Golden Week Highlights Tourism and Home Appliances as Bright Spots, Refocusing on the China Theme
UOB Kay Hian
09 October 2024
China’s Golden Week has once again proven to be a key driver for economic activity, especially in tourism and home appliances. With the resurgence of consumer confidence, bolstered by government policies and a potential wealth effect, the focus is shifting back to the China theme. Despite a 33% rebound in China consumer stocks since the end of September, valuations remain undemanding, presenting opportunities for further growth and re-rating.
Tourism: A Strong Surge in Domestic and Outbound Travel
Tourism during Golden Week saw a substantial rebound, with both domestic and international travel surging past pre-pandemic levels. According to the Ministry of Culture and Tourism (MCT), domestic tourism traffic reached 765 million, a 5.9% increase compared to 2023 and a 10.2% rise over 2019 levels. Tourism receipts rose to RMB 700.8 billion, reflecting a 6.3% year-on-year growth.
Outbound travel also flourished, with cross-region traffic reaching 13.1 million during the week. The daily average of 1.87 million represented a 25.8% year-on-year increase. Ctrip reported that its platform saw record-high travel bookings, surpassing 2019 levels. Feizhu also highlighted a 50% year-on-year increase in outbound bookings, with international hotel bookings recovering to approximately 120% of 2019 levels.
The robust demand for travel was supported by a decline in travel costs. Feizhu noted that domestic flight and hotel prices dropped by 13% and 6%, respectively, while international flight and hotel prices fell by 19% and 3%, further encouraging consumer spending on travel.
Home Appliances: Promotions Spark Consumer Demand
The home appliance sector saw an impressive 149.1% year-on-year increase in sales during Golden Week, with sales of home appliances alone surging by 160.8%. Promotions played a pivotal role in driving consumer demand, with trade-in programs and special deals boosting sales. Suning, one of China’s largest electronics retailers, reported a 200% year-on-year increase in foot traffic, with trade-in orders growing by 132%.
Consumer appetite for high-end, large home appliances was particularly strong. Suning reported significant growth in sales of premium items, with floor-standing air conditioners, ultra-thin range hoods, and built-in refrigerators growing by 85%, 113%, and 271%, respectively.
Macau Visitation Surpasses 2019 Levels
Macau, a key destination for Chinese tourists, saw visitor numbers exceed pre-pandemic levels during Golden Week. The Macao Government Tourism Office reported 993,117 visitors, 83% of whom were from mainland China. On a daily basis, Macau averaged 141,874 visitors, representing a 22.9% year-on-year increase and a 1.9% rise compared to 2019 levels. The strong performance also exceeded the government’s forecast by 9.1%, showcasing Macau’s resilience as a leading travel destination.
Catering: Dining Out Booms During the Holiday
Golden Week also saw robust growth in the catering sector, with dining consumption increasing significantly. According to VAT invoice data from The State Administration of Taxation, snack and fast-food sales grew by 8.1% and 9.0% year-on-year, respectively. Meituan, a leading platform for local services, reported that restaurant dining consumption during the first five days of the holiday grew by 33.4% compared to 2023, with night-time dining showing even stronger growth at 44.8%.
Leading restaurant chains also benefited from the surge in consumer spending. Jiumaojiu’s Tai Er and Song Hotpot brands served over 1.27 million and 230,000 customers, respectively, during the holiday. Haidilao, a major player in the hotpot market, served over 10 million customers in the first six days of Golden Week, with delivery orders surging by over 60% compared to pre-holiday levels.
Listed Companies Analysis
Anta Sports (2020 HK/BUY/HK$132.30)
Anta Sports has been a key beneficiary of the resurgence in consumer confidence during Golden Week. As one of China’s leading sportswear companies, Anta’s performance is set to benefit from the broader recovery in consumer spending, particularly in the apparel sector. With the refocusing on China’s domestic market, Anta’s visibility for earnings growth in 2024 has improved, leading to a positive re-rating of its stock. The company is currently trading at 20.0x 2024F PE and 16.6x 2025F PE, while UOB Kay Hian maintains a target price of HK$132.30, which implies a 37.0% upside from its current price.
Galaxy Entertainment (27 HK/BUY/HK$48.00)
Galaxy Entertainment has reaped the benefits of the recovery in Macau’s tourism sector. With visitation numbers exceeding pre-pandemic levels and strong demand from mainland Chinese tourists, Galaxy is well-positioned to capitalize on the continued recovery in Macau’s gaming industry. The company is currently trading at 18.3x 2024F EV/EBITDA, with UOB Kay Hian maintaining a BUY rating and a target price of HK$48.00, implying a 26.3% upside.
Haidilao (6862 HK/BUY/HK$21.80)
Haidilao’s performance during Golden Week was stellar, with over 10 million customers served and a significant boost in delivery orders. The company’s ability to capture increased consumer spending during the holiday demonstrates its strong brand presence and operational efficiency. Haidilao is currently trading at 12.3x 2024F PE, with UOB Kay Hian maintaining a BUY rating and a target price of HK$21.80, implying a 32.9% upside from its current price.
Haier Smart Home (6690 HK/BUY/HK$43.10)
Haier, a leading player in the home appliances sector, saw strong demand during Golden Week, particularly for premium products. The company’s focus on innovative, high-end appliances has allowed it to capture a significant share of the growing consumer demand. Haier is currently trading at 13.8x 2024F PE, with UOB Kay Hian maintaining a BUY rating and a target price of HK$43.10, which represents a 33.2% upside.
Mengniu Dairy (2319 HK/BUY/HK$23.20)
Mengniu Dairy also performed well during Golden Week, benefiting from increased consumer spending on food and beverages. With improving channel inventories and a positive outlook for earnings growth in 2024, Mengniu is positioned for further upside. The company is currently trading at 15.0x 2024F PE, and UOB Kay Hian maintains a BUY rating with a target price of HK$23.20, implying a 29.9% upside.
Midea (000333 CH/BUY/Rmb106.50)
Midea’s H-share IPO and strong performance during Golden Week highlight its dominant position in the home appliances market. The company saw a 38% increase in sales during the holiday, driven by demand for premium appliances. Midea is currently trading at 15.0x 2024F PE, with UOB Kay Hian maintaining a BUY rating and a target price of RMB 106.50, implying a 32.8% upside.
In conclusion, Golden Week provided a significant boost to the Chinese economy, particularly in the tourism and home appliance sectors. With consumer confidence on the rise and government policies in place to support growth, the refocusing on China presents a wealth of opportunities for investors, particularly in the sectors and companies mentioned above.
