Upward bound

Gen Z a rising force in Asian consumer spending

Special report May 2021

 
 
Prepared for: pdesai@[Link]
 Asia consumer

Oliver Matthew Contents

Country Head - Japan
[Link]@[Link]
+81 3 4578 8041 Executive summary ......................................................................................................... 3
Wenjun Xia
+81 3 4578 8055
Investment thesis ............................................................................................................ 4

From millennials to Gen Z .............................................................................................. 8

What does Generation Z want? .................................................................................. 18

Strong consumer growth .............................................................................................. 26

Our Gen Z consumer portfolio .................................................................................... 32

Before Gen Z, millennials
were the stars of the show
All prices quoted herein are as of close of business 17 May 2021, unless otherwise stated.

Buyer’s market

CLSA and CL Securities Taiwan Co., Ltd. (“CLST”) do and seek to do business with companies covered in its research reports. As such, investors
should be aware that there may be conflicts of interest which could affect the objectivity of the report. Investors should consider this report
as only a single factor in making their investment decisions.
Find CLSA research on Bloomberg, Thomson Reuters, FactSet and CapitalIQ - and profit from our evalu@tor proprietary database at [Link]
For important disclosures please refer to page 66.

2 [Link]@[Link] 18 May 2021

 
 
Prepared for: pdesai@[Link]
 Executive summary Asia consumer

Upward bound
Generation Z the next big Generation Z is increasingly shaping consumption in Asia, and by the time these
demographic youngsters start hitting peak earnings in 2030, they are likely to form the top
demographic group. Numbering 978m, the cohort slightly outnumbers the region’s
953m millennials who currently lead consumer trends. Combining population data
with findings from our proprietary survey of consumer preferences, we select 23
stocks to play the Gen Z theme. Our resulting portfolio has the largest weights in
China, followed by India and Japan.

From millennials to Gen Z In 2020, millennials and Gen Z already comprised 22% and 23% of the total
population in Asia Pacific. By the time the last millennials and most of Gen Z are
reaching peak earnings capacity in 2030, according to Euromonitor per capita
consumer expenditure in Asia will have risen to US$5,832, up from US$3,268 in
2020. China and India dominate in both numbers and spending growth.

What does Gen Z want? To get a closer look at Gen Z, we conducted a proprietary survey in which we asked
200 shoppers aged 15-25 in China, India and Indonesia about their buying preferences.
We found that members of Gen Z are digital natives and want good brands at low
prices. Sales channel does not matter but it needs to be accessible by smartphone and
offer decent security. Spending habits are also changing, and we see that Gen Z will
further increase ecommerce sales, especially in fashion. However, the group will also
look to widen spending on travel (China), eating out and education (India).

Strong consumer growth The past 10 years have seen very strong demand translate into excellent results for
consumer companies in Asia. Sales have grown 83% and operating profit 123%, as
operating profit margins reached 10.8%. PE multiples have risen from 20x to 30x
and compounding operating profit growth remains crucial.

Our 2030 Gen Z portfolio To construct our portfolio, we started by considering the likely retail sales value of
the different regions in 2030. Then, we identified key product segments we like in
terms of decent profit margin profile. Finally, we picked companies exposed to
these themes while taking into account management quality. Our portfolio
comprises 23 names and can be found on page 7.

Top-five Asian markets to A US$10tn consumer expenditure uplift, 2020-30

add US$10.3tn to total
(US$m)
consumption by 2030
7,000,000
6,627,500.9

6,000,000

5,000,000

4,000,000

3,000,000
1,979,741.2
2,000,000
804,793.8
1,000,000 678,331.6
403,768.1

0
China India Indonesia Japan South Korea

Source: CLSA, Euromonitor

18 May 2021 [Link]@[Link] 3

 
 
Prepared for: pdesai@[Link]
 Investment thesis Asia consumer

Rising to the top

At almost 1 billion strong, Asia’s Gen Z has both the demographic weight and
Asia has almost 1
billion Gen Z economic purchasing power to be a driving consumer force over the next 10 years.
youngsters We believe companies tied to Chinese and Indian consumer demand that execute
effectively in the digital space or have a laser focus on Gen Z will benefit. In 2020,
over 72% of this group and 82% of total consumption power were in China, India,
Japan, Korea and Indonesia.

Population in Asia by group in 2020 Comparing populations for different countries in Asia
Asia Pacific (%)
Generation Alpha Generation Z Millennials
Silent Generation X Baby Boomers Silent Generation
Generation 100
Generation
3% Alpha 90
17% 80
Baby
Boomers 70
15% 60
50
Generation X Generation Z 40
20% 23%
30
Millennials 20
22% 10
0
China India Indonesia Japan South Korea Asia Pacific
Source: CLSA, Euromonitor Source: CLSA, Euromonitor

Population in 2020
(thousands) Generation Generation Z Millennials Generation X Baby Silent Total
Alpha Boomers Generation Population
Born between 2010-2024 1995-2009 1980-1994 1965-1979 1946-1964 1925-1945
China 176,804 250,768 305,533 336,062 275,736 53,930 1,400,050
India 252,153 362,787 318,311 230,370 157,826 27,857 1,349,810
Indonesia 52,640 68,610 61,853 52,554 32,491 5,298 273,524
Japan 10,709 17,620 20,558 27,064 31,110 17,730 125,765
South Korea 4,532 8,329 10,959 12,635 11,853 3,381 51,781
Asia Pacific 711,036 977,520 952,781 830,369 624,593 131,507 4,231,399
Source: CLSA, Euromonitor

Population in 2030
(thousands) Generation Generation Z Millennials Generation X Baby Silent Total
Alpha Boomers Generation Population
Born between 2010-2024 1995-2009 1980-1994 1965-1979 1946-1964 1925-1945
China 233,334 249,718 303,919 324,268 213,454 15,782 1,418,893
India 340,394 356,654 309,008 210,571 110,885 7,142 1,470,147
Indonesia 70,674 67,370 60,267 48,633 23,666 1,286 299,198
Japan 14,321 18,174 20,566 26,514 27,443 8,319 120,350
South Korea 5,674 8,506 11,034 12,543 10,717 1,447 51,976
Asia Pacific 953,008 963,024 933,806 781,711 473,107 41,221 4,507,970
Source: CLSA, Euromonitor

Gen Z are more affluent and better educated than older demographic groups. Unlike
Gen Z are more
affluent and educated
previous generations, who are more likely to sacrifice present consumption for the
but live in uncertain future, Gen Z appear to emulate millennials. With climate change and social,
times political and economic uncertainty on the horizon, they prefer to focus on the
present and live life to the fullest. This drives them to want to buy new things, try
new experiences and experiment with new ways of living. Having a more flexible

4 [Link]@[Link] 18 May 2021

 
 
Prepared for: pdesai@[Link]
 Investment thesis Asia consumer

and experimental life may be a unique feature of Gen Z. As this group moves from
their 20s into their 30s as time marches towards 2030, rising incomes will
spearhead a US$10.3 trillion increase in consumption for these five economies.

Expected addition to total consumption from 2020 to 2030

By 2030, consumption
(US$m)
from these Asian five
economies to grow 7,000,000 6,443,772
US$10.3 trillion
6,000,000

5,000,000

4,000,000

3,000,000
1,980,671
2,000,000
946,655
1,000,000 593,189
374,405

0
China India Indonesia Japan South Korea
Source: CLSA, Euromonitor

According to Euromonitor, from 2020-30 per capita consumer spending in China

Different growth rates
for each country will be highest in the hotels & catering category while education will be the fastest-
growing segment in India and South Korea. For Japan, personal care will the largest
source of consumer spending growth.

2020-30 Cagr in per capita consumer expenditure by market and category

Cagr (%) China India Indonesia Japan South Korea
Total 7.6 7.7 6.0 3.6 4.2
Food & Beverage 6.4 6.9 5.8 3.5 3.6
Alcohol & Tobacco 6.3 6.9 5.6 3.7 3.5
Clothing & Footwear 6.8 7.3 6.4 3.1 3.4
Housing 7.4 6.9 5.9 3.1 3.5
Health related 7.2 6.4 5.9 3.4 4.1
Transport 5.5 6.9 6.1 3.6 4.7
Leisure & Recreation 6.7 7.1 5.8 3.1 3.6
Education 7.4 9.5 5.8 3.9 7.0
Hotels & Catering 10.5 9.1 6.3 3.8 3.9
Personal Care 7.8 6.6 6.0 4.2 4.8
Others 8.5 7.5 6.2 3.9 4.4
Source: CLSA, Euromonitor

Insights into Gen Z

Gen Z represents the largest consumer base in Asia through 2030. As this
Gen Z is more
demanding demographic become increasingly influential, companies need to be prepared and
make them part of their business strategy. Our proprietary survey reveals that Gen
Z is more demanding, both in terms of quality and pricing, than their elders and
expects to be in control. Digital services come naturally to them in a way that blurs
the lines between products and services, delineating the older population’s
behaviour and choices. Born during economic recession and financial turmoil, the
Gen Z cohort are likely to be cautious consumers. They prefer products that offer
value-for-money and reflect real life.

18 May 2021 [Link]@[Link] 5

 
 
Prepared for: pdesai@[Link]
 Investment thesis Asia consumer

How important are these factors to you? (0 = not important, 10 = very important)
Price is the most
(Average score) China (n=51) India (n=83) Indonesia (n=64)
important factor
10 0=Not important
10=Most important
9 8.5 8.5
7.8 8.0
8
6.8 6.8
7 6.2
6 5.6 5.5

5
4
3
2
1
0
The Brand The Price Where I buy it
Source: CLSA

China and India to consume more

Looking out to 2030, consumption by market is set to shift incrementally. China will
Largest increases in
food & beverage, move from 51% to 57% while India will increase from 14% to 16%. Meanwhile,
housing and transport Japan will decline from 23% to 17% and Korea will decrease from 6% to 5%.
Indonesia should maintain its 5% share.

The biggest absolute consumption increases will be in food & beverage, housing
and leisure & recreation.

Change in absolute market size from 2020 to 2030 by category

(US$m) China India Indonesia Japan South Korea
Total 6,443,772 1,980,671 593,189 946,655 374,405
Food & Beverage 1,135,687 486,198 186,932 144,730 35,971
Alcohol & Tobacco 172,889 35,864 41,180 17,453 5,421
Clothing & Footwear 359,368 97,724 21,180 29,841 22,165
Housing 1,337,735 242,326 59,726 190,565 58,476
Health related 319,714 56,118 12,828 44,288 6,389
Transport 586,073 131,083 18,465 43,877 39,732
Leisure & Recreation 741,693 412,627 107,141 101,544 35,601
Education 231,642 39,282 32,697 41,079 22,700
Hotels & Catering 393,130 14,415 15,082 79,074 28,284
Personal Care 399,368 91,696 22,631 18,731 20,218
Others 503,898 32,051 62,935 81,671 41,624
Source: CLSA, Euromonitor

By percentage, greatest In percentage terms, consumption will rise the most for hotels & catering in China,
rise in China will be transport in India, hotels & catering in Indonesia, personal care in Japan and leisure
from hotels & catering & recreation in Korea.

2020-30 Cagr in total consumer expenditure by market and category

Cagr (%) China India Indonesia Japan South Korea
Total 7.7 8.6 6.9 3.1 4.3
Food & Beverage 6.6 7.9 6.8 3.0 3.6
Alcohol & Tobacco 7.3 7.9 6.9 2.6 3.5
Clothing & Footwear 7.0 7.5 6.9 3.0 4.2
Housing 6.5 7.8 6.7 2.5 3.8
Health related 8.8 8.7 7.1 3.5 2.6
Transport 10.6 10.1 7.2 3.3 3.9
Leisure & Recreation 8.6 8.5 7.2 3.4 4.5
Education 7.7 8.8 7.0 3.1 4.2
Hotels & Catering 11.9 7.8 7.3 3.4 4.5
Personal Care 9.1 4.4 7.0 3.6 4.1
Others 9.3 9.1 7.0 3.4 4.3
Source: CLSA, Euromonitor

6 [Link]@[Link] 18 May 2021

 
 
Prepared for: pdesai@[Link]
 Investment thesis Asia consumer

How to invest this theme

We have constructed a Gen Z portfolio with 2030 consumption changes in mind.
Overlay 2030 Gen Z
portfolio over As part of this exercise, we deliberately excluded digital platforms since we already
millennial stock ideas made the case for them in our report on millennials. We suggest overlaying the Gen
Z portfolio over our millennial stock ideas.

We put a greater weight on China and India because the future consumption boom
Greater weight on
China and India will have the largest absolute impact there. We do, however, include several
investment ideas outside of these markets to tap into local trends, notably in Japan
and Korea.

In addition to the size of future consumer markets, we take into account Gen Z
23 stocks across nine
markets preferences; companies’ strategies and ability to outgrow their competitors; and
compound earnings growth from 2021 to 2030. In total, we have selected 23 stocks
across nine markets that will benefit from rising spending in Asia and the increasing
impact of Gen Z.

