Consumer Sector – China/Hong Kong Market Overview

1. Mid-Autumn Festival Boosts Tourism and Consumption

• Tourism: The three-day Mid-Autumn Festival holiday from September 15-17, 2024, saw a significant recovery in domestic tourism. This holiday marked the strongest recovery of tourism spending among mini-breaks this year. Tourism receipts during this period amounted to RMB 51 billion, an 8% increase compared to 2019, with tourism traffic up by 6.3% year-on-year. On a per capita basis, spending increased by 1.6% versus the same period in 2019, showing a significant rise in domestic travel activity.
• Catering Sector: Lower-tier tourism destinations experienced high demand in their restaurant businesses. Haidilao, a leading hotpot chain, reported serving over 5 million customers during the festival, with popular short-trip destinations seeing table turnover rates exceeding 7x, highlighting the strength of domestic tourism.

2. Home Appliance Consumption

• Trade-in Stimulated Demand: The home appliance sector benefited from trade-in policies and government subsidies that encouraged consumer spending. During the Mid-Autumn Festival, home appliance sales from key retail enterprises grew by 7.9% year-on-year. Central government subsidies totaling RMB 640 million helped 600,000 consumers purchase nearly 800,000 units of home appliances, contributing to over RMB 3.3 billion in sales value. Suning, a major appliance retailer, reported a 244% increase in offline traffic, with a 148% surge in trade-in order sales, driven by these trade-in subsidies.

3. Macau’s Tourism Sector

• Higher-than-Expected Visitation: Macau recorded strong tourist arrivals during the festival, with over 125,000 arrivals per day on September 15 and 16, 2024. The daily visitation exceeded expectations by 25%, and was 7% higher than the 2023 figures for the same holiday period. This recovery of inbound tourism exceeded market expectations and significantly supported Macau’s hospitality and entertainment sectors.

4. Company Recommendations

• Anta Sports (2020 HK): Recommended as a BUY with a target price of HK$109.60, implying 22.7x 2024 PE. Anta’s strong brand and operational discipline, along with healthy inventories, make it a top pick.
• Galaxy Entertainment (27 HK): A BUY with a target price of HK$48.00. This is based on 14.5x 2024 EV/EBITDA, benefiting from Macau’s robust tourism recovery.
• Haidilao (6862 HK): The hotpot giant is a BUY with a target price of HK$19.60. The company posted strong performance during the Mid-Autumn Festival, with a target PE of 19.6x for 2024.
• Haier (6690 HK): A BUY recommendation with a target price of HK$33.10, bolstered by trade-in policies stimulating home appliance sales.
• Midea (000333 CH): BUY with a target price of RMB 77.10, benefiting from its leadership in home appliance sales.
• Miniso (MNSO US): The company is rated BUY with a target price of US$29.30, benefitting from disciplined operations and strong overseas business prospects.

5. Investment Recommendation

The report maintains an OVERWEIGHT stance on the China/Hong Kong consumer sector, favoring companies with strong overseas business prospects, disciplined operations, and healthy inventories. The Mid-Autumn Festival demonstrated a strong rebound in domestic tourism and home appliance consumption, supported by government subsidies and trade-in policies. Companies with strong brand recognition and robust financials are expected to outperform in the near term.

This insight positions Anta, Haidilao, and Haier as top picks for investors seeking exposure to the Chinese consumer market’s recovery post-pandemic.

Conclusion

• Top Pick: Anta Sports remains the standout recommendation for its solid growth potential and valuation

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