China Consumer Staples_ 4Q24 Preview_ Looking for a better start into 2025 after a reset in 4Q24; Watch out for policy roll-out

Summary of Key Points from the Conference Call Industry Overview - The China Consumer Staples sector has seen a year-to-date increase of approximately 7% on a market cap weighted average basis, with a 6% rise observed this week, compared to a 20% rally in MSCI China year-to-date [1][2] - Market sentiment is gradually improving, supported by a steadier consumer confidence index and expectations of policy stimulus following the Two Sessions, which prioritize domestic consumption demand recovery [1] Core Insights and Arguments - Earnings Outlook: The market is expected to focus more on the topline and earnings outlook for 2025 rather than the 4Q/2H24 results, with EPS estimates approximately 3% below Bloomberg consensus [1] - Margin Enablers: Key focus areas for the upcoming results season include margin enablers, sell-in improvements in 2Q for beer and dairy, and competition/pricing actions from companies like UPC and Nongfu [1] - Policy Impact: Policies such as consumption vouchers and childcare subsidies are anticipated to enhance disposable income for low-income groups, with recent announcements from local governments indicating initial positive developments [1] Company-Specific Insights - Mengniu Dairy: Expected to provide comments on margin enablers and sell-in improvements [1] - Budweiser APAC: Anticipated to surprise with dividend per share (DPS) enhancements [1] - Laojiao: The controlling shareholder has committed to increasing equity ownership, indicating confidence in future performance [1] Sector Performance - Beer: Retail growth has been steady during the Lunar New Year (LNY) period, with positive shipment trends noted in February compared to January [2][18] - Dairy: Stable year-over-year retail growth observed, with disciplined shipment and easing promotion levels [2][22] - Spirits: Companies are focusing on channel management and wholesale price stabilization, with expectations for positive sales growth in 2025 [17][19] Key Metrics and Projections - Sales and Profit Estimates: Various companies have projected sales and net profit growth for 2024 and 2025, with notable figures including: - Tsingtao Brewery: 4% sales growth in 4Q24, with a projected 2% growth in 2025 [11] - Mengniu Dairy: Expected to see a 2% sales growth in 2025 [11] - Yili Industrial: Anticipated to have a 3% sales growth in 2025 [11] - Cost Trends: Cost trackers indicate sequential cost tailwinds in barley, with Budweiser APAC facing slightly inflated costs due to aluminum price increases [20] Upcoming Events and Factors to Watch - The China Food & Drinks Fair scheduled for March 25-27 is a key event to monitor for industry developments [9] - Wholesale price trends and channel inventory levels for key spirits SKUs will be critical indicators of market health [9] Additional Insights - Consumer Sentiment: Improved consumer sentiment is expected to drive sales growth in various segments, particularly in beverages and snacks [21] - Raw Milk Prices: Stabilization in raw milk prices is anticipated, with a continued exit of smaller dairy farms contributing to supply-demand balance [22] This summary encapsulates the essential insights and projections from the conference call, highlighting the overall positive sentiment in the China Consumer Staples sector and the specific strategies and expectations of key companies within the industry.