Our 2030 Gen Z portfolio: Key plays on long-term Asia consumption growth
Company Stock code Market Price PE EV/Ebitda Div yld EPS growth
cap (lccy) (x) (x) (%) (%)
(US$m)
21CL 22CL 21CL 22CL 21CL 22CL 21CL 22CL
Covered
AllHome HOME PM 542 7.0 18.1 12.6 10.1 7.6 1.1 1.7 46.6 43.7
Asian Paints APNT IS 36,420 2,782.8 85.0 80.8 54.1 52.4 0.6 0.6 20.3 5.3
China Feihe 6186 HK 25,474 22.1 22.6 18.4 14.5 11.5 1.6 2.3 (0.4) 23.0
CP All CPALL TB 16,328 57.0 43.2 20.4 13.1 9.1 1.2 2.4 (26.5) 111.5
Dabur DABUR IS 12,902 534.4 47.8 42.6 37.8 33.1 0.7 0.8 13.1 12.3
Domino's DMP AU 7,117 106.5 40.9 34.9 21.1 18.2 1.7 2.0 17.9 17.1
Fast Retailing 9983 JP 84,333 86,090 45.5 41.5 16.7 15.1 0.6 0.7 14.5 9.7
Flight Centre FLT AU 2,336 15.3 50.3 14.7 9.0 4.7 1.3 4.5 - 241.5
Hindustan Unilever HUVR IB 76,171 2,376 57.5 49.2 42.9 36.7 1.6 1.8 20.2 17.0
Jollibee JFC PM 3,897 167.2 36.7 25.2 7.5 5.3 0.9 1.3 - 45.7
Jubilant Food JUBI IN 5,065 2,816.2 191.6 79.4 51.6 33.0 0.1 0.4 (39.4) 141.4
Kobe Bussan 3038 JP 7,187 2,843 33.1 28.8 18.1 15.9 0.9 1.0 23.2 15.0
LG H&H 051900 KS 21,101 1,518,000 28.0 24.2 15.4 13.2 0.9 1.0 14.0 15.6
Li Ning 2331 HK 20,644 68.1 53.6 40.6 35.4 25.7 0.7 1.0 55.2 32.6
Luzhou Laojiao 000568 CH 56,390 257.8 49.9 39.5 35.7 28.3 1.3 1.8 25.7 26.3
Shiseido 4911 JP 27,441 7,697 114.9 37.5 26.3 15.0 0.6 0.8 - 206.5
Smoore Intl 6969 HK 39,474 55.6 49.4 36.5 40.2 29.3 1.0 1.4 109.8 35.7
Studio Dragon 253450 KS 2,551 95,800 43.8 32.8 13.9 12.5 - - 107.9 33.5
ThaiBev THBEV SP 12,632 0.7 16.6 14.6 13.0 11.5 3.0 3.4 12.7 7.4
Unicharm 8113 JP 24,279 4,265 28.4 25.1 13.0 11.6 1.0 1.2 72.1 13.2
Zozo 3092 JP 10,118 3,470 30.4 27.0 19.0 16.4 1.6 1.8 12.7 12.6
Not Covered
Mayora Indah¹ MYOR IJ 3,929 2,510.0 23.5 20.3 13.6 12.1 1.4 1.6 15.9 15.9
Unicharm Indonesia¹ UCID IJ 450 1,650.0 14.0 10.5 5.5 4.7 1.8 2.4 48.1 32.4
¹ Estimate data from FactSet. Source: CLSA, Bloomberg, FactSet

18 May 2021 [Link]@[Link] 7

 
 
Prepared for: pdesai@[Link]
 Section 1: From millennials to Gen Z Asia consumer

From millennials to Gen Z

In Asia, millennials and Gen In 2020, millennials and Gen Z already comprised 22% and 23% of the total
Z to drive consumption in population in Asia Pacific. By the time the last millennials and most Gen Z are
2030 reaching peak earnings capacity in 2030, according to Euromonitor, per capita
consumer expenditure in Asia will have risen to US$5,832, up from US$3,268 in
2020. China and India dominate in both numbers and spending growth.

We have a great interest in how changes in population characteristics affect

consumption in Asia. In 2018, we analysed how millennials affect the consumer
sector. Here, we revisit the topic and find that in the next 10 years, both millennials
and Generation Z will drive the dynamics of consumer spaces. The size of these
two groups and their increasing spending power will give them more influence in
the market.

When analysing population distribution, we divide each age group into cohorts,
which include generation alpha (born between 2010 and 2024), generation Z (born
between 1995 and 2009), millennials (born between 1980 and 1994), generation
X (born between 1965 and 1979), baby boomers (born between 1946 and 1964)
and the silent generation (born between 1925 and 1945). In 2020, millennials and
generation Z in Asia reached 953m and 978m and accounted for 46% of the Asia
population.

Figure 1 Figure 2

Population in Asia by group in 2020 Comparing populations for different countries in Asia

Asia Pacific (%)

Generation Alpha Generation Z Millennials
Silent Generation X Baby Boomers Silent Generation
Generation 100
Generation
3% Alpha 90
17% 80
Baby
Boomers 70
15% 60
50
Generation X Generation Z 40
20% 23%
30
Millennials 20
22% 10
0
China India Indonesia Japan South Korea Asia Pacific

Source: CLSA, Euromonitor Source: CLSA, Euromonitor

India has the highest According to Euromonitor, millennials and Gen Z comprise about 24% and 27% of
proportion of Gen Z India’s population, compared to 25% and 23% for Indonesia. These markets are
followed by China, South Korea, and Japan at somewhat lower levels. In terms of
absolute value, India and China contribute the most to the Generation Z and
millennial populations; combined, 66% of millennials and 63% of Gen Z populations
are from these two countries. These two cohorts also represent the largest portion
of population for India and Indonesia.

8 [Link]@[Link] 18 May 2021

 
 
Prepared for: pdesai@[Link]
 Section 1: From millennials to Gen Z Asia consumer

Figure 3

Population in 2020
(thousands) Generation Generation Z Millennials Generation X Baby Silent Total
Alpha Boomers Generation Population
Born between 2010-2024 1995-2009 1980-1994 1965-1979 1946-1964 1925-1945
China 176,804 250,768 305,533 336,062 275,736 53,930 1,400,050
India 252,153 362,787 318,311 230,370 157,826 27,857 1,349,810
Indonesia 52,640 68,610 61,853 52,554 32,491 5,298 273,524
Japan 10,709 17,620 20,558 27,064 31,110 17,730 125,765
South Korea 4,532 8,329 10,959 12,635 11,853 3,381 51,781
Asia Pacific 711,036 977,520 952,781 830,369 624,593 131,507 4,231,399
Source: CLSA, Euromonitor

Figure 4

Population in 2030
(thousands) Generation Generation Z Millennials Generation X Baby Silent Total
Alpha Boomers Generation Population
Born between 2010-2024 1995-2009 1980-1994 1965-1979 1946-1964 1925-1945
China 233,334 249,718 303,919 324,268 213,454 15,782 1,418,893
India 340,394 356,654 309,008 210,571 110,885 7,142 1,470,147
Indonesia 70,674 67,370 60,267 48,633 23,666 1,286 299,198
Japan 14,321 18,174 20,566 26,514 27,443 8,319 120,350
South Korea 5,674 8,506 11,034 12,543 10,717 1,447 51,976
Asia Pacific 953,008 963,024 933,806 781,711 473,107 41,221 4,507,970
Source: CLSA, Euromonitor

In 2030, millennials and Gen Looking at average gross income by age group, millennials and Gen Z in Asia
Z will be the core markets represent the youngest categories and the lowest earners in 2020. But in 2030,
these two groups will be securely in their prime earning years, as average income
for millennials increase from US$6,000-7,000 to above US$12,000, and average
income for Gen Z go up from the US$2,000-5,000 level to US$10,000-12,000.
Figure 5 Figure 6

Average gross income by age group in Asia, 2020 Average gross income by age group in Asia, 2030
9,000 (US$) 16,000 (US$)

Millennials
8,000 14,000
Millennials Millennials Gen Z
Millennials Millennials
7,000
Millennials 12,000 Gen Z
6,000
Gen Z 10,000
5,000
8,000
4,000
6,000
3,000
Gen Z
4,000
2,000

1,000 2,000

0 0
65+
65+

15-19

20-24

25-29

30-34

35-39

40-44

45-49

50-54

55-59

60-64
15-19

20-24

25-29

30-34

35-39

40-44

45-49

50-54

55-59

60-64

Source: CLSA, Euromonitor Source: CLSA, Euromonitor

Millennials are showing By market, we observe that while Gen Z are still the lowest earners, millennials
their power already play an important role due to their higher gross incomes. In China and
Indonesia, millennials as a group have the highest gross income compared to other
cohorts and are the main consumption power. In terms of absolute value, the
incomes of millennials in Japan and South Korea are 8x more than India, China and
Indonesia, on average.

18 May 2021 [Link]@[Link] 9

 
 
Prepared for: pdesai@[Link]
 Section 1: From millennials to Gen Z Asia consumer

Figure 7

In China and Indonesia, Average gross income of population in 2020 by market

millennials are the highest
50,000 (US$) 15-19 (Gen Z) 20-24 (Gen Z)
earners
25-29 (Millennials) 30-34 (Millennials)
45,000
35-39 (Millennials) 40-44
40,000 45-49 50-54
35,000 55-59 60-64
30,000 65+

25,000
20,000
15,000
10,000
5,000
0
China India Indonesia Japan South Korea

Source: CLSA, Euromonitor

A focus on China, India, We focus on China, India, Indonesia, Japan and South Korea because they make up
Indonesia, Japan and the majority of Asia in size and wealth. We believe data from these five markets
South Korea give us enough meaningful insight to answer the question: what are the best ways
to invest in changing consumer trends?

China
Millennials made up 21.8% According to Euromonitor, there are more than 305 million millennials in China in
of China’s total population 2020, representing 21.8% of the total population, while generation Z accounts for
in 2020 251 million, or 17.9% of the total population. If divided by social class, millennials
and Gen Z population are very wealthy, comprising 39.4% and 9.8% of total Social
Class A population (individuals with gross income over 200% more than average).
Meanwhile, 45.6% of millennials and 23% of Gen Z have higher than average gross
income.

Figure 8

China has 305m Millennials China: Millennial and Gen Z population

and 251m Gen Z
25 (%)
2020 2030

20

15

10

0
Generation Z Millennials Generation Z Millennials
China Asia Pacific

Source: CLSA, Euromonitor

10 [Link]@[Link] 18 May 2021

 
 
Prepared for: pdesai@[Link]
 Section 1: From millennials to Gen Z Asia consumer

Figure 9

Millennials and Gen Z China: Social class distribution by age/generation 2020

represent 49% of Social
Class A 450,000 (thousands) Gen Z Millennials Others

400,000

350,000

300,000

250,000

200,000

150,000

100,000

50,000

0
Social Class A Social Class B Social Class C Social Class D Social Class E

Note: Social classes data refer to the number of individuals with a gross income A – over 200%, B – between 150%
and 200%, C- between 100% and 150%, D – between 50% and 100%, E – less than 50% of average gross income
of all individuals aged 15+. Source: CLSA, Euromonitor

India
In India, millennials After China, India has the second-largest population in the world. Euromonitor
comprise 23.6% of total suggests India has the highest millennial population at more than 318 million in
population in 2020 2020, just below the US total population of 331 million and representing 23.6% of
India’s total population. At the same time, generation Z totals 363m or 23.6% of
India’s population. In 2030, the proportion of millennials and Gen Z will become
lower as more people are born. Millennials and Gen Z are 39.3% and 11.5% of Social
Class A. Compared to China, India’s millennial wealth distribution favours the lower
end. Above-average gross income totalled 29.7% for millennials and 15.2% for Gen
Z in 2020.

Figure 10

India has 318m millennials India: Millennial and Gen Z Population

and 362m Gen Z
30 (%)
2020 2030

25

20

15

10

0
Generation Z Millennials Generation Z Millennials
India Asia Pacific

Source: CLSA, Euromonitor

18 May 2021 [Link]@[Link] 11

 
 
Prepared for: pdesai@[Link]
 Section 1: From millennials to Gen Z Asia consumer

Figure 11

Millennial wealth India: Social class distribution by age/generation 2020

distribution leaning towards
lower end 500,000 (thousands) Gen Z Millennials Others

450,000
400,000
350,000
300,000
250,000
200,000
150,000
100,000
50,000
0
Social Class A Social Class B Social Class C Social Class D Social Class E

Note: Social classes data refer to the number of individuals with a gross income A – over 200%, B – between 150%
and 200%, C- between 100% and 150%, D – between 50% and 100%, E – less than 50% of average gross income of
all individuals aged 15+. Source: CLSA, Euromonitor

Indonesia
Indonesia’s millennials In 2020, there were 61.8 million millennials in Indonesia, or 22.6% of the total
represent 22.6% of the total population. In addition, there were 68.6m generation Z in Indonesia. Millennials and
population in 2020 Gen Z are 42.6% and 11.9% of Social Class A. Still, 59.5%, or 48.4m millennials,
have below average gross income. As high as 79.5% of Gen Z earn income below
the average level.

Figure 12

Indonesia has 61.8m Indonesia: Millennials and Gen Z population

millennials and 68.6m
Gen Z 30 (%)
2020 2030

25

20

15

10

0
Generation Z Millennials Generation Z Millennials
Indonesia Asia Pacific

Source: CLSA, Euromonitor

12 [Link]@[Link] 18 May 2021

 
 
Prepared for: pdesai@[Link]
 Section 1: From millennials to Gen Z Asia consumer

Figure 13

More millennials from Indonesia: Social class distribution by age/generation 2020

Social Class D
80,000 (thousands) Gen Z Millennials Others

70,000

60,000

50,000

40,000

30,000

20,000

10,000

0
Social Class A Social Class B Social Class C Social Class D Social Class E

Note: Social classes data refer to the number of individuals with a gross income A – over 200%, B – between 150%
and 200%, C- between 100% and 150%, D – between 50% and 100%, E – less than 50% of average gross income of
all individuals aged 15+. Source: CLSA, Euromonitor

Japan
We use Japan as a Millennials and generation Z amount to 20.6m and 17.6m in Japan, constituting only
benchmark for a mature 16.3% and 14% of the total population in 2020. Gross income above average totalled
economy 9.6m in 2020 for millennials and 2.8m for Gen Z. Our primary interest in Japan is more
as a gauge for possible insights into how target generations prioritise spending when
they get wealthier, rather than as a demand driver. However, as a group they still
represent a sizeable piece of spending power in annual consumption.

Figure 14

Steady population in an Japan: Millennials and Gen Z population

ageing society
25 (%)
2020 2030

20

15

10

0
Generation Z Millennials Generation Z Millennials
Japan Asia Pacific

Source: CLSA, Euromonitor

18 May 2021 [Link]@[Link] 13

 
 
Prepared for: pdesai@[Link]
 Section 1: From millennials to Gen Z Asia consumer

Figure 15

Millennials and Gen Z have Japan: Social class distribution by age/generation 2020
less wealth in Japan
45,000 (thousands) Gen Z Millennials Others

40,000

35,000

30,000

25,000

20,000

15,000

10,000

5,000

0
Social Class A Social Class B Social Class C Social Class D Social Class E

Note: Social classes data refer to the number of individuals with a gross income A – over 200%, B – between 150%
and 200%, C- between 100% and 150%, D – between 50% and 100%, E – less than 50% of average gross income of
all individuals aged 15+. Source: CLSA, Euromonitor.

South Korea
Millennials make up 21.2% As of 2020, the millennial population in Korea was 11m, or 21.2% of the total
of South Korea’s population population according to Euromonitor. It also has 8.3m generation Z, or 16.1% of the
in 2020 total population. Above-average gross income for millennials and generation Z
totalled 4.7m and 1.4m in 2020, and the percentage with above-average gross
income was 43.1% for millennials and 23.2% for Gen Z, which is a similar level to
Japan.

Figure 16

Steady population in an South Korea: Millennials and Gen Z population

ageing society
25 (%)
2020 2030

20

15

10

0
Generation Z Millennials Generation Z Millennials
South Korea Asia Pacific

Source: CLSA, Euromonitor

14 [Link]@[Link] 18 May 2021

 
 
Prepared for: pdesai@[Link]
 Section 1: From millennials to Gen Z Asia consumer

Figure 17

Millennials and Gen Z have South Korea: Social class distribution by age/generation 2020
less wealth in Korea 18,000 (thousands) Gen Z Millennials Others

16,000
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
Social Class A Social Class B Social Class C Social Class D Social Class E
Note: Social classes data refer to the number of individuals with a gross income A – over 200%, B – between 150%
and 200%, C- between 100% and 150%, D – between 50% and 100%, E – less than 50% of average gross income of
all individuals aged 15+. Source: CLSA, Euromonitor

Economic purchasing power

Per-capita consumer The demographic scale of Asia’s millennials and generation Z dominates, as does
expenditure in Asia was their economic purchasing power. In 2000, generation X, now aged 41-55, were
US$3,268 in 2020 only in the early phases of their careers when China consumer expenditure was
about US$469, or 1/9th of US$4,117 expenditure twenty years later. By the time
the last millennials start hitting peak earnings and Gen Z begin earning higher wages
in 2030, consumer expenditure per capita in Asia Pacific is expected to be
US$5,832 from US$3,268 in 2020, according to Euromonitor.

