Tianfeng: The consumer sector trend has not ended. Pay attention to the timing of right-hand layout in optional consumption.

Tianfeng released a research report stating that the consolidation of the consumer sector market is a rest rather than an end. The current investment strategy for the essential consumer sector is: based on the concept of holding positions, with a focus on undervalued, high-quality, stable growth stocks, combined with a high dividend yield; selecting based on valuation, ROE, and dividend yield, primarily focusing on the first-tier industries such as food and textiles. The optional consumer sector's allocation strategy can start from financial reports, selecting targets with improved operations, and positioning based on the degree of improvement in macroeconomic data. Key points from Tianfeng: Core conclusion: Reviewing the long process of the transformation of the consumer industry in the United States and Japan, the consolidation of the consumer sector market is a rest rather than an end. Looking at the migration process of consumer trends in the United States and Japan, the common trend is the shift of the consumer base from households to individuals, and the shift of consumption objects from optional consumption in urbanized lifestyles to personal spiritual consumption. This process often accompanies a decrease in GDP growth rate. Currently, China is transitioning from high-speed growth to high-quality growth, with a preliminary judgment that the economic indicators such as population and income structure in China are similar to the positioning of Japan's third consumer society and the latter stages of the U.S. brand consumption stage, where retail growth mainly relies on quantity growth. The current investment strategy for the essential consumer sector is: based on the concept of holding positions, the main focus is on undervalued, high-quality, stable growth stocks, combined with a high dividend yield; selection is based on valuation, ROE, and dividend yield, primarily focusing on the first-tier industries such as food and textiles. The allocation strategy for the optional consumer sector can start from financial reports, selecting targets with improved operations, and positioning based on the degree of improvement in macroeconomic data. Looking at the migration process of consumer trends in the United States and Japan, the common trend is the shift of the consumer base from households to individuals, and the shift of consumption objects from optional consumption in urbanized lifestyles to personal spiritual consumption, which often accompanies a decrease in GDP growth rate. The bank discovered that Japan's second to fourth consumer societies can be compared to the three consumption stages in the United States, reflecting the shift from a "quantity" consumption stage to a "quality" consumption stage, and then to a "spiritual" consumption stage. Looking at population and income structure, the near three consumption stages in the United States and Japan have similar driving factors. The three stages of consumption society in Japan after 1945 were driven by rapid development under the demographic dividend, intensified wealth polarization under a shifting growth rate, and changes in consumption concepts under long-term low growth rates. Similar to Japan, the three consumption stages in the United States were driven by the baby boom, intensified income stratification, and changes in consumption concepts. Currently, China is transitioning from high-speed growth to high-quality growth, with a shift in old and new growth engines. The bank preliminarily judged that China's economic indicators such as population and income structure are similar to the positioning of Japan's third consumer society and the latter stages of the U.S. brand consumption stage. Looking at population and income structure, China's population has reached a turning point in growth, aging trends are accelerating, a shift in urbanization rate has not yet occurred, and income growth rates have decreased compared to before 2018. Retail growth mainly relies on quantity growth, prices are relatively stable, implying a shift from a "quality" consumption stage to a "spiritual" consumption stage. Essential consumption: Holding concept, undervalued, high-quality, stable growth + high dividend yield Drawing lessons from the leading experiences of essential consumer companies in the United States, the countercyclical properties of leading brands in essential consumer goods such as Coca-Cola, Starbucks, and Walmart come from brand accumulation and user stickiness, as well as defensive properties against essential consumption. Currently, most industries in the essential consumer sector have entered a mature stage, characterized by stable low growth, and compared to other mature industries (such as utilities), their valuations are moderately low. The bank believes that the current investment strategy for the essential consumer sector is based on the concept of holding positions, with a focus on undervalued, high-quality, stable growth stocks, combined with a high dividend yield. Selection is based on valuation, ROE, and dividend yield, primarily focusing on the first-tier industries such as food and textiles. Optional consumption: Operational improvement + turning point in macroeconomic fundamentals Currently, the turning point in the fundamentals of consumption data may have already occurred, and macroeconomic data is showing numerous positive signals, with the positivity of macro consumption data coming from the combination of individual behaviors of micro consumers and corporate entities. Retail demonstrates the resilience of optional consumption repair, with Q1 consumer spending growth rate < income growth rate confirming the sustainability of data improvement. The bank's judgment is that the allocation strategy for the optional consumer sector can start from financial reports, selecting targets with improved operations, and positioning based on the degree of improvement in macroeconomic data. Selecting data from the 24 annual report, 25 first-quarter report, looking at marginal improvements from ROE and profit growth, and using the process of elimination based on base effects, the current focus can be on sectors such as motorcycles and home appliances. Risk warning: 1) Historical experience is for reference only; 2) Style classification is for reference only; 3) Uncertainty is present in policy formulation and implementation.