Ping An Securities: Policy dividends continue to be released, ready meals ushered in development opportunities

The Zhitong Finance App learned that Ping An Securities released a research report stating that this “20 rules for expanding consumption” directly benefit the catering industry chain. With the continuous introduction of policies to stimulate consumption and the gradual recovery of residents' income and confidence, the recovery in consumption will show a low and high pace, maintaining the food and beverage industry's “better than the big market” rating. Furthermore, the current “20 Rules for Expanding Consumption” specifically targets prepared dishes. The Central Committee document also mentions pre-prepared dishes, showing the central government's determination to vigorously develop the prepared food industry. The prepared food industry will usher in new development opportunities with subsequent specific policy support.

Incident: On July 31, the State Council forwarded the National Development and Reform Commission's “Measures to Restore and Expand Consumption” notice, proposing 20 targeted measures in several areas, including stabilizing bulk consumption, expanding service consumption, promoting rural consumption, expanding new types of consumption, improving consumption facilities, and optimizing the consumption environment. Among them, it specifically proposed supporting the consumption of food services and speeding up the construction of a prepared food base.

Ping An Securities's main views are as follows:

Expand consumption of food services and promote a recovery in B-side demand in the food and beverage industry.

This “20 Rules for Expanding Consumption” proposes to expand consumption of food services: promote healthy food consumption, oppose food waste, support local food festivals, create specialty food districts, and carry out food and beverage consumption promotion activities. Optimize the relevant regulations for extending the opening hours of restaurants according to local conditions. The recovery of the downstream catering industry will effectively drive the recovery of B-side demand in the upstream food and beverage industry, especially sub-industries in the catering industry chain such as frozen food, prepared dishes, frozen baking, condiments, and beer.

The Central Document once again mentions prepared dishes, and the industry will usher in new opportunities for development.

This “20 Rules for Expanding Consumption” specifically targets prepared dishes: cultivating the “farming base+central kitchen+cold chain logistics+restaurant” model, exploring the potential of the prepared food market, accelerating the construction of prepared food bases, fully reflecting the principles of safety, nutrition and health, and improving the standardization level of food quality and delivery. Promote transparent kitchens so that consumers can eat at ease. This follows the proposal of the Central Committee Document No. 1 of 2023 to “raise the level of standardization and standardization of industries such as clean food and central kitchen. Cultivate and develop the precooked food industry.” Afterwards, the prepared food industry once again appeared in the Central Committee document, showing the central government's determination to vigorously develop the prepared food industry. With subsequent specific policy support, the prepared food industry will usher in new development opportunities.

Pre-made dishes are competing in the blue ocean, and the trillion racetrack is very popular.

China's prepared food market reached 419.6 billion yuan in 2022, and is expected to exceed trillion yuan in 2026. The restaurant chain process is accelerating. Coupled with the rapid development of the takeout and group meal market, demand for cost reduction and efficiency is driving the release of B-side prepared dishes; changes in social structure are driving the rapid expansion of the C-side prepared food market, and the epidemic has accelerated its penetration rate to increase continuously. The current concentration of the industry is low, and leading companies with scale advantages are expected to quickly seize market share and improve profitability through product structure optimization and refined cost management.

This “20 Rules for Expanding Consumption” directly benefits the catering industry chain:

1) The quick-frozen food, prepared dishes, and frozen baking industries have broad space and clear long-term logic. At the same time, the downstream catering industry is gradually improving, and B-side demand has recovered. I recommend Yasui Foods (603345.SH) and Chef Senmio (001215.SZ); I recommend paying attention to Licao Foods (300973.SZ).

2) Condiments With subsequent catering channel repairs, inventory digestion and cost pressure relief, and structural improvements brought about by zero-additive products and compound seasoning products, sector performance is expected to improve quarterly. Haitian Flavors (603288.SH) and Baoli Foods (603170.SH) are recommended.

Risk warning: 1) the slope of consumption recovery falls short of expectations; 2) food safety issues; 3) the impact of fluctuations in raw materials.