As these younger generations move from their 20s into their 30s and 40s as time
marches towards 2030, rising incomes will lead to a US$10.3 trillion increase in
consumption among these five economies.

Figure 18

Consumption to grow by Expected additions to total consumption from 2020-30

US$10.3 trillion by 2030 (US$m)
from five economies 7,000,000 6,443,772

6,000,000

5,000,000

4,000,000

3,000,000
1,980,671
2,000,000
946,655
1,000,000 593,189
374,405

0
China India Indonesia Japan South Korea
Source: CLSA, Euromonitor

In 2030, Asia to comprise Consumer expenditure in Asia totalled US$4,559bn in 2000, accounting for 23% of
34% of world’s US$19,818bn in total world consumption. In 2020, Asia consumption rose to
consumption US$13,826bn, making up 29.9% of US$46,284bn in total world consumption. In
2030, Euromonitor projects Asia consumption to be US$26,290bn, or 33.5% of the
world’s total consumption of US$78,593bn.

18 May 2021 [Link]@[Link] 15

 
 
Prepared for: pdesai@[Link]
 Section 1: From millennials to Gen Z Asia consumer

India’s much lower income In contrast, consumption levels in India are significantly lower than the other four
levels in 2030 to continue markets. India’s per capita consumption was US$292 in 2000, US$1,141 in 2020
to lag China and forecast to be US$2,395 in 2030, still behind China’s current level. Indonesia
sits in between; in 2000, it was slightly ahead of China at US$496 per capita,
reached US$2,263 in 2020, and is expected to hit US$4,052 in 2030.

The richer and more mature South Korean and Japan markets started in 2000 at
US$6,506 and US$20,356 per capita, respectively. By 2020, South Korea advanced
to US$13,943 per capita while Japan’s “lost generation” went nowhere at
US$21,007. By 2030, South Korea is expected be at US$21,094, ahead of Japan’s
current level, while Japan is forecast to grow to US$29,818 per capita.

Figure 19

China, India and Indonesia Per capita consumer expenditure by country

grew rapidly in terms of (US$) China India Indonesia Japan South Korea Asia Pacific
35,000
per-capita consumption
30,000

25,000

20,000

15,000

10,000

5,000

0
2000 2020 2030
Source: CLSA, Euromonitor

By market, consumption The picture for total consumption looks very different. In 2000, consumption in
varied a lot China was US$590bn, or 13% of Asia’s total, far behind Japan’s US$2584bn, which
represented 57% of total Asia consumption. Meanwhile, South Korea was
US$306bn, or 7% of the Asia total, and India was US$299bn, or 7%, and Indonesia
was US$105bn, or 2%.

Figure 20

Japan accounted for over Percentage of total consumption in Asia by market in 2000
half of the total (%)
60 56.7
consumption in Asia in 2000
50

40

30

20
13.0

10 6.6 6.7
2.3 1.3 1.6
1.0 0.9
0
China India Indonesia Japan South Malaysia Philippines Singapore Thailand
Korea
Source: CLSA, Euromonitor

16 [Link]@[Link] 18 May 2021

 
 
Prepared for: pdesai@[Link]
 Section 1: From millennials to Gen Z Asia consumer

Fast forward to 2020 and China is now dominates consumption in Asia at

US$5849bn, or 42% of the total, while at US$2,642bn, Japan has shrunk to 19% of
total Asia consumption. South Korea is US$722bn, still 5% of total Asia, and India
is US$1540bn, or 11%, and Indonesia is US$619bn, or 5%.

Figure 21

China has the highest Percentage of total consumption in Asia by country in 2020
consumption levels among (%)
all Asian countries in 2020
45 42.3

40
35
30
25
19.1
20
15 11.1
10
4.5 5.2
5 1.5 1.9 2.3
0.8
0
China India Indonesia Japan South Malaysia Philippines Singapore Thailand
Korea
Source: CLSA, Euromonitor

Euromonitor extrapolates While much may change, Euromonitor believes that China is on track to hit
that China is on track to US$12,292bn in 2030, or 47% of the total, while Japan grows to US$3,521bn, only
reach 47% of total in 2030 13% of the total. South Korea is expected to be US$1,096bn, moving to 4% of total,
and India should be US$3,521bn, rising to 13%, while Indonesia is US$1,212bn, still
5% of total.

Figure 22

China to strengthen its Percentage of total consumption in Asia by country in 2030

position as the top (%)
consuming market 50 46.8
in Asia in 2030
45
40
35
30
25
20
13.4 13.6
15
10
4.6 4.2
5 1.7 2.0
0.8
2.0

0
China India Indonesia Japan South Malaysia Philippines Singapore Thailand
Korea
Source: CLSA, Euromonitor

Clearly, Asia consumption has plenty of room to grow, and opportunities remain in
several subcategories.

18 May 2021 [Link]@[Link] 17

 
 
Prepared for: pdesai@[Link]
 Section 2: What does Generation Z want? Asia consumer

What does Generation Z want?

Our survey finds that Gen Z To get a closer look at Gen Z, we conducted a proprietary survey in which we asked
values brand and pricing 200 shoppers aged 15-25 in China, India and Indonesia about their buying preferences.
and likes ecommerce We found that members of Gen Z are digital natives and want good brands at low
prices. Sales channel does not matter but it needs to be accessible by smartphone and
offer decent security. Spending habits are also changing, and we see that Gen Z will
further increase ecommerce sales, especially in fashion. However, the group will also
look to widen spending on travel (China), eating out and education (India).

Consumer insights
Gen Z slightly outnumber We examine differences in behaviour between Gen Z and millennials and how this
millennials will impact consumption over the next 10 years. Aged 11-25 in 2020, Gen Z
outnumber millennials by a small degree, notably due to the large cohort in India.

Smartphones have always For most Gen Z, smartphones have always been a part of their lives. This is arguably
been part of life for Gen Z the biggest single difference between it and previous generations. With a
smartphone, the whole world is within reach. From information to entertainment to
finding services, the virtual platform is easier to access than the physical world.

Consumers have more This optionality is a critical difference. Previously, consumers had limited occasions
options than ever before to make selections, and few choices for brands or experiences. Now, the options
are much broader and accessible 24 hours a day, and increasingly important in China
and India.

Our survey results, provided here, help us understand key purchasing behaviour in
each market.

The survey conclusions

Gen Z are more Since Gen Z are digital natives, they prefer to buy via their smartphones, with little
independent and have high help from store staff. They are highly price sensitive, and where they buy is much
price sensitivity less important than the price or the brand. Online privacy is a paramount concern,
but so is access to credit in China. Indian consumers show a high interest in socially-
responsible brands. The areas of highest discretionary spending interest vary widely
based on location, but fashion is still popular everywhere. Eating out is the most
important segment in Indonesia while it is education in India and travel in China.

Pricing vs brand
Gen Z value price the most Our findings suggest that Gen Z is slightly more sensitive to price than brand or
when buying channel. This was the most important factor in China, India and Indonesia.
Interestingly, brand and channel are somewhat more important in Indonesia than in
either India or China.

18 [Link]@[Link] 18 May 2021

 
 
Prepared for: pdesai@[Link]
 Section 2: What does Generation Z want? Asia consumer

Figure 23

Price is the most How important are these factors to you? (0 = not important, 10 = very important)
important factor
(Average score) China (n=51) India (n=83) Indonesia (n=64)
10 0=Not important
10=Most important
9 8.5 8.5
7.8 8.0
8
6.8 6.8
7 6.2
6 5.6 5.5

5
4
3
2
1
0
The Brand The Price Where I buy it

Source: CLSA

Channel
Before reviewing our purchase channel-related results, we thought it would be
useful to establish a baseline for mobile internet usage. Overall usage is highest in
Indonesia, with people spending an average 04:46 hours per day on their phones,
followed by India at 03:23 hours per day. Meanwhile, China, South Korea and Japan
lag behind the worldwide average of 03:22 hours per day.

Figure 24

People in Indonesia spend a Daily time spent using mobile internet

higher than global average
time on mobile internet (hours) Time per day spent using mobile internet
07:59
Time per day spent using internet

06:43
06:30

05:22
05:50
04:46
04:22
03:23 03:22
03:10
02:26

01:32

Indonesia India Worldwide China South Korea Japan

Source: CLSA, GWI (2020 Q3)

When we look at mobile ecommerce adoption rates and average revenue per user
(ARPU) for consumer goods by market, the results are surprising. While Indonesia
and India have high mobile ecommerce adoption rates, their ARPUs are much lower.
On the other hand, relatively wealth countries such as Japan, South Korea and China
have higher spending rates in mobile ecommerce.

18 May 2021 [Link]@[Link] 19

 
 
Prepared for: pdesai@[Link]
 Section 2: What does Generation Z want? Asia consumer

Figure 25

High mobile ecommerce Mobile ecommerce adoption and ARPU on consumer goods
adoption rate in Indonesia
and India but low spending 90 (%) ARPU on consumer goods (RHS) ($) 2,500
Mobile Ecommerce adoption¹
80

70 2,000

60
1,500
50

40
1,000
30

20 500
10

0 0
Indonesia India Worldwide China South Korea Japan

¹ Percentage of internet users aged 16-64 who bought something online via a mobile device in Jan 2021. ARPU is
based on estimates of full-year consumer spend for 2020. Source: CLSA, GWI (Q3 2020), STATISTA

Preference varies by Gen Z is the first generation born in a digital world. With their higher digital literacy,
geography they also expect brands to act like digital natives. Our survey results show that there
are some noticeable differences in channel preferences across Gen Z by geography.
In China and Indonesia, the smartphone is the no1 consideration when buying
something. However, fashion and shoes still need to be tried on. In India, the
smartphone comes in third place, and socially-responsible brands are very popular.

Gen Z are more In all markets, needing advice from staff was a very low priority. Although Gen Z
independently minded are used to social media, they tend to be more independently minded and celebrity
opinions do not affect their choice, especially in China and India. In addition, they
appear to have a neutral view towards online reviews.

Figure 26 Figure 27

China - When deciding to buy something, I . . . India - When deciding to buy something, I . . .

Prefer to buy on smartphone Need to try on clothes and shoes

Preference for socially responsible

Need to try on clothes and shoes
brands

Need to touch and feel before buying Prefer to buy on smartphone

Willing to pay for faster delivery Need to touch and feel before buying

Preference for socially responsible Trust online reviews more than anything
brands else
Trust online reviews more than anything Willing to pay for faster delivery
else

Need advice from staff or the brand Need advice from staff or the brand

Write reviews to share experience Celebrity opinions

Celebrity opinions (Average score) Write reviews to share experience (Average score)

0 2 4 6 8 10 0 2 4 6 8 10
Disagree Strongly agree Disagree Strongly agree

Source: CLSA Source: CLSA

20 [Link]@[Link] 18 May 2021

 
 
Prepared for: pdesai@[Link]
 Section 2: What does Generation Z want? Asia consumer

Figure 28

Strong preference for Indonesia - When deciding to buy something, I . . .

purchasing on smartphone
Prefer to buy on smartphone
Need to try on clothes and shoes
Need to touch and feel before buying
Preference for socially responsible brands
Trust online reviews more than anything else
Celebrity opinions
Willing to pay for faster delivery
Need advice from staff or the brand
Write reviews to share experience (Average score)

0 2 4 6 8 10
Disagree Strongly agree
Source: CLSA

For the overall population, we see that South Korea has the highest social media
penetration rate (89%) among these markets, followed by Japan (74%) and China
(65%). While India appears low in terms of penetration rate, it has the largest
increase in number of users, having grown 48% from last year.
Figure 29

South Korea has the highest Social media penetration: Active users as a percent of total population
social media penetration (%)
100
rate 89
90
80 74

70 65
62
60 54

50
40 32
30
20
10
0
South Korea Japan China Indonesia Worldwide India
Source: CLSA, KEPIOS (Jan 2021)

Figure 30

Countries and territories with the largest change in the absolute number of social media users (Jan 2020 vs Apr 2019)
No. Largest absolute Number of users Users increased by No. Largest absolute Number of users Users increased by
growth increased percentage (%) growth increased percentage (%)
1 India +130,000,000 +48.0 11 Nigeria +3,400,000 +14.0
2 China +15,000,000 +1.5 12 Colombia +3,400,000 +11.0
3 Indonesia +12,000,000 +8.1 13 Japan +3,000,000 +3.8
4 Brazil +11,000,000 +8.2 14 Bangladesh +3,000,000 +9.1
5 Iran +9,400,000 +39.0 15 Egypt +2,900,000 +7.3
6 U.S.A +6,900,000 +3.1 16 Algeria +2,400,000 +12.0
7 Philippines +5,800,000 +8.6 17 Pakistan +2,400,000 +7.0
8 Vietnam +5,700,000 +9.6 18 Thailand +2,300,000 +4.7
9 Mexico +5,300,000 +6.3 19 Germany +2,300,000 +6.5
10 South Africa +3,500,000 +19.0 20 Argentina +2,200,000 +6.9
Source: CLSA, KEPIOS

18 May 2021 [Link]@[Link] 21

 
 
Prepared for: pdesai@[Link]
 Section 2: What does Generation Z want? Asia consumer

Credit
High demand for online In China, we see high demand for online privacy, ahead of value for money. In India,
privacy in China we see value for money as the most important factor, followed by a return policy,
while online privacy ranked third. In Indonesia, value for money is the top priority,
and privacy comes in second. Overall, value for money is important for Gen Z.

Renting or borrowing money is a low priority in India or Indonesia, but a decent

number of consumers showed interest in borrowing money for purchases in China.

Figure 31 Figure 32

China - When deciding to buy something, I . . . India - When deciding to buy something, I . . .

Demand for online privacy Demand for value for money

Demand for value for money Demand for return policy

Demand for return policy Demand for online privacy

Want to borrow money to buy Interest in subscription model

Interest in subscription model Preference for renting instead of buying

Preference for renting instead of buying Want to borrow money to buy

(Average score, max = 10) (Average score, max = 10)

0 2 4 6 8 10 0 2 4 6 8 10
Disagree Strongly agree Disagree Strongly agree

Source: CLSA Source: CLSA

Figure 33

Value for money is the Indonesia - When deciding to buy something, I…

priority in India and
Indonesia
Demand for value for money

Demand for online privacy

Demand for return policy

Interest in subscription model

Preference for renting instead of buying

Want to borrow money to buy

(Average score, max = 10)

0 2 4 6 8 10
Disagree Strongly agree

Source: CLSA

Spending priorities
Spending priorities vary When asked about their spending priorities, the results varied significantly across
across regions regions. In China, discretionary spending priorities are fashion, travel and
entertainment. In India, saving is no.1, followed by travel and education. In
Indonesia, saving is no.1 followed by eating out and then fashion.

