steadily. As the industry peak season for the New Year's Day and Spring Festival approaches, tight supply and demand will continue to exist. The increased control of channels under the channel reform and the gap between the approved price and the ex-factory price make the performance of high-end liquor more long-term certainty, and high-end liquor has both certainty and growth Sex.

In the first half of 2020, the performance of sub-high-end liquor was under pressure due to the epidemic. With the recovery of the drinking scene in the second and third quarters, the performance of sub-high-end and local leading liquors recovered quarter by quarter, and the performance of Fenjiu, Gujing, Jiugui, and Yanghe rebounded in 2020Q3. Strong. At the same time, the price of high-end liquor is pulling up the sub-high-end price band. In the future, the sub-high-end mainstream price band will gradually increase. In the fourth quarter and next year, the sub-high-end liquor has a low base, and demand is gradually restored, which will promote the expansion and growth of sub-high-end and local liquor leaders. The performance improvement is more flexible.

1.2.2 Dairy products: the price of raw milk rises, and the leading advantage of dairy products is solid

In the context of upstream supply shortages, raw milk prices continued to rise in the second half of 2020, approaching historical highs. Leading dairy companies seized market share by controlling costs and other methods. Under the duopoly structure of the dairy industry, market concentration is accelerating toward the industry leader. In the first three quarters of 2020, Yili's room temperature milk market accounted for 38.8%, ranking first.

As an industry leader, Yili has increased its market share by controlling expenses, transferring costs, and increasing prices. The company's traditional advantage areas are growing steadily, and at the same time, it actively adjusts the product structure and expands the new product market. In addition, with years of channel sinking and intensive cultivation, Yili has many sales outlets, wide coverage, high degree of flattening, and outstanding channel advantages. Yili accounts for 40% of channels in third- and fourth-tier cities and townships, and the channels are even more sinking. Lower-tier cities will become the main driving force for the future growth of dairy products. Yili will benefit from rising prices and volumes brought about by consumption upgrades in lower-tier cities and continuous optimization of product structure.

1.2.3 Condiments: Driven by the recovery of catering, corporate profits increase

In the first half of 2020, the condiment industry was dragged down by downstream catering channels. With the recovery of the catering industry, the condiment industry recovered quarter by quarter. In 2020Q3, the condiment segment performed steadily. The industry's overall revenue growth rate rose to 13.2% year-on-year, and the year-on-year net profit growth rate rose to 19.4%.

From the perspective of key condiment companies, Haitian Flavour's revenue in the first three quarters of 2020 increased by 15.3% year-on-year, and net profit attributable to the parent increased by 19.2% year-on-year. The company's revenue target for the first three quarters has been completed by 75%, and the net profit target has been completed. 72.3%. In 2020Q3, the company's three major categories will achieve steady growth. With its brand and channel advantages, it will promote channel sinking, and the central, northern and western regions will rapidly increase volume. The company continues to enrich its category layout, and through channel development and sinking, it continues to increase its market share and maintain its leading edge. In the first three quarters of 2020, Zhongju High-tech's revenue increased by 7.9% year-on-year, and its net profit attributable to its mother increased by 22.4% year-on-year. The main business of soy sauce remained stable and rose, and the growth rate of chicken essence and chicken powder became positive with the recovery of the catering end. With the continuous optimization and improvement of product structure and continuous promotion of channel construction, the company's profitability will steadily improve.

2. Analysis of the characteristics of the CSI subdivided food and beverage index

2.1. Index compilation: Optimizing industry leaders in food and beverage segments

The CSI Subdivided Food and Beverage Industry Thematic Index (000815.CSI, referred to as subdivided food) is composed of the stocks of larger and liquid companies in subdivided industries such as food manufacturing to reflect the subdivision of food The overall trend of industrial company stocks.

Chart 5: CSI Subdivision Food and Beverage Index Compilation Plan

Source: wind, China National Financial Securities Research Institute

2.2. Market value distribution: the weighted average market value presents a broader market style

From the perspective of market value distribution, the weighted average total market value of index constituent stocks is 618.199 billion yuan, the weighted average free float market value is 260.828 billion yuan, and the weighted average market value presents a broader market style. In terms of quantity, there are 9 constituent stocks with a total market value of more than 100 billion yuan, and the majority of stocks have a total market value of less than 20 billion yuan and a free float market value.

