China Equity Strategy_ LNY consumption_ What's hot and what's not_. Mon Feb 10 2025

Summary of Key Points from the Conference Call Industry Overview - The conference call primarily discusses the Chinese consumer market during the Lunar New Year (LNY) period, focusing on spending trends and specific sectors such as entertainment, home appliances, and ACGN goods [2][11][30]. Core Insights and Arguments Consumer Spending Trends - Overall Consumption: The Ministry of Culture and Tourism reported 501 million trips during the LNY, a 5.9% year-on-year increase, with total spending reaching RMB 677 billion, up 7% year-on-year [2]. - Consumption Breakdown: There is a notable divergence in spending between soft luxury goods in tier-1 cities and affordable treats in lower-tier cities, with the latter showing stronger demand [2][11]. - Household Financial Health: Households in tier-1 cities are more affected by property price declines, leading to a greater need to repair balance sheets compared to lower-tier city households [2]. Hot Sectors - Box Office Performance: The box office during LNY totaled RMB 9.51 billion, a 19% year-on-year increase, and 1.6 times the pre-COVID level [3][18]. - ACGN Goods: The market for ACGN (Anime, Comics, Games, Novels) goods reached RMB 169 billion in 2024, growing 41% year-on-year, with expectations to reach RMB 309 billion by 2029 [13][15]. - Home Appliances: Trade-in related home appliance sales reached approximately RMB 240 billion, up 12.3% year-on-year. However, a slowdown in sales growth is anticipated for 2025, with estimates dropping to 5% year-on-year from a consensus of 9-12% [30][31]. Sectors Underperforming - Macau Tourism: Inbound tourists to Macau during LNY were 1.31 million, down 4% year-on-year, with gaming revenue (GGR) falling 10% year-on-year [4]. - Hainan Duty-Free Sales: Duty-free sales in Hainan dropped 16% year-on-year to approximately RMB 2.1 billion, with visits down 19.2% year-on-year [4][40]. Investment Recommendations - Long Positions: Recommendations include YUM China, Miniso, MGM China, and Haier H, which are expected to benefit from resilient mass consumption spending and trends in affordable goods [11][12]. - Caution on Home Appliances: The home appliance sector is viewed with caution due to potential risks in 2025 sales growth, influenced by tariffs and previous demand pull-forward [30][31]. Additional Insights - E-bike Market: E-bike sales reached 55 million units in 2023, with a boost from trade-in policies. The top players include Yadea and Aima [36][37]. - Cultural Travel Trends: There is a shift towards local cultural and heritage travel, with a 30% year-on-year rise in outbound travel orders reported by Trip.com [40]. This summary encapsulates the key points discussed in the conference call, highlighting both opportunities and risks within the Chinese consumer market during the Lunar New Year period.