22 [Link]@[Link] 18 May 2021

 
 
Prepared for: pdesai@[Link]
 Section 2: What does Generation Z want? Asia consumer

In all markets, spending on bike/motorbike/car came last. Saving is the first option
in India and Indonesia but is fourth in China.

Figure 34 Figure 35

China – If I suddenly had $1000 USD I would spend it on… India - If I suddenly had $1000 USD I would spend it on…

Fashion items Save it

Travel Travel

Entertainment Education

Save it Fashion items

Eating out/Food/Drinks Eating out/Food/Drinks

Health/Cosmetics Health/Cosmetics
Consumer electronics Consumer electronics
(Smartphone/PC/others) (Smartphone/PC/others)
Education Entertainment

Others Others

Bike/Motorbike/Car (Average score, max = 10) Bike/Motorbike/Car (Average score, max = 10)

0 2 4 6 8 10 0 2 4 6 8 10
Disagree Strongly agree Disagree Strongly agree

Source: CLSA Source: CLSA

Figure 36

Priorities differ for Indonesia - If I suddenly had $1000 USD, I would spend it on…
discretionary spending
across markets
Save it
Eating out/Food/Drinks
Fashion items
Others
Entertainment
Travel
Health/Cosmetics
Consumer electronics (Smartphone/PC/others)
Education
Bike/Motorbike/Car (Average score, max = 10)

0 2 4 6 8 10
Disagree Strongly agree

Source: CLSA

Health/cosmetics and travel We believe building an investment framework that overlays Gen Z preferences on
are important top of overall growth metrics would create an attractive investment portfolio. As a
result, it’s important to have exposure to fashion, eating out, health/cosmetics and
travel.

Currently, Japan has the We now examine the per-capita consumption by category in each market and try
highest per-capita to overlay our survey result with market data. Currently, Japan has the highest per-
consumption capita consumption at US$21,006, followed by Korea at US$13,943 and China at
US$4,177, which represents one-fifth of Japan’s spending.

18 May 2021 [Link]@[Link] 23

 
 
Prepared for: pdesai@[Link]
 Section 2: What does Generation Z want? Asia consumer

Figure 37

Per-capita consumption by category in 2020

(US$) China India Indonesia Japan Korea
Total 4,177.4 1,141 2,263.9 21,006.4 13,943.4
Food 884.8 314 696.6 3,027.7 1,503.5
Beverages 27.8 4.6 41.7 279.6 111.4
Alcoholic Drinks 50.7 6.7 4.7 338.9 127.3
Tobacco 69.8 16.6 155.5 133.5 129.8
Clothing 212.9 53.9 60.6 595.6 763
Footwear 51.7 14.7 20.8 95.1 86.4
Housing Related 1,260.2 191.3 285.5 6,165 2,884.4
Health Related 389.3 56.8 73 862.5 792.3
Transport 304.2 189.9 388.4 2,097.9 1,478.4
Communications 144.4 27.6 123.7 730.9 723.4
Leisure and Recreation 217.3 8.5 55.3 1,571.4 996.2
Education 260.1 51.7 85.9 420.6 777.6
Hotels and Catering 173.8 21.3 225.5 1,639.5 1,445.6
Personal Care 17.1 13.4 28 838.2 492.5
Others 113.3 170 18.7 2,210 1,631.6
Source: CLSA, Euromonitor

Japan is expected to lead in In 2030, Japan will still be in the lead at US$28,478, followed by Korea at
2030 on per capita basis US$21,641 and China at US$8,765, which should grow significantly to more than
one-third of Japan’s spending according to Euromonitor. In countries with lower
per-capita spending level, such as China, India and Indonesia, large increases in food
& beverage consumption is expected. Further consumption trends will be discussed
in detail by market.
Figure 38

Per-capita consumption by category in 2030

(US$) China India Indonesia Japan South Korea
Total 8,663.3 2,394.7 4,051.9 29,817.6 21,094.3
Food & Beverage 1,649.7 614.2 1,228.1 4,257.3 2,143.4
Alcohol & Tobacco 51.2 9 71.7 401.5 157.4
Clothing & Footwear 97.6 13.5 8.7 457.8 177
Housing 143.1 32.3 275.3 181 183.5
Health related 425.8 100.7 107.7 833.6 1,135.6
Transport 88.5 28.7 37.5 136.1 137
Leisure & Recreation 2,411.6 378.7 503.4 8,393.8 4,121.6
Education 797.2 141.3 128.4 1,265.9 1,553.7
Hotels & Catering 822.9 455 713.1 3,036 2,157.8
Personal Care 305.7 52.1 222.3 1,105.2 1,157.4
Others 491.5 17.6 100.9 2,299.1 1,536.6
Source: CLSA, Euromonitor

Figure 39

Increase in per-capita consumption during 2020-30

(US$) China India Indonesia Japan South Korea
Total 4,485.9 1,253.7 1,788 8,811.2 7,150.9
Food & Beverage 764.9 300.2 531.5 1,229.6 639.9
Alcohol & Tobacco 23.4 4.4 30 121.9 46
Clothing & Footwear 46.9 6.8 4 118.9 49.7
Housing 73.3 15.7 119.8 47.5 53.7
Health related 212.9 46.8 47.1 238 372.6
Transport 36.8 14 16.7 41 50.6
Leisure & Recreation 1,151.4 187.4 217.9 2,228.8 1,237.2
Education 407.9 84.5 55.4 403.4 761.4
Hotels & Catering 518.7 265.1 324.7 938.1 679.4
Personal Care 161.3 24.5 98.6 374.3 434
Others 274.2 9.1 45.6 727.7 540.4
Source: CLSA, Euromonitor

24 [Link]@[Link] 18 May 2021

 
 
Prepared for: pdesai@[Link]
 Section 2: What does Generation Z want? Asia consumer

Figure 40

Percentage of spend by category, 2020

(%) China India Indonesia Japan Korea
Total (US$) 4,177.4 1,141 2,263.9 21,006.4 13,943.4
Food 21.2 27.5 30.8 14.4 10.8
Beverages 0.7 0.4 1.8 1.3 0.8
Alcoholic Drinks 1.2 0.6 0.2 1.6 0.9
Tobacco 1.7 1.5 6.9 0.6 0.9
Clothing 5.1 4.7 2.7 2.8 5.5
Footwear 1.2 1.3 0.9 0.5 0.6
Housing Related 30.2 16.8 12.6 29.3 20.7
Health Related 9.3 5.0 3.2 4.1 5.7
Transport 7.3 16.6 17.2 10.0 10.6
Communications 3.5 2.4 5.5 3.5 5.2
Leisure and Recreation 5.2 0.7 2.4 7.5 7.1
Education 6.2 4.5 3.8 2.0 5.6
Hotels and Catering 4.2 1.9 10.0 7.8 10.4
Personal Care 0.4 1.2 1.2 4.0 3.5
Others 2.7 14.9 0.8 10.5 11.7
Source: CLSA, Euromonitor

In percentage terms, China, India and Indonesia spend much more than their peers
on food & beverage at 21%, 28% and 31% of their total consumption in 2020. In
wealthier countries, such as Japan, Korea and China, Euromonitor estimates the
main category in which consumers spend the most on is the housing category. China
spends 30%, Japan spends 29% and Korea spends 21% of their total consumption
budget on housing, due to high urbanisation levels and higher land and housing
prices. The same trends of 10-year Cagrs can be observed below.

Different growth rates in In terms of Cagr over the period, China sees the largest growth in hotels & catering,
each country while India and South Korea per-capita consumer expenditure is high in education.
For Japan there’s more growth in personal care.

Figure 41

2020-30 Cagr in per capita consumer expenditure in each country by category

Cagr (%) China India Indonesia Japan South Korea
Total 7.6 7.7 6.0 3.6 4.2
Food & Beverage 6.4 6.9 5.8 3.5 3.6
Alcohol & Tobacco 6.3 6.9 5.6 3.7 3.5
Clothing & Footwear 6.8 7.3 6.4 3.1 3.4
Housing 7.4 6.9 5.9 3.1 3.5
Health related 7.2 6.4 5.9 3.4 4.1
Transport 5.5 6.9 6.1 3.6 4.7
Leisure & Recreation 6.7 7.1 5.8 3.1 3.6
Education 7.4 9.5 5.8 3.9 7.0
Hotels & Catering 10.5 9.1 6.3 3.8 3.9
Personal Care 7.8 6.6 6.0 4.2 4.8
Others 8.5 7.5 6.2 3.9 4.4
Source: CLSA, Euromonitor

18 May 2021 [Link]@[Link] 25

 
 
Prepared for: pdesai@[Link]
 Section 3: Strong consumer growth Asia consumer

Strong consumer growth

Over the last 10 years, sales The past 10 years have seen very strong demand translate into excellent results for
grew 83% at consumer consumer companies in Asia. We see how sales grew 83% and operating profit
companies increased 123%, as operating profit margin reached 10.8%. PE multiples have risen
from 20x to 30x and compounding operating profit growth remains crucial.

Forward drivers
We consider a few key drivers for consumer company growth in our main markets.

Revenues: The annual average revenue growth rate from 2010 to 2020 was 3.2%.
Including high-growth companies with less than a 10-year track record, overall sales
growth would have been closer to 5%.

Figure 42

We expect a 5% Cagr in Revenue going forward

revenue going forward (US$bn)
1,400

1,200 Cagr = 5%

1,000

800

600

400

200

0
2020 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E 2030E
Source: CLSA

Operating margins (OPM)

While generalising OPM is a daunting task, we believe it is helpful to consider a few
factors:
1. At the overall industry level, growth in revenues on a relatively consistent basis
allows for companies to deliver higher operating margins as costs are amortised.
Fixed costs do not need to rise in sudden fits and starts, and variable costs can
be managed efficiently. Clearly however, there are many reasons why the
growth is not linear, as the recent COVID situation has reminded us all.
Raw material cost is less of 2. Consumer companies have generally been able to handle changes in cost inputs
a concern relatively well; when costs rise, we have seen generally seen consumer
companies looking to raise prices; or to shrink sizes for similar prices. Many
companies have a large portion of packaging costs which are related to oil price.
Channel’s bargaining power 3. Channel shifts: here the bargaining power of the channel is a key factor, and is
is a key factor for OPM and a critical factor also for the marketing expense. Historically, companies spent
marketing money on advertising to boost awareness of brands and products, and the
winners in such marketing typically gained proportional “shelf space”; this
usually led to larger market leaders gaining higher margins than smaller players
through marketing synergies. Clearly the rules of engagement have changed
with the emergence of ecommerce, and this channel is emerging as the critical
one for most companies. Yes, in many more developed economies (Japan most
notably in Asia) ecommerce has taken more time to take off. Also, in emerging
countries with lower spending, infrastructure may not yet support large

26 [Link]@[Link] 18 May 2021

 
 
Prepared for: pdesai@[Link]
 Section 3: Strong consumer growth Asia consumer

proportion of ecommerce, but China has set a precedent which not only is
driving the biggest consumption growth market, it is also giving consumer
companies a glimpse into the marketing future.
4. Competition: globalisation and low interest rates are evidently bringing more
global companies to search for growth, hence looking to expand into growth
markets in Asia. On the other hand, Asian companies are coming to raise more
capital to boost their marketing and production needs. As such, we expect
increasing competition in China, India and Indonesia as these factors play out.
Two diverging trends: 5. Changing Consumer trends: we see two key trends here; first Asia is ageing, and
Ageing Asia and younger in more developed markets, the older generation are rich and looking to spend
digital natives on health, travel and their families. Second, the younger generation are digital
natives and may take different approaches to communication and ownership;
fragmented ownership or renting are entirely plausible purchase behaviours for
this group.

The past 10 years has seen very strong consumer demand translate into excellent
results for consumer companies in Asia. We see how sales grew 83% and OP grew
123%, as OPM reached 10.8%. PE Multiples have risen from 20x to 30x.
Compounding operating profit growth remains crucial.

A brief view of Asia To take a brief look at how the consumer industry has evolved in the past 10 years,
consumer sector in the past we performed a simple screen based on the following criteria: 1) Public companies
10 years in consumer sector; 2) Companies with more than US$500m market cap; 3)
Companies whose headquarters are in Asia. After removing companies with little or
no track record, we are left with 406 companies. Please note there might be
selection/survivorship bias in our result as we don’t screen for each year.

Figure 43

Overall trend of consumer sector (n=406)

(US$bn) FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 Cagr (%)
Total sales 467.6 550.9 651.6 701.9 687.9 678.1 651.5 698.8 749.0 818.1 853.7 6.2
Total operating profit 41.5 52.9 64.8 70.8 69.4 69.4 68.0 73.7 82.4 90.8 92.4 8.3
OPM (%) 8.9 9.6 9.9 10.1 10.1 10.2 10.4 10.5 11.0 11.1 10.8
Total net income 30.6 41.4 47.6 52.3 51.6 50.0 49.6 53.0 65.5 65.4 60.0 7.0
Total market cap 641.6 859.3 881.9 1,017.7 1,167.2 1,200.1 1,325.4 1,282.5 1,753.5 1,517.5 1,806.2 10.9
Multiple (MCap/net income) (x) 20.9 20.8 18.5 19.5 22.6 24.0 26.7 24.2 26.8 23.2 30.1 -
Source: CLSA, FactSet. Here FY2009 means companies with fiscal year end up to 2010/3, same for other years

Sector net income almost In the Asia consumer sector, total revenue increased 83% from US$467.6bn to
doubled, with valuation US$853.7bn from FY2009-19. Operating profit was 41.5bn in FY2009, for an OPM
changed to 30.1x of 8.9%, and rose by US$51bn, or 123% from FY2009-19. OPM now stands at
10.8%. Net income for consumer was US$30.6bn in FY2009 and rose to US$60bn
in FY2019, a US$50bn increase or +172%. Over this time period, the market cap of
the consumer companies, which was US$641.6bn in 2009 advanced to US$1.8tn
in FY2019. Given that net income climbed 95.8%, we see that multiples increased
from 20.9x to 30.1x.

We pick a concentrated In this report, we look forward 10 years and pick a concentrated portfolio of Asian
portfolio of consumer companies we expect to see major outperformance based on consumer trends.
names Before we do so, it is instructive to look at the best performers of the last 10 years
in the consumer sector. The criteria we have applied is current market cap over
US$5bn and under CLSA coverage.