Figure Table 6: The distribution of the total market value of the subdivided food index (100 million yuan, cut-off 2020.12.6)

Source: wind, China National Financial Securities Research Institute

Chart 7: The distribution of free circulation market value of subdivided food index (100 million yuan, as of 2020.12.6)

Source: wind, China National Financial Securities Research Institute

2.3. Industry distribution: Shigekura liquor, dairy products and condiments sector

From the perspective of Shenwan's first-level industry distribution, the China Securities Subdivision Food and Beverage Index is mainly deployed in the food and beverage industry, with an industry weight accounting for 96.89%, followed by a small amount of allocation in the agriculture, forestry, animal husbandry and fishery, medical biology and chemical industries. From the perspective of sub-industry distribution, the index mainly focuses on liquor, dairy products and condiment industries, with allocation weights of 58.00%, 14.49% and 13.61% respectively. In addition, there are certain allocation weights in beer and other food industries.

Chart 8: Subdivided food index Shenwan first-level industry distribution (as of 2020.12.6)

Source: wind, China National Financial Securities Research Institute

Chart 9: Subdivided food index subdivision industry distribution (as of 2020.12.6)

Source: wind, China National Financial Securities Research Institute

From the perspective of the sub-industries of the top ten heavyweight stocks, the index constituent stocks are highly concentrated, with the top ten heavyweight stocks accounting for 75.28%.The CSI Subdivision Food and Beverage Index focuses on subdivision food leaders with excellent profitability and growth capabilities. Chongcang Wuliangye, Yili Co., Ltd., Kweichow Moutai, Haitian Flavour, Luzhou Laojiao and other liquor, dairy products and condiment leaders. The index focuses on high-ROE high-quality consumer white horse stocks. The top five heavy-duty stocks have a ROE greater than 20%. The heavy-duty stocks as a whole have high profitability and high growth characteristics.

Chart 10: The top ten heavyweight stocks in the CSI Food and Beverage Index (as of 2020.12.6)

Source: wind, China National Financial Securities Research Institute

2.4. Northbound funds are favored, and the coverage of land stocks reaches 84%

Northbound funds prefer mature tracks and stable premium leaders, so food leaders are favored by foreign investors as core assets. As of December 6, 2020, among the 28 first-tier industries of Shenwan, the market value of Lu Stock Connect in the food and beverage industry ranked first, with a market value of 385.21 billion yuan, followed by medical biology, household appliances, electronics, banking, and Banking and finance and other industries.

Among the 49 constituent stocks of the China Securities Subdivision Food and Beverage Index, 41 are Land Stock Connect, and the coverage of the constituent stocks is 84%. As of December 6, 2020, the market value of China Stock Connect's holdings in the China Securities Subdivision Food and Beverage Index reached 379.405 billion yuan, and the weighted average stock market value accounted for 13% of the free float market value. The core consumer assets represented by Moutai, Wuliangye, Yili, and Haitian Flavours accounted for a relatively high share of the stock market value of Lu Stock Connect. Since the beginning of this year, the market value of Lu Stock Connect has steadily increased.

Chart 11: Breakdown of the food index and the market value of the first-tier industries of Shenwan Stock Connect (100 million yuan, as of 2020.12.6)

Chart 12: The value and proportion of the stock market held by Wuliangye Lu Stock Connect since the beginning of this year (as of 2020.12.6)

Exhibit 13: Yili Stock Connect's stock market value and proportion since the beginning of this year (as of 2020.12.6)

Chart 14: Kweichow Moutai Land Stock Connect’s stock market value and proportion since the beginning of this year (as of 2020.12.6)

Chart 15: The value and proportion of the stock market held by Haitian Flavours and Lu Stock Connect since this year (as of 2020.12.6)

2.5. Strong profitability and high growth potential

We have calculated the year-on-year growth rate of ROE and net profit attributable to the China Securities Subdivision Food and Beverage Index and other major market indexes to compare the profitability and growth capacity of the subdivision food index reflected in the major market indexes. It can be seen that the China Securities Subdivision Food and Beverage Index has strong profitability and excellent growth. Its ROE is 22.79% and the year-on-year growth rate of net profit attributable to the parent is 14.71%, which is outstanding in the main market indexes.

