Zhongtai Securities: The rapid development of new categories of tea drinks has led to a significant recovery in demand for liquid packaging equipment

The Zhitong Finance App learned that Zhongtai Securities released a research report saying that in recent years, domestic beverage consumption has undergone significant structural changes. Benefiting from the popularization of healthy consumption concepts, the rapid development of emerging categories such as sugar-free beverages, tea drinks, and energy drinks, the continuous launch of new products from second- and third-tier brands and the acceleration of production capacity construction have led to a significant recovery in equipment demand. Against the backdrop of resounding domestic and foreign market demand, the liquid packaging industry as a whole showed a healthy development trend where revenue scale and profitability increased simultaneously. China's liquid packaging machinery overseas has the advantage of multiple factors. After years of development in the domestic market, domestic manufacturers have formed strong support for overseas competition in many areas.

The main views of Zhongtai Securities are as follows:

Liquid packaging machinery is the core production equipment for FMCG industries such as food and beverages, daily chemicals, condiments, etc. The industry mostly sells full-line sales, that is, full-line solutions such as “all-in-one blow-filling machines”. China and other countries with more developed beverage markets mainly focus on the transformation and upgrading of production lines, and demand for ultra-clean lines/sterile lines is strong. However, developing markets such as Asia, Africa, and Latin America are still in the stage of new expansion, and product demand is relatively elementary. The economic life of domestic liquid packaging machinery is usually around 10 years.

According to iMarcGroup's forecast, the compound growth rate (CAGR) of the global packaging equipment market from 2024 to 2032 is 3.8%. During the “14th Five-Year Plan” period, the average annual growth rate of China's packaging machinery industry is expected to be around 8%. The average profitability growth rate of enterprises in the industry has reached about 7%, the export value is expected to reach 12 billion US dollars, and the international competitiveness of the industry has improved markedly.

Domestic market: In recent years, domestic beverage consumption has undergone significant structural changes. Benefiting from the popularization of healthy consumption concepts and the rapid development of emerging categories such as sugar-free beverages, tea, and energy drinks, the continuous launch of new products from second- and third-tier brands and the acceleration of production capacity construction, driving a significant recovery in equipment demand. After 19 years, the overall domestic growth of listed companies has entered an expansion cycle, and competition in the domestic market is intense, and it is expected to increase steadily in the future.

Overseas markets: Overseas emerging markets have generally been in a growth range in the past 10 years, and growth accelerated after the pandemic. The increase in consumer consumption capacity in emerging economies such as India, Southeast Asia, and Latin America has contributed to a continued increase in consumption of bottled water and sugary drinks. After the epidemic, in global industrial investment and supply chain restructuring, emerging countries grew significantly and entered the dual logic of “increased consumption+equipment upgrade”. With significant cost performance advantages and after-sales service, the export boom accelerated. Chinese manufacturers still had a low share of overseas markets, and there is still plenty of room for growth in the future.

Zhongtai Securities believes that in the context of domestic and foreign market demand resonance, the liquid packaging industry as a whole has shown a healthy development trend of increasing revenue scale and profitability at the same time. China's liquid packaging machinery overseas has the advantage of multiple factors.

After years of development in the domestic market, domestic manufacturers have formed strong support for overseas competition in many aspects

Cost and delivery: Domestic equipment is lower than European, American and Japanese brands in terms of purchase costs and long-term maintenance costs. Logistics from China to Southeast Asia and South Asia are smooth and production delivery is fast, accurately matching the needs of emerging market customers for high cost performance and rapid commissioning.

Technical service stability: The automation line integration and filling speed of domestic enterprises are sufficient to meet the needs of emerging markets, and Chinese enterprises have the will and ability to provide highly customized products and provide immediate after-sales through technical guidance and cooperation with local dealers.

Macro trends: In the context of global industrial investment trends in emerging countries and supply chain restructuring, the payment capacity of leading beverage companies in emerging countries may continue to improve, and the wave of upgrading the food and beverage industry in Vietnam, Indonesia, India and other countries along the route has created room for continuous demand for packaging equipment; this trend has been substantially confirmed on the enterprise side. Domestic companies, such as Dailong and Xinmeixing, have grown several times in the scale of their overseas business over the past ten years. The share of overseas orders has continued to increase, customer repurchases have continued, and the industry has entered a new stage where the penetration rate continues to increase.

It is recommended to focus on relevant targets: Dayilong (002209.SZ), Xinmeixing (300509.SZ), Yongchuang Intelligence (603901.SH), and Central Asia Co., Ltd. (300512.SZ).

Risk warning: Changes in the international political situation; the performance of relevant targets falls short of expectations; there is a risk that the information used in the research report will not be updated in a timely manner; market size estimates are biased.