18 May 2021 [Link]@[Link] 27

 
 
Prepared for: pdesai@[Link]
 Section 3: Strong consumer growth Asia consumer

The purpose is to understand what drove outperformance in the past 10 years. As

a result, we are interested in the following areas:

Sales growth
Looking at the company level, based on data from different categories we can see
companies from Food, Beverage & Tobacco sectors account for 32%, almost one
third of our portfolio. After removing companies with less track records, coverage
sales shows an increased by 37% in the period CY2010 to CY2020, from US$542bn
to US$742bn dollars. Consumer Services segment has the largest Cagr in last 10
years, , contributed by education names such as TAL Education group and New
Oriental, whose market values almost increased 10 fold.

Figure 44

Sales growth
(US$m) CY10 CY11 CY12 CY13 CY14 CY15 CY16 CY17 CY18 CY19 CY20 CY10-20
Cagr (%)
Food & Staples Retailing 184,311 204,296 222,828 220,657 221,446 203,421 216,591 221,173 234,772 239,007 239,075 2.6
Food, Beverage & Tobacco 192,046 233,251 252,139 249,279 228,181 207,478 217,958 228,651 244,757 247,881 259,217 3.0
Consumer Durables & Apparel 31,600 39,274 36,232 39,455 44,678 43,947 46,441 60,184 67,818 71,227 74,296 8.9
Retailing 71,196 84,206 89,404 85,509 83,999 77,320 84,477 70,135 75,014 69,586 71,817 0.1
Household & Personal Products 50,426 57,360 62,657 61,175 63,316 61,871 66,672 68,027 72,094 73,305 68,817 3.2
Capital Goods 3,396 3,667 3,852 4,300 4,753 5,038 5,480 6,064 7,021 7,667 9,812 11.2
Consumer Services 778 1,096 1,369 1,747 2,172 2,526 3,280 4,423 6,077 7,773 9,029 27.8
Media & Entertainment 5,751 5,890 5,874 4,795 4,385 4,277 5,134 5,201 5,459 5,858 6,356 1.0
Materials 2,269 2,661 2,672 2,789 3,080 3,160 3,080 3,545 3,740 3,858 3,730 5.1
Total 541,774 631,702 677,028 669,706 656,010 609,037 649,113 667,404 716,752 726,162 742,149
(%)
Food & Staples Retailing 34.0 32.3 32.9 32.9 33.8 33.4 33.4 33.1 32.8 32.9 32.2
Food, Beverage & Tobacco 35.4 36.9 37.2 37.2 34.8 34.1 33.6 34.3 34.1 34.1 34.9
Consumer Durables & Apparel 5.8 6.2 5.4 5.9 6.8 7.2 7.2 9.0 9.5 9.8 10.0
Retailing 13.1 13.3 13.2 12.8 12.8 12.7 13.0 10.5 10.5 9.6 9.7
Household & Personal Products 9.3 9.1 9.3 9.1 9.7 10.2 10.3 10.2 10.1 10.1 9.3
Capital Goods 0.6 0.6 0.6 0.6 0.7 0.8 0.8 0.9 1.0 1.1 1.3
Consumer Services 0.1 0.2 0.2 0.3 0.3 0.4 0.5 0.7 0.8 1.1 1.2
Media & Entertainment 1.1 0.9 0.9 0.7 0.7 0.7 0.8 0.8 0.8 0.8 0.9
Materials 0.4 0.4 0.4 0.4 0.5 0.5 0.5 0.5 0.5 0.5 0.5
Total 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Source: CLSA, Bloomberg. Based on 82 companies with more than US$5bn market value in consumer sector covered by CLSA

In terms of absolute increase, China has added US$87bn, followed by Japan at

US$52bn and Thailand US$31bn. Although not counted in this table, addition of
new companies in CLSA coverage actually contributes US$41bn, US$30bn, US$6bn
for China, Japan and Thailand respectively. Looking at the average sales per
company, it has risen from US$6,607m in 2010 to US$9,051m in 2020.

Figure 45

Sales trend in consumer sector by geography

(US$m) CY10 CY11 CY12 CY13 CY14 CY15 CY16 CY17 CY18 CY19 CY20 CY10-20
Cagr (%)
Japan 254,338 275,771 297,250 272,446 267,742 249,448 276,565 277,904 298,857 311,866 305,913 1.9
China 70,229 91,182 97,595 112,117 103,706 101,862 104,600 124,330 140,460 147,220 156,951 8.4
Australia 102,671 120,829 126,393 123,140 116,391 95,038 96,234 82,481 83,120 69,235 75,909 (3.0)
Singapore 42,493 58,564 60,425 59,336 58,794 54,931 58,106 61,353 64,094 62,294 69,016 5.0
Thailand 13,837 16,111 22,444 27,153 30,081 29,976 31,979 35,931 40,367 43,702 44,520 12.4
India 19,790 22,994 23,451 23,325 24,997 23,431 24,180 26,796 27,801 28,170 27,930 3.5
Taiwan 17,264 20,848 21,480 22,292 21,986 21,339 21,316 22,342 24,588 25,182 26,315 4.3
Korea 9,720 11,555 12,514 13,806 16,498 17,586 19,752 19,400 20,525 21,042 19,111 7.0
Indonesia 8,922 10,909 12,335 12,633 12,250 11,758 12,778 13,147 13,145 13,526 12,511 3.4
Philippines 1,259 1,550 1,665 1,938 2,095 2,424 2,379 2,494 2,426 2,592 2,685 7.9
Malaysia 1,252 1,389 1,476 1,521 1,470 1,245 1,224 1,224 1,368 1,332 1,289 0.3
Total 541,774 631,702 677,028 669,706 656,010 609,037 649,113 667,404 716,752 726,162 742,149 3.2
Source: CLSA, Bloomberg. Based on 82 companies with more than US$5bn market value in consumer sector covered by CLSA

28 [Link]@[Link] 18 May 2021

 
 
Prepared for: pdesai@[Link]
 Section 3: Strong consumer growth Asia consumer

Figure 46

Sales percentage of total consumer sector by geography

(%) CY10 CY11 CY12 CY13 CY14 CY15 CY16 CY17 CY18 CY19 CY20
Japan 46.9 43.7 43.9 40.7 40.8 41.0 42.6 41.6 41.7 42.9 41.2
China 13.0 14.4 14.4 16.7 15.8 16.7 16.1 18.6 19.6 20.3 21.1
Australia 19.0 19.1 18.7 18.4 17.7 15.6 14.8 12.4 11.6 9.5 10.2
Singapore 7.8 9.3 8.9 8.9 9.0 9.0 9.0 9.2 8.9 8.6 9.3
Thailand 2.6 2.6 3.3 4.1 4.6 4.9 4.9 5.4 5.6 6.0 6.0
India 3.7 3.6 3.5 3.5 3.8 3.8 3.7 4.0 3.9 3.9 3.8
Taiwan 3.2 3.3 3.2 3.3 3.4 3.5 3.3 3.3 3.4 3.5 3.5
Korea 1.8 1.8 1.8 2.1 2.5 2.9 3.0 2.9 2.9 2.9 2.6
Indonesia 1.6 1.7 1.8 1.9 1.9 1.9 2.0 2.0 1.8 1.9 1.7
Philippines 0.2 0.2 0.2 0.3 0.3 0.4 0.4 0.4 0.3 0.4 0.4
Malaysia 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2
Total 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Source: CLSA, Bloomberg. Based on 82 companies with more than US$5bn market value in consumer sector covered by CLSA

Operating profit growth (YoY change)

Operating profit was 44bn in 2010, for an OPM of 8.0%, and has risen by US$33bn,
or 77% from 2010 to 2020. OPM now stands at 10.4%. In terms of region, China
has added US$20bn in OP, Japan US$6bn and Thailand US$2bn.

Figure 47

OP trend in consumer, by sector in Asia

(US$m) CY10 CY11 CY12 CY13 CY14 CY15 CY16 CY17 CY18 CY19 CY20 CY10-20
Cagr (%)
Food & Staples Retailing 8,994 11,053 11,738 11,374 10,280 9,100 8,635 9,973 10,398 10,979 10,644 1.7
Food, Beverage & Tobacco 19,644 24,622 28,959 27,231 26,778 24,421 25,919 29,975 34,424 35,518 38,140 6.9
Consumer Durables & Apparel 2,653 3,581 3,793 4,508 5,416 5,538 5,599 6,502 7,657 8,806 9,366 13.4
Retailing 5,542 6,345 6,992 6,335 5,555 5,584 4,499 6,104 7,825 6,883 7,049 2.4
Household & Personal Products 5,471 6,233 6,844 6,789 7,589 8,124 9,117 9,890 10,608 10,247 8,626 4.7
Capital Goods 198 220 263 286 355 402 438 517 587 670 870 15.9
Consumer Services 127 179 172 279 304 347 440 572 671 872 240 6.6
Media & Entertainment 541 692 439 305 373 486 619 931 773 906 1,146 7.8
Materials 357 387 388 390 430 550 567 630 628 676 739 7.6
Total 43,527 53,311 59,587 57,499 57,081 54,553 55,834 65,095 73,571 75,557 76,821
Source: CLSA, Bloomberg. Based on 82 companies with more than US$5bn market value in consumer sector covered by CLSA

Figure 48

OP trend in consumer, by geography in Asia

($m) CY10 CY11 CY12 CY13 CY14 CY15 CY16 CY17 CY18 CY19 CY20 CY10-20
Cagr (%)
Japan 17,980 22,098 24,368 22,425 21,517 19,192 22,696 25,113 26,735 25,751 24,285 3.1
China 7,219 9,914 12,494 13,329 13,436 13,214 12,735 17,491 21,624 25,023 27,674 14.4
Australia 6,827 7,944 8,140 7,530 6,580 5,944 2,903 5,085 6,220 4,713 5,191 (2.7)
Singapore 2,357 2,829 2,863 2,769 2,760 2,681 2,798 2,322 2,969 3,488 3,766 4.8
Thailand 839 1,047 1,519 1,206 1,633 1,743 2,030 1,964 2,393 2,660 3,321 14.7
India 3,549 4,101 4,302 4,193 4,692 4,795 5,024 5,794 6,066 6,314 5,880 5.2
Taiwan 844 868 1,048 1,051 1,022 1,158 1,177 1,268 1,565 1,653 1,664 7.0
Korea 1,855 2,031 2,036 2,153 2,785 3,304 3,691 3,260 3,024 2,989 2,543 3.2
Indonesia 1,738 2,130 2,421 2,363 2,114 1,940 2,228 2,302 2,494 2,456 1,992 1.4
Philippines 167 159 184 246 320 386 358 298 254 290 324 6.8
Malaysia 152 189 213 233 222 196 193 197 227 220 180 1.7
Total 43,527 53,311 59,587 57,499 57,081 54,553 55,834 65,095 73,571 75,557 76,821 5.8
Source: CLSA, Bloomberg. Based on 82 companies with more than US$5bn market value in consumer sector covered by CLSA

18 May 2021 [Link]@[Link] 29

 
 
Prepared for: pdesai@[Link]
 Section 3: Strong consumer growth Asia consumer

Change in operating margin

Japan and Korea and Taiwan have noticeably lower OPM than other areas; South
Korea has declined from 19% in 2010 to 13% in 2020, and while Japan has
improved from 7% in 2020 to 8% in 2020 it still remains low. Thailand has improved
to 7.5% through the period. China’s OPM continues to show some improvements;
it has risen from 10% to 18% in the past decade.

Figure 49

OPM by region for consumer companies

(%) CY10 CY11 CY12 CY13 CY14 CY15 CY16 CY17 CY18 CY19 CY20
Japan 7.1 8.0 8.2 8.2 8.0 7.7 8.2 9.0 8.9 8.3 7.9
China 10.3 10.9 12.8 11.9 13.0 13.0 12.2 14.1 15.4 17.0 17.6
Australia 6.6 6.6 6.4 6.1 5.7 6.3 3.0 6.2 7.5 6.8 6.8
Singapore 5.5 4.8 4.7 4.7 4.7 4.9 4.8 3.8 4.6 5.6 5.5
Thailand 6.1 6.5 6.8 4.4 5.4 5.8 6.3 5.5 5.9 6.1 7.5
India 17.9 17.8 18.3 18.0 18.8 20.5 20.8 21.6 21.8 22.4 21.1
Taiwan 4.9 4.2 4.9 4.7 4.6 5.4 5.5 5.7 6.4 6.6 6.3
Korea 19.1 17.6 16.3 15.6 16.9 18.8 18.7 16.8 14.7 14.2 13.3
Indonesia 19.5 19.5 19.6 18.7 17.3 16.5 17.4 17.5 19.0 18.2 15.9
Philippines 13.3 10.3 11.0 12.7 15.3 15.9 15.1 12.0 10.5 11.2 12.1
Malaysia 12.1 13.6 14.4 15.3 15.1 15.7 15.8 16.1 16.6 16.5 14.0
Total 8.0 8.4 8.8 8.6 8.7 9.0 8.6 9.8 10.3 10.4 10.4
Source: CLSA, Bloomberg. Based on 82 companies with more than US$5bn market value in consumer sector covered by CLSA

Net income growth

Net income for consumer was US$26bn in 2010 and has risen to US$52bn in 2020;
a US$26bn increase, or +98%yoy, above operating profit growth over the period,
and far ahead of sales growth. Profit per company was US$630m in 2020, up from
319m in 2010.

Figure 50

Net income trend in consumer, by geography in Asia

(US$m) CY10 CY11 CY12 CY13 CY14 CY15 CY16 CY17 CY18 CY19 CY20 CY10-20
Cagr (%)
Japan 7,261 9,912 13,536 12,633 12,649 11,307 13,086 16,072 16,717 15,749 13,616 6.5
China 5,430 6,946 8,829 9,726 10,074 9,714 9,920 13,241 16,487 18,934 21,014 14.5
Australia 4,296 4,875 5,025 4,949 5,065 2,357 1,331 3,268 6,000 3,963 3,016 (3.5)
Singapore 2,106 2,737 2,482 2,448 2,323 2,140 2,302 2,409 1,860 2,375 2,594 2.1
Thailand 750 943 1,160 812 893 983 1,160 1,364 1,486 1,715 1,722 8.7
India 2,677 3,031 3,199 2,484 3,279 3,302 3,612 4,335 4,622 5,108 4,869 6.2
Taiwan 578 586 591 778 769 837 894 2,474 1,092 1,158 1,245 8.0
Korea 1,430 1,397 1,288 1,237 1,672 2,074 2,380 2,094 1,872 1,876 1,711 1.8
Indonesia 1,268 1,619 1,809 1,776 1,582 1,436 1,711 1,754 1,912 1,849 1,535 1.9
Philippines 171 107 182 240 262 275 323 217 175 189 217 2.4
Malaysia 122 140 164 178 168 152 154 150 163 162 132 0.8
Total 26,088 32,293 38,265 37,262 38,737 34,579 36,874 47,378 52,388 53,078 51,670 7.1
Source: CLSA, Bloomberg. Based on 82 companies with more than US$5bn market value in consumer sector covered by CLSA

30 [Link]@[Link] 18 May 2021

 
 
Prepared for: pdesai@[Link]
 Section 3: Strong consumer growth Asia consumer

Price/earnings rerating
As such, the past 10 years has been very much a golden era for Asia consumer
companies; sales increased by 37% and profits doubled.