Chart 16: Comparison of the profitability and growth capacity of major indexes of subdivided foods and markets (as of 2020.12..6)

2.6. Market value coverage is high, liquidity is good, and valuation is at a historically high level

The CSI Food and Beverage Index (930653.CSI) reflects the overall performance of food and beverage-related listed companies. There are 90 constituent stocks. Although the number of constituent stocks in the CSI Food and Beverage Index is only the constituent stocks of the CSI Food and Beverage Index About half of the number, but it covers the 49 largest and most liquid component stocks in the CSI Food and Beverage Industry, and has a high market value coverage: The total market value of the CSI Food and Beverage Index is 92.77%. , The market value of circulation accounted for 93.31%. From the perspective of daily turnover rate, CSI’s breakdown of food and beverage indexThe daily turnover rate of the number has always been higher than that of the Shanghai and Shenzhen 300 Index. The stocks selected by the subdivision food index are the most closely watched and most actively traded stocks in the food and beverage industry, so they have good liquidity.

Chart 17: Comparison of market value of subdivided food and China Securities Food and Beverage Index (100 million yuan, as of 2020.12.6)

Chart 18: The daily turnover rate of major indexes since 2015 (as of 2020.12.6)

From the perspective of index valuation, as of December 6, 2020, the PE (TTM) of the CSI Subdivision Food and Beverage Index is 52.55 times, which is at the 100% quantile of historical valuation, and is at a historically high level. .

2.7. Outstanding profitability and moderate fluctuations

With the characteristics of high transparency and high flexibility, index funds have become a tool for capital to carry out long-term strategic asset allocation or to capture market upward opportunities in stages. From the perspective of historical performance, since the release date of April 11, 2012, the CSI Subdivision Food and Beverage Index has achieved a cumulative return of 330.66%, which is higher than that of the CSI 300 (101.05%), CSI 500 (81.90%) and Venture Capital in the same period. Board refers to the rate of return (291.71%). The index's rate of return this year has reached 70.57%, and the rate of return in the past 1 and 3 years is 77.42% and 143.01%, respectively. It can be seen that the CSI Food and Beverage Index subdivided in both short-term returns, medium-to-long-term returns, and long-term returns have outstanding performance and outstanding profitability. From the perspective of volatility, the long-term volatility of the CSI Subdivision Food and Beverage Index is comparable to that of the CSI 500, and the mid- to long-term volatility is higher than that of the CSI 500 and lower than the ChiNext index. From the perspective of risk and return, the short-term and long-term annualized Sharpe ratios of the China Securities Subdivision Food and Beverage Index are outstanding, leading the major market indexes.

Chart 19: CSI Food and Beverage Index Performance and Risk Performance (As of 2020.12.6)

3. Huabao CSI Subdivision Food and Beverage Industry Theme ETF

3.1. Fund Information

On December 1, Fortune CSI subdivided the food and beverage industry themed ETF (fund abbreviation "food ETF", subscription code: 515713, transaction code: 515710), which was officially issued by the China Securities Regulatory Commission and was the first food in the market. Beverage ETF. The fund is a stock index fund with passive investment. It mainly adopts a portfolio replication strategy to track the underlying index so that its risk-return characteristics are similar to the risk-return characteristics of the market portfolio represented by the underlying index. The fund subscription period is from December 14, 2020 to December 18, 2020.

3.2. Manager information

Hwabao Fund Management Co., Ltd. was established on March 7, 2003. It was initiated and established by Hwabao Trust and Société Générale Asset Management Co., Ltd. Hwabao Trust holds 51% of its shares, and Société Générale holds 49%. It is the first Chinese-foreign joint venture fund management company initiated by a trust company and a foreign asset management company in China. As of December 6, 2020, the number of non-monetary index fund products under the Huabao Fund is 19, and the index fund size is 45.069 billion yuan; Huabao Cash Plus (511990.SH, 130.502 billion yuan) under the Huabao Fund is currency Type ETFs are currently the largest and higher trading volume of currency funds on the market (the size of the fund is calculated according to the disclosure of the third quarterly report of 2020).

Deeply cultivate index products to create a diversified and high-quality product line

Hwabao Fund’s index funds (including index enhancement funds) cover broad-based indexes, industry themes, Smart Beta and other categories. After years of deep cultivation and accumulation, Hwabao Fund has formed a diversified and high-quality product line: its wide The base index series ranges from large-cap to small-cap market value styles, covering the Shanghai and Shenzhen 300, CSI 100, CSI 500, and CSI 1000 indices, their industry themes and Smart Beta ETF is unique, with comprehensive product lines in subdivisions. The industry theme of Huabao Fund and Smart Beta funds cover medical ETFs, brokerage ETFs, bank ETFs, military industry ETFs, leading technology ETFs, leading consumer products, electronic 50 ETFs and other boutique index funds that fit the investment trend.

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