Guotai Junan Securities: The Advanced Path of Consumer Goods Investment - Viewing Consumption from a Demand Perspective

According to the information from Zhitong Finance and Economics APP, Guotai Junan Securities released a research report stating that it is optimistic about the investment opportunities in China's leading consumer companies in the long term, especially those leading enterprises with first-class business models and business characteristics, broad market prospects, clear growth logic, and a continuously improving industry competitive landscape, which are expected to demonstrate their investment value in the medium to long term.

Investment Recommendation: Based on the research framework of "The Way to Advance Consumer Goods Investment," Guotai Junan Securities is optimistic about the long-term investment opportunities in China's leading consumer companies, especially those leading enterprises with first-class business models and business characteristics, broad market prospects, clear growth logic, and a continuously improving industry competitive landscape, which are expected to demonstrate their investment value in the medium to long term.

Consumer demand is the core driving force of economic growth. Without consumer demand, there is no economic development. In economics, consumption is considered the ultimate goal and criterion of production activities. Only when products or services are consumed, the entire production process is truly completed. As an important part of the tertiary industry, the growth of consumption can drive the development of related industries, becoming an important industry for national economy and employment absorption. Its role in driving economic growth is becoming stronger (in 2023, consumer spending accounted for 54.7% of GDP, becoming the main contributor to economic growth, and ultimately, consumer spending contributed 82% to GDP growth, making consumption a "stabilizer" and "ballast" for economic growth in the true sense).

Population trends and residents' income are core factors affecting consumer demand, directly determining the scale and structure of the consumer market. Population trends affect consumer demand mainly through changes in population size and structure. With the growth of the population, consumer demand naturally increases (more people mean more consumption). Different age groups have different consumption preferences (for example, the elderly aged 60 and above have strong demand for medical health, travel, and retirement, while teenagers under 17 prefer personalized and entertainment consumption such as games, movies, and personalized clothing), thus, changes in population structure (aging, declining birth rates, smaller family sizes) will bring about rotation of consumer categories. At the same time, residents' income is another core factor affecting consumer demand. Income levels and growth rates directly determine consumers' purchasing power. Increasing residents' income is essential to truly enhance consumer confidence, activate the consumer market;

Consumer tendencies and consumer concepts jointly shape consumers' purchasing behavior and consumption patterns. Consumer tendencies refer to the proportion of residents' income used for consumption, which has a significant impact on the consumer market. If residents' consumption tendencies fluctuate downward, it will constrain the expansion of the consumer market. Meanwhile, with the development of society and the improvement of residents' living standards, residents' consumer concepts are constantly changing. Consumer concepts will affect consumers' values, preferences, and perceptions of products or services, thereby influencing their purchasing decisions and ultimately affecting the demand structure of the consumer market. For easier understanding, Guotai Junan Securities summarizes the current new consumer concepts in China into six points: the rise of domestic products, healthy consumption, convenient consumption, personalized consumption, cost-effective consumption, and emotional value consumption Risk Warning: The global economic downturn pressure has led to a slowdown in consumer market growth; the effectiveness of domestic consumption promotion policies is lower than expected, facing challenges in the specific implementation process; against the backdrop of weak demand recovery, there is a risk of further intensifying competition in the consumer market