Figure 51

Market caps for consumer Total Market Cap

companies have risen to (US$bn)
1,800
US$2tn in 2020 1,625
1,600
1,401
1,400 1,323

1,200 1,122

960
1,000 922
819 846

800 734
654
570
600

400

200

0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Source: CLSA, Bloomberg. Based on 82 companies with more than US$5bn market value in consumer sector
covered by CLSA

Over this time, the market cap of the consumer companies, which was 570bn in
2010 has risen to 1.6tn in 2020; given that Net income has risen by 124%, we can
see that multiples have increased from 21x to 26x.

Figure 52

Market cap/net income by sector and geography

PE (x) 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2020 vs
2010 (%)
Food & Staples Retailing 16.8 17.6 16.4 18.9 20.0 37.6 32.7 20.5 27.3 21.9 30.7 182.8
Food, Beverage & Tobacco 23.9 21.4 19.8 23.1 23.2 26.3 24.8 22.8 25.8 26.6 30.2 126.3
Consumer Durables & Apparel 13.1 9.3 8.5 8.0 7.9 8.9 9.5 10.9 11.3 12.8 15.4 117.4
Retailing 20.2 18.0 17.2 22.7 22.6 28.3 39.1 27.9 18.0 27.1 32.7 162.0
Household & Personal Products 25.8 25.7 26.9 30.1 29.0 35.6 32.2 34.3 37.2 38.3 46.8 181.0
Capital Goods 15.8 11.7 12.7 17.5 18.1 18.4 17.5 18.3 19.3 20.8 23.8 151.2
Consumer Services 42.2 30.6 26.4 19.9 24.6 24.1 38.5 49.8 52.8 68.8 143.5 339.9
Media & Entertainment 22.8 34.1 26.8 65.4 31.1 30.8 20.7 21.4 27.4 22.4 26.5 116.3
Materials 25.1 27.8 28.8 36.4 38.9 43.4 45.5 48.2 57.5 55.4 61.5 245.4
PE (x)
Japan 22.8 18.4 14.8 18.9 20.1 25.7 22.3 19.8 21.7 22.4 27.6 121.0
China 21.8 17.2 14.7 13.3 13.8 15.6 14.7 16.5 17.9 19.2 24.7 113.6
Australia 17.7 16.8 16.8 19.7 19.4 29.8 45.2 21.1 10.3 13.7 20.8 117.3
Singapore 21.1 16.1 16.7 17.9 18.2 17.9 17.2 18.1 21.8 17.8 14.5 68.4
Thailand 14.7 17.7 20.8 34.3 30.7 25.3 21.1 22.0 22.6 20.8 22.4 152.1
India 25.2 26.8 28.5 43.4 36.2 41.5 37.5 38.9 42.9 41.7 44.5 176.3
Taiwan 15.1 20.8 23.0 22.2 23.6 23.6 23.3 9.3 25.7 24.9 22.5 148.9
Korea 12.7 15.9 20.4 20.8 20.5 25.4 23.7 24.7 28.2 22.7 24.0 189.9
Indonesia 19.6 19.8 25.7 32.2 31.7 37.2 38.9 38.9 34.2 31.5 27.5 140.4
Philippines 8.2 18.3 17.7 24.3 29.6 34.9 27.4 31.7 33.5 35.2 27.8 339.7
Malaysia 22.7 26.5 27.4 27.2 28.8 28.9 28.2 23.1 34.0 34.8 37.0 162.5
Total 20.7 18.4 17.1 19.8 20.1 24.0 22.6 20.7 21.3 22.1 26.3 127.0
Source: CLSA, Bloomberg. Based on 82 companies with more than US$5bn market value in consumer sector covered by CLSA

18 May 2021 [Link]@[Link] 31

 
 
Prepared for: pdesai@[Link]
 Section 4: Our Gen Z consumer portfolio Asia consumer

Our Gen Z consumer portfolio

Portfolio construction To construct our portfolio, we started by considering the likely retail sales value of
the different regions in 2030. Then, we identified key product segments we like in
terms of decent profit margin profile. Finally, we picked companies exposed to
these themes while taking into account management quality.

We select 23 stocks for our We select 23 stocks to gain diversified exposure to our view of Asia consumer in
Gen Z consumer portfolio 2030. We overlay our findings about consumer preferences with expected market
and segment growth outlooks. Our resulting portfolio has the largest position in
China, followed by India and Japan.

Key companies for 2030

China has a 42% weight in We allocate 42% of our portfolio to China. We seek exposure to rising health-
our portfolio related spending and cosmetics via Shiseido. To capture increased spending on
fashion, we suggest owning Fast Retailing and Li Ning. White spirits is also a key
market and with higher spending on drinking, we suggest a focus on Luzhou Laojiao.

We allocate 25% to India India has a 25% weight in our portfolio. One of our main themes is exposure to
packaged consumers goods via rising prices with household and personal care
(HPC) leaders Hindustan Unilever and Dabur. For general income growth, we like
Asia Paints. Finally, to capture the dining out trend, we believe a position in Jubilant
Food Works, which operates restaurant chains, would do nicely.

Japan consumer names For Japan, we allocate 10% and suggest investing in Unicharm to ride the ageing
account for 10% healthcare trend and Zozo to make a direct play on ecommerce expansion in
fashion, cosmetics and luxury, and Kobe Bussan for discount retail.

South Korea Turning to South Korea, LG H&H provides exposure to fast moving consumer goods
(FMCG) and Studio Dragon to Korean entertainment exports, which are in high
demand throughout Asia. Both of these companies have significant exposure and/or
growth outlook in China.

Indonesia For Indonesia, we like packaged consumer goods companies Unicharm Indonesia
and Mayora.

We have also added select plays from other markets on themes that resonate with
Gen Z. Our analysts are particularly passionate about:

Additional select plays In Australia, we allocate 2% each in Domino’s for eating out and Flight Centre for
travel. For the Philippines, we allot 1% to home and garden retailer All Home for
decorating and 1% to Jollibee for eating out. For Thailand, we assign a 2% weight
for CPALL, which also plays on the eating out theme via convenience stores.

32 [Link]@[Link] 18 May 2021

 
 
Prepared for: pdesai@[Link]
 Section 4: Our Gen Z consumer portfolio Asia consumer

Figure 53

Our 2030 consumer portfolio

Market Overall theme Preferred segment Company Allocated Subtotal (%)
(%)

China Ecommerce uplift Cosmetics Shiseido 8

Lower city ramp in population Fashion Fast Retailing 8

Lower city ramp in population Sportswear Lining 8

Premiumisation White spirits Luzhou Laojiao 8

Health conscious Health devices SMOORE 5

Dairy, health-related Functional food Feihe 5

Subtotal 42

India Rising income HPC Hindustan Unilever 6

Rising income Paints Asia Paints 6

Brand power HPC Dabur 6

Food service Eating out Jubilant Food Works Ltd 7

Subtotal 25

Japan Consolidation in retail Discount retail Kobe Bussan 5

Rising health concerns Adult health Unicharm 5

Ecommerce shift Ecommerce fashion & cosmetics ZOZO 5

Subtotal 15

Indonesia Brand adoption FMCG Mayora 3

FMCG Unicharm Indonesia 3

Subtotal 6

Korea Premiumisation Cosmetics/HPC/Beverage LG H&H 2

Entertainment Exports Entertainment Studio Dragon 2

Subtotal 4

Thailand CVS CPALL 2

Philippines Food service Jollibee 1

AllHome 1

Australia Foodservice Domino's 1

Travel Flight Centre 1

Singapore Premiumisation Beverage Thai Beverage 2

Subtotal 8

Total 100 100

Source: CLSA

The value of retail

In 2030, China remains the Before creating our retail forecast for 2030, we first analyse population and per
largest retail market, capita expenditure growth. According to Euromonitor, China will remain the largest
followed by India retail market in 2030, increasing to US$7.4tn in size with a 7.6% Cagr. India will
surpass Japan and become the second-largest Asian market with an 8.9% Cagr, and
its size is expected to more than double and reach US$1.6tn in 2030. In total, Asia
will grow to US$11tn, with China contributing more than half, followed by India at
15%, Japan at 13%, South Korea at 4% and Indonesia at 3%.

18 May 2021 [Link]@[Link] 33

 
 
Prepared for: pdesai@[Link]
 Section 4: Our Gen Z consumer portfolio Asia consumer

Figure 54

Retail market size forecast

(US$bn) 2020 21CL 22CL 23CL 24CL 25CL 26CL 27CL 28CL 29CL 30CL Cagr (%)
China 3,531 3,994 4,203 4,511 4,849 5,206 5,589 5,998 6,432 6,885 7,359 7.6
India 701 855 917 973 1,048 1,131 1,220 1,317 1,422 1,532 1,646 8.9
Indonesia 177 195 208 216 233 251 269 288 308 328 349 7.0
Japan 1,083 1,104 1,149 1,213 1,252 1,289 1,324 1,359 1,395 1,432 1,468 3.1
South Korea 321 341 348 369 384 401 417 434 452 470 488 4.3
Combined 5,813 6,489 6,825 7,284 7,766 8,277 8,819 9,397 10,009 10,648 11,311
% of combined
China 60.7 61.5 61.6 61.9 62.4 62.9 63.4 63.8 64.3 64.7 65.1
India 12.1 13.2 13.4 13.4 13.5 13.7 13.8 14.0 14.2 14.4 14.6
Indonesia 3.0 3.0 3.1 3.0 3.0 3.0 3.1 3.1 3.1 3.1 3.1
Japan 18.6 17.0 16.8 16.7 16.1 15.6 15.0 14.5 13.9 13.4 13.0
South Korea 5.5 5.3 5.1 5.1 4.9 4.8 4.7 4.6 4.5 4.4 4.3
Source: CLSA, Euromonitor

Key segments in China

We expect above average We believe cosmetics, white spirits and fashion will be the key growth areas for
growth in cosmetics, retail spending in China. For each segment, we expect consumer demand to remain
alcohol and fashion in China high and growth to be above the market average. All three areas have a very broad
range of pricing and relatively fragmented markets, allowing the best-performing
companies to gain share and benefit from strong cash flows.

Cosmetics
Skincare market in China to China is the world’s largest skincare market. We expect this segment to continue
grow at a 10% Cagr growing at a 10% Cagr, as spending per capita remains far behind regional and
global peers. The switch to more premium products has been evident in the last few
years, and it is clear that this trend still has momentum, as evidenced by the
proprietary surveys we conducted on cosmetics usage and attitudes in our Skin Gold
China 6 report.

Figure 55

China’s per capita China: Beauty and personal care consumption (BPC) per capita
consumption of BPC
products is still very low 400 (US$)
2010 2020

350

300

250

200

150

100

50

0
China Japan South Korea USA France United Kingdom

Source: CLSA, Euromonitor

34 [Link]@[Link] 18 May 2021

 
 
Prepared for: pdesai@[Link]
 Section 4: Our Gen Z consumer portfolio Asia consumer

Figure 56

Premium BPC market is China: Beauty and personal care market - premium vs mass
about 18% in 2020 Premium market Mass market
(%) Premium market growth (RHS) Mass market growth (RHS) (%)
100 35
90 30
80
25
70
60 20
50 15
40 10
30
5
20
10 0
0 (5)
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Source: CLSA, Euromonitor

Investors should seek However, we believe competition is becoming increasingly fierce in the low and
exposure in high-end middle segments. Instead, investors should seek exposure in high-end skincare,
skincare where gross profit margins are higher and brands generally require less innovation
and fewer new products than makeup, leading to steadier profit generation.

White spirits
We expect China’s alcohol China is the world’s largest alcohol market at US$330bn as of 2019 and baijiu, or
market growth at a 5% Cagr white spirits, is the most interesting segment. Although baijiu is only 10% of sector
going forward to 2030 volume, it represents 50% of its value so the category has superior pricing power.
We expect that the market, which enjoyed a 5.8% Cagr from 2010-2019, could have
a Cagr of up to 5% over the next several years until 2030. This market in China is
highly attractive due to its high gross margins, as the category has high average
selling prices (ASP) and is tied to gift giving and entertainment. Showing respect to
others is often demonstrated through appropriate pricing over other factors.

Figure 57

Alcohol market in China

(US$m) 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2010-19 Cagr (%)
Alcoholic Drinks
Off-trade Value RSP 103391.6 128,333 139,290 138,269 133,904 140,331 145,425 156,690 174,605 180,958 6.4
On-trade Value RSP 94863.3 118,527 133,957 132,154 131,186 136,822 135,906 140,232 149,810 148,636 5.1
Total Value RSP 198255 246,860 273,247 270,422 265,090 277,153 281,331 296,922 324,415 329,594 5.8
Beer
Off-trade Value RSP 17445.2 20,594 22,770 25,538 27,090 28,019 27,153 28,113 30,278 30,300 6.3
On-trade Value RSP 30410.3 35,969 40,933 46,833 51,286 54,048 53,695 56,644 61,989 63,173 8.5
Total Value RSP 47855.6 56,563 63,703 72,370 78,377 82,066 80,848 84,758 92,267 93,472 7.7
Cider/Perry
Off-trade Value RSP 1.4 2 2 2 2 3 3 4 5 5 15.7
On-trade Value RSP 0.5 1 1 1 1 1 1 1 1 1 12.1
Total Value RSP 1.9 2 3 3 3 4 4 5 6 7 15.0
RTDs
Off-trade Value RSP 49.4 58 70 108 337 472 303 259 262 264 20.5
On-trade Value RSP 135.8 165 203 326 653 664 380 320 323 323 10.1
Total Value RSP 185.2 224 273 434 989 1,136 682 579 585 587 13.7
Spirits
Off-trade Value RSP 73465 91,756 97,598 92,113 85,498 88,789 94,172 104,120 119,353 127,118 6.3
On-trade Value RSP 35977.3 45,464 48,916 44,885 40,312 40,064 39,156 40,655 44,012 44,580 2.4
Total Value RSP 109442.4 137,220 146,514 136,998 125,810 128,852 133,328 144,775 163,365 171,698 5.1
Wine
Off-trade Value RSP 12430.5 15,923 18,850 20,507 20,976 23,049 23,794 24,195 24,708 23,271 7.2
On-trade Value RSP 28339.4 36,928 43,904 40,110 38,935 42,046 42,674 42,612 43,484 40,559 4.1
Total Value RSP 40769.9 52,851 62,754 60,617 59,911 65,095 66,468 66,806 68,192 63,830 5.1
Source: CLSA, Euromonitor

18 May 2021 [Link]@[Link] 35

 
 
