The China stock market has fallen so much, where has all the money gone?

This year's A-share market specializes in all kinds of dissatisfaction.

From1.Kweichow Moutai in 200 yuan, to Hengrui Pharma with a price-earnings ratio of 99 times, and then to soy sauce stocks with a market value of 300 billion.

What kind of white horse stocks may disappoint you, only the core assets of the consumer industry are stable happiness.

But from the traditional valuation, the P/E ratio (PE) and P/B ratio (PB) of the big consumer sector are not cheap:

① The PE of food and beverage industry is 32. 17 times, reaching the historical percentile of 68%, and PB is 6.5 times, reaching the historical percentile of 81%;

② The price-earnings ratio of the subdivided liquor sector is as high as 32. 17 times, which is much higher than the historical average.

Are consumer stocks overvalued?

Guotai Junan Retail Team recently released "Sticking to the Leading Consumer and Sharing the Growth of China", and analyzed the changing logic of the valuation of consumer stocks in detail.

This article is ***2303 words, and the estimated reading time is 10 minute. Pull to the bottom to read the core idea of this article.

Remember America's "Beautiful 50"?

Before discussing whether the valuation of white horse stocks is too high, we might as well review the "beautiful 50" market in the early 1970 s in the United States

The so-called "Beautiful 50" refers to the 50 large-cap stocks that were highly sought after in the new york Stock Exchange from the late 1960s to the early 1970s, among which there are many consumer brands that we are still familiar with, such as McDonald's and Coca-Cola.

One of the most important characteristics of "Beautiful 50" is the coexistence of high profit and high PE, which literally translates as "very expensive good stock".

From 197 1, the share price and valuation level of "Beauty 50" rose rapidly. At the end of 1972, the median valuation was more than 40 times, and the highest Polaroid company even exceeded 90 times, while the median valuation of Standard & Poor's 500 was only 12 times.

On the other hand, the return on investment of "Beautiful 50" is also amazing. From June 1970 to the end of June 1972, the "Beautiful 50" index rose by 89%, 35 percentage points higher than the S&P 500.

On the other hand, in China, the biggest controversy in the current consumption field is undoubtedly "whether the valuation is too high".

We believe that when the consumer industry develops to a certain stage, we should not simply judge the valuation level based on the price-earnings ratio (PE).

The valuation model of consumer stocks is changing.

From a technical point of view, we believe that the valuation system of consumer industry is changing from PE model to DDM model. Behind this is the evolution of the capital market's understanding of the consumer industry.

We take the well-known Nestle Company as an example to analyze the valuation model transformation in its development cycle.

As a global food giant, Nestle 1989-2000 is in a period of rapid development, and the PE valuation has steadily increased at this stage;

From 2000 to 2008, PE valuation fluctuated synchronously with revenue growth;

Since 2009, Nestle has achieved a highly stable endogenous growth through mergers and acquisitions, and its business segments and product brands have been continuously expanded and improved, and the valuation premium has become more and more obvious.

In 20 17, Nestle's PE reached a record high of 35 times, which brought rich returns to investors.

It can be seen from this case that once a consumer goods enterprise has established a solid competitive advantage and sustained profitability, the valuation will not decline, but will hit record highs.

Looking at the whole overseas market, the growth rate of revenue and net profit may slow down after the consumer leader enters maturity, but the valuation level will not decline.

Once a consumer leader has built a moat deep enough, stable growth, increased market share, improved profits and sustained dividends will be enough to support its valuation level.

03. The main consumers of the community reached the highest level in history.

In the current domestic secondary market, although the valuation of large consumer industries is not cheap, many institutions still maintain a high enthusiasm for capital allocation.

Judging from the allocation of domestic funds, the enthusiasm for the allocation of consumption white horses has reached an unprecedented level.

From the perspective of overseas capital allocation, MSCI increased the proportion of A shares for the third time, and the inflow of funds from the north accelerated, and the large consumer industry occupied the first place in allocation.

Looking at the market, we can easily find that consumer stocks are especially favored by big funds. Analyzing the reasons behind it, we think there are two points:

1. The business model is clear and the financial content is simple. 2. Economic downside risk aversion is higher.

When will the consumer stock market end?

Still taking the American "Beautiful 50" as an example, there are three main reasons why the "Beautiful 50" market is coming to an end:

1) A large number of fiscal deficits and credit expansion in the United States have accumulated a high inflation bubble. The food crisis has triggered an upward trend in CPI, and the Federal Reserve has to accelerate the tightening of monetary policy;

2) 1973 Oil crisis broke out, which led to the further deterioration of inflation, the rising cost of raw materials eroded corporate profits, the gross profit margin and profit growth rate of enterprises both declined, and the stock market turned from bull to bear;

3) From 1973, the profit growth rate and ROE of "Beauty 50" began to decline, and the profit stability was questioned by the market.

We believe that the phenomenon of A-share institutions "holding a group to keep warm" can only be broken in two situations:

1) The leading consumption performance continues to be lower than expected, but at present, the revenue and net profit of white horse stocks such as Kweichow Moutai, Wuliangye, Gree Electric and Midea Group have maintained steady growth;

2) Like America's "Beautiful 50", A shares have undergone great external changes, such as the overall escalation of Sino-US friction or the cliff-like recession of the global economy, but at present, the probability is very small.

Neither of these situations is likely at present.

How to configure it later?

In the follow-up configuration, we suggest to tap investment opportunities from two main lines.

1) Supply efficiency: Leading enterprises with high operating efficiency, steady growth in performance and obvious competitive advantages will continue to grow by squeezing the market share of small and medium-sized enterprises, which deserves special attention.

2) Demand dividend: There are still huge consumer demand dividends in the third-and fourth-tier markets. We are optimistic about enterprises with strong track growth, industry logic and revenue support, especially the leading companies whose strategic focus is to expand to the low-end market and can increase market share through their own management and cost advantages.

Abstract:

1 The traditional big consumption sector is not cheap now.

But when the consumer industry develops to a certain stage, its leading stocks should not be judged by the price-earnings ratio (PE).

The valuation system of consumer industry is changing from PE model to DDM model. Once a consumer leader has built a moat deep enough, stable growth, increased market share, improved profits and sustained dividends will be enough to support its valuation level.

Domestic funds and overseas funds have maintained a high enthusiasm for the allocation of large consumer industries. Consumer stocks are favored by big funds because of their clear business model and simple financial content, and they can avoid risks better when the economy goes down.

The market of consumer stocks is not easy to be broken in the short term. Follow-up configuration, from the perspective of supply, pay attention to leading enterprises; From the perspective of demand, pay attention to enterprises with strong growth, industry logic and income support.