Prepared for: pdesai@[Link]
 Section 4: Our Gen Z consumer portfolio Asia consumer

Figure 58

Baijiu (Chinese spirits) market

Volume (m litres) 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2010-19
Cagr (%)
Other spirits 4,079 4,493 4,844 5,194 5,284 5,505 5,614 5,578 5,389 5,139 2.6
Economy Chinese Spirits 1,701 1,864 2,001 2,175 2,328 2,423 2,333 2,158 1,820 1,434 (1.9)
Lower Mid-Range Chinese Spirits 892 968 1,046 1,134 1,112 1,166 1,228 1,264 1,298 1,328 4.5
Upper Mid-Range Chinese Spirits 783 860 939 1,046 1,018 1,050 1,097 1,131 1,153 1,165 4.5
Premium Chinese Spirits 346 392 419 397 381 397 448 460 491 524 4.7
Super Premium Chinese Spirits 239 272 283 262 246 253 283 327 374 421 6.5
Chinese Herbal Spirits 117 137 157 180 201 210 218 232 246 259 9.2
Shochu/Soju - - - - - 6 7 5 7 7
(%)
Economy Chinese Spirits 41.7 45.7 49.0 53.3 57.1 59.4 57.2 52.9 44.6 35.2
Lower Mid-Range Chinese Spirits 21.9 23.7 25.6 27.8 27.2 28.6 30.1 31.0 31.8 32.6
Upper Mid-Range Chinese Spirits 19.2 21.1 23.0 25.6 25.0 25.7 26.9 27.7 28.3 28.6
Premium Chinese Spirits 8.5 9.6 10.3 9.7 9.3 9.7 11.0 11.3 12.0 12.8
Super Premium Chinese Spirits 5.9 6.7 6.9 6.4 6.0 6.2 6.9 8.0 9.2 10.3
Chinese Herbal Spirits 2.9 3.4 3.8 4.4 4.9 5.1 5.3 5.7 6.0 6.3
Shochu/Soju - - - - - 0.2 0.2 0.1 0.2 0.2
(US$m)
Other Spirits 102,770 128,540 136,020 127,171 116,868 120,328 125,203 136,165 153,838 161,774 5.2
Super Premium Chinese Spirits 66,598 84,469 85,162 71,661 60,313 60,362 63,294 72,325 85,115 92,742 3.7
Premium Chinese Spirits 15,308 19,138 21,983 21,694 21,385 22,754 24,566 25,239 28,054 29,237 7.5
Upper Mid-Range Chinese Spirits 12,209 14,451 16,659 19,531 19,870 20,909 21,163 22,147 23,773 23,689 7.6
Lower Mid-Range Chinese Spirits 4,178 5,016 5,847 6,808 6,879 7,334 7,519 7,945 8,606 8,714 8.5
Chinese Herbal Spirits 1,405 1,800 2,197 2,640 3,056 3,267 3,237 3,445 3,801 3,907 12.0
Economy Chinese Spirits 3,073 3,666 4,173 4,837 5,366 5,656 5,374 5,022 4,440 3,434 1.2
Shochu/Soju - - - - - 46 49 43 50 51
(%)
Super Premium Chinese Spirits 64.8 65.7 62.6 56.4 51.6 50.2 50.6 53.1 55.3 57.3
Premium Chinese Spirits 14.9 14.9 16.2 17.1 18.3 18.9 19.6 18.5 18.2 18.1
Upper Mid-Range Chinese Spirits 11.9 11.2 12.2 15.4 17.0 17.4 16.9 16.3 15.5 14.6
Lower Mid-Range Chinese Spirits 4.1 3.9 4.3 5.4 5.9 6.1 6.0 5.8 5.6 5.4
Chinese Herbal Spirits 1.4 1.4 1.6 2.1 2.6 2.7 2.6 2.5 2.5 2.4
Economy Chinese Spirits 3.0 2.9 3.1 3.8 4.6 4.7 4.3 3.7 2.9 2.1
Shochu/Soju - - - - - 0.0 0.0 0.0 0.0 0.0
Source: CLSA, Euromonitor

Fashion
We expect China’s China’s fashion market has a value of about US$238bn and is the biggest market
US$238bn fashion market globally. The market has enjoyed a 5.5% Cagr from 2010-20 and remains highly
to become more diversified fragmented. Still, we expect further ASP differentiation is possible as income
increases, and some consolidation of the market is likely. As such, it is an attractive
market for leading players. Economies of scale are important because they help
secure the pricing required to generate strong GPM, drive a strong retail presence,
and allow for wider marketing. Fashion are high impulse purchase items, so the role
of physical retail remains stronger than other segments. In addition, extensive
marketing is crucial to attract attention to brands and gain endorsements from
trend leaders.

36 [Link]@[Link] 18 May 2021

 
 
Prepared for: pdesai@[Link]
 Section 4: Our Gen Z consumer portfolio Asia consumer

Figure 59
China is the world’s largest China: Apparel market
apparel market at
350 (US$bn) Apparel (LHS) YoY growth (%) 25
US$238bn in 2020

300 20

15
250
10
200
5
150
0
100
(5)

50 (10)

0 (15)
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Source: CLSA, Euromonitor

China credit
Borrowing to buy branded According to our survey, shoppers in China are willing to borrow to buy big brand
products in China names and this behaviour is likely to increase. We believe there are a number of
important points here regarding credit use. First, it is becoming much easier to
borrow, as new online lenders and credit cards now actively pursue consumers.
Second, many Gen Z consumers are only children and expect to inherit their
parents’ wealth and property, driving this group to be less concerned about paying
back loans in the future for current spending. We already see this trends among
millennials, and we believe it will become more pronounced among Gen Z.

Figure 60

Correlation between YoY China: Retail market and credit borrowing

change in retail market and
3,000 (Rmbbn) Credit borrowing Retailing
credit borrowings

2,500

2,000

1,500

1,000

500

0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Source: CLSA, Euromonitor

In 2019, China’s total household debt was about Rmb54tn, a 15% increase YoY, with
residential mortgage making up more than half of the debt. If we exclude credit cards,
P2P and consumption bank loans and compared this debt with retail market size, we
observe a similar pattern in YoY incremental change. Clearly, borrowing is an
underlying driver of growing consumer spending. Furthermore, Gen Z children were
born into more prosperous households, and thus more likely to purchase with credit.

18 May 2021 [Link]@[Link] 37

 
 
Prepared for: pdesai@[Link]
 Section 4: Our Gen Z consumer portfolio Asia consumer

Figure 61

More than half of debt is China: Breakdown of household financial debts

mortgage (Rmbbn) Residential mortgage Credit cards
70,000 MSEs Other consumption bank loans
Housing Provident Fund loans P2P loans
60,000
Margin financing Others & deduction item
50,000
40,000
30,000
20,000
10,000
0
(10,000)
2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019
Source: CLSA

Figure 62

Household debt level China: Household debt as % of disposable income

increased since 2010 160 (%) China China - ex-MSEs US Australia Korea

140

120
104.7
100
94.9
80

60

40

20
1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019
Source: CLSA

Key segments in India

We focus on the HPC, food Over the next 10 years, the health, transport and education segments are set to
service and paint segments drive consumer expenditures in India. Specifically, we believe home and personal
in India care (HPC), food service and paints will be the key growth areas in retail spending.

Figure 63

We expect health-related India: 2020-30 absolute change in consumer expenditure by category

expenditures to have (%)
180
highest growth by 2030 160
140
120
100
80 171 161
60 131 130 128 125 114 113 112 111 105 105
40 16
53
20
0
Personal care
Health related

Education

Household Goods

Leisure

Housing
Alcohol & Tobacco

Clothing &

Others
Food & Beverage
Transport

Total

Hotels & Catering

Communications
Footwear
and Services

Source: CLSA, Euromonitor

38 [Link]@[Link] 18 May 2021

 
 
Prepared for: pdesai@[Link]
 Section 4: Our Gen Z consumer portfolio Asia consumer

Beauty and personal care

The beauty and personal care (BPC) market in India reached US$14bn in 2020.
Although it declined 4.3% in 2020 due to Covid, it enjoyed a 6.9% Cagr from 2010-19.

Figure 64

In India, BPC market was India: Beauty and personal care market
US$14bn in 2020 16 (US$bn) Beauty and Personal Care YoY growth (RHS) (%) 20

14
15
12
10
10

8 5

6
0
4
(5)
2

0 (10)
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Source: CLSA, Euromonitor

As of 2020, per capita beauty consumption in India was only US$10, by far the
lowest among the five Asian markets we are focusing on this report. By comparison,
China’s per capita BPC consumption was US$50 and Japan’s was US$279. As Gen
Z, the most well-educated generation to date, becomes the main consumption
power in India, we expect spending in this category to outgrow general retail
spending, making this a key area of growth.

Food service
Food services market is The food services market in India is benefiting from a cultural shift towards eating
experiencing a structural food made outside the home, primarily hastened by the paucity of time,
change convenience and quality improvements (mainly in taste and temperature of food).
In India, the overall size of the food service market was US$32bn in 2020. While
2020 was negatively impact by Covid, the segment had a 6.1% Cagr over 2010-19,
according to Euromonitor.

Figure 65

Food service market was India: Consumer food service

US$32.1bn in 2020 70 (US$bn) Consumer Foodservice YoY growth (RHS) (%) 20

60 10

50 0

40 (10)

30 (20)

20 (30)

10 (40)

0 (50)
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Source: CLSA, Euromonitor

18 May 2021 [Link]@[Link] 39

 
 
Prepared for: pdesai@[Link]
 Section 4: Our Gen Z consumer portfolio Asia consumer

Our survey results and analysis agree that there is a clear intent by consumers to
increase spending on eating out; current per capita spending in India in 2020 is
US$24 compared to Japan at US$1,258.

Paints
Paint industry is estimated According to Nirmal Bang, India’s paint industry totalled Rs500bn in FY2020.
to be Rs500bn in FY2020 Consumer preferences have been shifting from the traditional whitewash to high-
quality paints such as emulsions and enamel paints, which provide the basis for
stable growth in the Indian paint industry. We also see the paint industry as a proxy
for urbanisation and the widespread rise of incomes in India.

Figure 66

Industrial paints account for India: Paint market

80% of the market (Rsbn)
600 Industrial paints Decorative paints

500

400

300

200

100

0
FY08 FY12 FY16 FY20
Source: CLSA, Nirmal Bang

Key segments in Japan

Within Japan, we find adult health products attractive and also prefer to invest in
channel changes via ecommerce. While the ecommerce penetration rate is growing
steadily, it is still proceeding at lower rate than other Asian countries such as China
and South Korea. Japan’s retail market was US$989bn in 2020 and decreased by
13.5% compared to 2010. However, ecommerce has been growing steadily over the
past 10 years, with a Cagr of 8.9% in 2010-20.

Figure 67

Japan adult health market Japan: Adult health market

totalled US$21.4bn in 2020 (US$bn) (%)
30 Adult health YoY (RHS) 20

15
25
10
20
5

15 0

(5)
10
(10)
5
(15)

0 (20)
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Source: CLSA, Euromonitor

40 [Link]@[Link] 18 May 2021

 
 
Prepared for: pdesai@[Link]
 Section 4: Our Gen Z consumer portfolio Asia consumer

Figure 68

Japan’s ecommerce ratio Japan: Traditional retail vs ecommerce

was 10.4% in 2020
1,400 (US$bn) Traditional retail (%) 12
Ecommerce
1,200 Ecommerce ratio (RHS) 10

1,000
8
800
6
600
4
400

200 2

0 0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Source: CLSA, Euromonitor

Figure 69

Ecommerce ratio for different sectors in Japan

Ecommerce ratio (%) 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Apparel and Footwear 7.7 8.8 9.5 10.2 10.8 11.7 12.9 14.1 15.2 16.4 20.8

Beauty and Personal Care 5.9 6.1 6.4 6.5 6.9 7.4 8.1 8.5 9.1 9.7 12.1

Consumer Appliances 4.7 4.9 5.0 5.1 5.2 5.5 6.0 6.3 6.6 6.9 7.7

Consumer Electronics 6.6 6.8 8.3 9.4 9.8 10.4 11.0 11.4 11.9 12.0 15.8

Consumer Health 4.0 4.2 4.5 5.1 5.8 6.5 7.1 7.7 8.2 8.7 10.5

Home Care 0.8 0.9 1.0 1.1 1.3 1.5 1.7 1.9 2.1 2.3 2.6

Home Improvement and Gardening 4.3 4.6 4.9 5.3 5.7 6.0 6.4 6.9 7.2 7.5 7.8

Homewares and Home Furnishings 6.3 6.6 6.8 7.0 7.4 7.8 8.1 8.5 9.0 9.3 10.1

Personal Accessories and Eyewear 6.9 7.2 7.7 8.1 8.5 8.8 9.6 10.1 10.7 11.3 15.1

Pet Care 7.1 8.2 9.2 9.8 10.3 10.8 11.1 11.8 12.0 12.4 13.2

Traditional Toys and Games 5.4 6.5 7.7 10.0 10.7 12.1 13.8 15.0 16.1 17.4 19.4

Video Games Hardware 11.0 15.0 15.5 16.0 16.1 16.7 17.2 17.7 19.0 21.7 24.4
Source: CLSA, Euromonitor

We expect that ecommerce will continue to add about 0.5-1% share per year going
forward. By 2030, ecommerce will be closer to 20% penetration.

Key segments in Indonesia

In Indonesia, beauty and personal care (BPC) is our main area of interest. The
industry has been growing since 2016 and reached almost US$10bn in 2020, with
a Cagr of 5.1% from 2010 to 2020.

We expect BPC to grow faster than average retail sales going forward as per capita
consumption in Indonesia remains very low at US$36 in 2020, especially when
compared to Japan’s per capita BPC consumption of US$279.

18 May 2021 [Link]@[Link] 41

 
 
Prepared for: pdesai@[Link]
 Section 4: Our Gen Z consumer portfolio Asia consumer

Figure 70

Beauty and personal care in Indonesia

12,000 (US$m) Beauty and Personal Care YoY growth (RHS) (%) 16

14
10,000
12

8,000 10

8
6,000
6

4,000 4

2
2,000
0

0 (2)
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Source: CLSA, Euromonitor

Given the smaller scale of the other Asian markets, we will not go into further detail
about the key categories, but we will select good companies with interesting
thematic approaches below.

Review of our 2018 consumer companies

In 2018, we introduced a We introduced a consumer portfolio in 2018 based on the consumer behaviour of
consumer portfolio based millennials. The selected companies in our portfolio performed well; only four out
on millennials of 16 selected stocks had negative returns when comparing 2020 to 2018 metrics.
On average, the group generated a 132% return. Total sales increased 8% over the
period, while operating profits were up by 46.2%. The market cap of all selected
names increased from US$777bn to US$1.2tn, or a positive 54%. Since net income
also increased 41%, this suggests a price to earnings ratio of 29.1x in the end of
2020 compared to 26.8x in 2018.

Figure 71

Key metrics of our 2018 portfolio

Company Rating Stock Market cap Total return1 Sales Operating profit Operating profit Net income
code (US$m) (%) (US$m) (US$m) margin (%) (US$m)
2018 2020 2018 2020 2018 2020 2018 2020 2018 2020
Alibaba BUY BABA US 453,658 649,310 23.8 52,238 93,462 8,705 15,157 16.7 16.2 10,536 23,092
Amorepacific SELL 090430 KS 13,600 11,688 14.2 4,798 3,763 438 121 9.1 3.2 302 30
Anta Sports BUY 2020 HK 14,196 42,848 246.4 3,646 5,152 862 1,327 23.6 25.8 621 749
H&H BUY 1112 HK 3,954 2,385 (36.7) 1,533 1,624 342 262 22.3 16.1 128 165
Jubilant Food O-PF JUBI IN 2,830 5,039 94.9 509 439 63 55 12.4 12.5 46 31
LG H&H O-PF 051900 KS 17,558 24,679 23.1 6,135 6,660 945 1,037 15.4 15.6 621 677
Sea Limited BUY SE US 4,774 71,459 1481.2 827 4,376 (989) (1,303) (119.6) (29.8) (961) (1,618)
Shenzhou BUY 2313 HK 19,631 29,468 75.8 3,170 3,341 691 836 21.8 25.0 687 741
Shiseido BUY 4911 JP 28,042 27,647 (2.0) 9,918 8,629 982 140 9.9 1.6 556 (109)
Softbank BUY 9984 JP 101,619 163,105 66.7 86,203 53,264 18,244 28,503 21.2 52.6 14,154 15,151
ZOZO BUY 3092 JP 11,299 7,694 (8.5) 1,062 1,331 269 396 25.4 29.8 159 284
TAL Edu BUY TAL US 16,792 28,569 62.7 2,341 3,991 294 (182) 12.6 (4.6) 337 (37)
Zee Entertainment BUY Z IB 6,770 2,936 (61.0) 1,105 1,023 333 199 30.1 19.4 224 138
Hindustan Unilever BUY HUVR IB 50,305 76,967 48.1 5,534 6,336 1,190 1,422 21.5 22.4 866 1,077
Titan SELL TTAN IB 11,381 19,045 67.7 2,803 2,706 262 182 9.3 6.7 201 131
Unicharm BUY 8113 JP 20,294 29,417 18.9 6,235 6,816 838 896 13.4 13.1 556 490
Sum 776,703 1,192,256 132.2 188,057 202,913 33,468 49,048 145 226 29,032 40,992
Source: CLSA, Bloomberg, FactSet. Note: Financials and market cap as of 4 Sept 2018 and 31 Dec 2020. 1 Total return from 4 Sept 2018 to 17 May 2021.

42 [Link]@[Link] 18 May 2021

 
 
Prepared for: pdesai@[Link]
 Section 4: Our Gen Z consumer portfolio Asia consumer

For the previous portfolio, we expected the success of internet platforms to

continue to capture millennial wallets; and that consumer companies would be
piling their marketing dollars onto these platforms to access Asia’s consumers.
Clearly this worked well, with SEA, Alibaba, Softbank and Zozo all being plays there;
4 out of 16 companies.

Non-internet firms that This time, we have deliberately reduced the number of internet platform companies
should be considered long- as we believe the investment cases for these are well known. And while we still
term winners in consumer consider many of them to be excellent companies and cheap stocks, we have had
many inquiries on non-internet companies which should be considered long-term
investment winners in consumer.

Figure 72

Key companies
Company Stock code Market Price PE EV/Ebitda Div yld EPS growth
cap (lccy) (x) (x) (%) (%)
(US$m)
21CL 22CL 21CL 22CL 21CL 22CL 21CL 22CL

Covered

AllHome HOME PM 542 7.0 18.1 12.6 10.1 7.6 1.1 1.7 46.6 43.7

Asian Paints APNT IS 36,420 2,782.8 85.0 80.8 54.1 52.4 0.6 0.6 20.3 5.3

China Feihe 6186 HK 25,474 22.1 22.6 18.4 14.5 11.5 1.6 2.3 (0.4) 23.0

CP All CPALL TB 16,328 57.0 43.2 20.4 13.1 9.1 1.2 2.4 (26.5) 111.5

Dabur DABUR IS 12,902 534.4 47.8 42.6 37.8 33.1 0.7 0.8 13.1 12.3

Domino's DMP AU 7,117 106.5 40.9 34.9 21.1 18.2 1.7 2.0 17.9 17.1

Fast Retailing 9983 JP 84,333 86,090 45.5 41.5 16.7 15.1 0.6 0.7 14.5 9.7

Flight Centre FLT AU 2,336 15.3 50.3 14.7 9.0 4.7 1.3 4.5 - 241.5

Hindustan Unilever HUVR IB 76,171 2,376 57.5 49.2 42.9 36.7 1.6 1.8 20.2 17.0

Jollibee JFC PM 3,897 167.2 36.7 25.2 7.5 5.3 0.9 1.3 - 45.7

Jubilant Food JUBI IN 5,065 2,816.2 191.6 79.4 51.6 33.0 0.1 0.4 (39.4) 141.4

Kobe Bussan 3038 JP 7,187 2,843 33.1 28.8 18.1 15.9 0.9 1.0 23.2 15.0

LG H&H 051900 KS 21,101 1,518,000 28.0 24.2 15.4 13.2 0.9 1.0 14.0 15.6

Li Ning 2331 HK 20,644 68.1 53.6 40.6 35.4 25.7 0.7 1.0 55.2 32.6

Luzhou Laojiao 000568 CH 56,390 257.8 49.9 39.5 35.7 28.3 1.3 1.8 25.7 26.3

Shiseido 4911 JP 27,441 7,697 114.9 37.5 26.3 15.0 0.6 0.8 - 206.5

Smoore Intl 6969 HK 39,474 55.6 49.4 36.5 40.2 29.3 1.0 1.4 109.8 35.7

Studio Dragon 253450 KS 2,551 95,800 43.8 32.8 13.9 12.5 - - 107.9 33.5

ThaiBev THBEV SP 12,632 0.7 16.6 14.6 13.0 11.5 3.0 3.4 12.7 7.4

Unicharm 8113 JP 24,279 4,265 28.4 25.1 13.0 11.6 1.0 1.2 72.1 13.2

Zozo 3092 JP 10,118 3,470 30.4 27.0 19.0 16.4 1.6 1.8 12.7 12.6

Not Covered

Mayora Indah¹ MYOR IJ 3,929 2,510.0 23.5 20.3 13.6 12.1 1.4 1.6 15.9 15.9

Unicharm Indonesia¹ UCID IJ 450 1,650.0 14.0 10.5 5.5 4.7 1.8 2.4 48.1 32.4
¹ Estimate data from FactSet. Source: CLSA, Bloomberg, FactSet

18 May 2021 [Link]@[Link] 43

 
 
Prepared for: pdesai@[Link]
 Section 4: Our Gen Z consumer portfolio Asia consumer

China
Shiseido (4911 JP - ¥7,697 - BUY) - Oliver Matthew
While listed in Japan, we consider Shiseido a strong China play. It has a solid
position in the premium segment compared to China-listed cosmetics companies,
which have so far focused on low- to mid-range segments.

Shiseido benefits from the The company is a great proxy play on the growth of luxury China cosmetics.
growth of luxury cosmetics Shiseido’s China business is the core sales and profit driver. China demand has been
in China met through inbound sales, DFS and onshore China; combined, these were ¥360bn,
or US$3.3bn in 2020, which represented 39% of sales and over 100% of OP.

More growth from China In 2021, we expect these channels to recover strongly; inbound sales should decline
after less focus on personal 19% to 18bn yen, DFS to grow 8% to 106bn, and China to grow 32% to 313bn yen,
care giving a total of 437bn yen, or +21%yoy, making 40% of sales; though with the
removal of the Personal Care business, this might mean that China demand
becomes even higher. Shiseido enjoys the highest brand awareness among
Japanese cosmetics companies in China, and has the best brand portfolio according
to our consumer surveys.

Figure 73

China: Market share of top-10 beauty and personal care players

Company share (%) 2015 2016 2017 2018 2019 2020
1 L'Oréal Groupe 8.9 8.3 8.3 9 10.3 11.3
2 Procter & Gamble Co, The 11.7 10.5 10 9.7 9.3 9.3
3 Estée Lauder Cos Inc 1.9 2 2.5 3.1 4.1 5
4 Shiseido Co Ltd 2.9 3 3.1 3.4 3.5 3.6
5 LVMH Moët Hennessy Louis Vuitton SA 1.7 1.8 2.1 2.5 2.9 3
6 Unilever Group 3.4 3.2 3 2.7 2.5 2.3
7 AmorePacific Corp 1.9 2.4 2.4 2.5 2.5 2.2
8 Shanghai Pehchaolin Daily Chemical Co Ltd 1.8 2 2.3 2.3 2.3 2.2
9 Jala (Group) Co Ltd 1.7 2 2.2 2.2 2.2 2.1
10 Colgate-Palmolive Co 2.7 2.8 2.7 2.3 2 1.9
Source: CLSA, Euromonitor

Figure 74

Japan: Market share of top-10 beauty and personal care players

Company (%) 2015 2016 2017 2018 2019 2020
1 Kao Corp 14.2 14.1 13.6 13.6 13.5 13.6
2 Shiseido Co Ltd 12.3 12.4 13.3 14.1 13.8 11.3
3 Kosé Corp 7.1 7.3 7.5 7.7 7.6 6.5
4 Procter & Gamble Co, The 4.4 3.8 3.7 3.6 3.7 3.7
5 Pola Orbis Holdings Inc 3.7 3.7 4 4 3.8 3.4
6 Lion Corp 2.4 2.5 2.5 2.5 2.5 3.1
7 Unilever Group 2.4 2.4 2.4 2.4 2.4 2.6
8 DHC Corp 2 2 2 2 2 2
9 Rohto Pharmaceutical Co Ltd 1.8 1.7 1.8 1.7 1.7 1.8
10 Fancl Corp 1.2 1.2 1.3 1.4 1.5 1.5
Source: CLSA, Euromonitor

44 [Link]@[Link] 18 May 2021

 
 
Prepared for: pdesai@[Link]
 Section 4: Our Gen Z consumer portfolio Asia consumer

We expect 8% top line and We expect Shiseido to increase its top-line by an 8% Cagr, with China growing at
17% of OPM growth an over 10% Cagr per year, and we see OPM reaching 17% longer term, from single
digits currently.

Fast Retailing (9983 JP - ¥86,090 - Outperform) - Oliver Matthew

China will be the key future growth driver for UNIQLO.

We estimate China sales were ¥566bn and OP was ¥66bn in FY8/20, and expect
24% growth in sales to 566bn in FY8/21, with OP of ¥99bn. So, in FY8/21, China
will be 26% of sales and 39% of OP. We expect that sales Cagr for the China
business can exceed 10% Cagr to 2030, and OPM will reach over 20%.

Fast Retailing has 10.6% Fast Retailing currently has 800 stores in China, and is adding around 80-100 per
market share in Japan and year, at the same time the company is expanding globally into Europe, US and
1.6% in China in 2020 broader Asia. Yet, we expect China to continue to build its portion of overall sales
and profits. Fast Retailing currently has 10.6% market share in Japan, and currently
around 1.6% in China.

Figure 75

China: Market share of top-10 apparel players

Rank Company (%) 2015 2016 2017 2018 2019 2020
1 Fast Retailing Co Ltd 0.7 1 1.1 1.2 1.4 1.6
2 Anta (China) Co Ltd 0.5 0.6 0.7 1 1.3 1.5
3 Semir Group Co Ltd 0.8 0.9 0.9 1.1 1.4 1.5
4 HLA Corp Ltd - - 1.4 1.3 1.4 1.4
5 Bestseller A/S 2 1.8 1.7 1.5 1.5 1.4
6 adidas Group 0.8 0.9 1 1.2 1.3 1.3
7 Nike Inc 0.6 0.7 0.8 0.8 1 1.1
8 Inditex, Industria de Diseño Textil SA 0.6 0.7 0.8 0.8 0.8 0.8
9 Bosideng International Holdings Co Ltd 0.4 0.5 0.6 0.6 0.7 0.8
10 Ningbo Peacebird Group Co Ltd 0.5 0.5 0.5 0.5 0.5 0.6
Source: CLSA, Euromonitor

We expect total company sales growth to be an 8% Cagr, with longer-term margins

increasing due to greater scale in ecommerce, along with better efficiency in SG&A
from logistics.

Figure 76

Japan: Market share of top-10 apparel players

Company (%) 2015 2016 2017 2018 2019 2020
1 Fast Retailing Co Ltd 12.5 13.4 13.7 14.1 14.1 15.5
2 Shimamura Co Ltd 5.5 5.8 5.8 5.7 5.5 6.2
3 LVMH Moët Hennessy Louis Vuitton SA 1.9 1.7 2.2 2.8 3.3 2.8
4 Wacoal Holdings Corp 2.1 2.1 2.1 2.1 2 2
5 World Co Ltd 2.8 2.6 2.6 2.4 2.2 2
6 Onward Holdings Co Ltd 2.3 2.2 2.2 2.1 2 1.8
7 TSI Holdings Co Ltd 1.6 1.6 1.5 1.6 1.7 1.6
8 Aoyama Trading Co Ltd 2.1 2.2 2.2 2.1 1.9 1.6
9 Mizuno Corp 1.4 1.5 1.5 1.5 1.5 1.5
10 adidas Group 1 1.1 1.1 1.2 1.3 1.4
Source: CLSA, Euromonitor

18 May 2021 [Link]@[Link] 45

 
 
Prepared for: pdesai@[Link]
 Section 4: Our Gen Z consumer portfolio Asia consumer

Li Ning (2331 HK - HK$68.05 - Outperform) - Casey Zheng

Product mix and sentiment Solid competing edge in products mix: Li Ning built up a solid foundation in
helps products mix, which has been proved by outstanding performance in functionality,
as well as the adoption of fashion elements. We believe Li Ning’s competitive
advantages to be sharpened in next decade, mainly driven by continuing R&D
investment and upgrading image. We expect continued unfavourable sentiment
toward foreign brands to direct consumers to leading domestic brands, among
which Li Ning is likely to benefit most.

Market share gainer amid market consolidation: Consumers usually cast preference
on functionality rather than fashion when making a purchase choice in sportswear
market, which leads to a constantly consolidated market, as leaders are more likely
to reinforce advantages by more Capex in R&D and A&P (Matthew effect). As a
result, we believe that Li Ning is well positioned to gain more shares from domestic
brands, including Peak, 361 degree, Qiaodan and Erke, who separately takes up
c.1% of whole market share.

Reforms lead to improved New catalyst: all-round evolution reforms: In the long run, we are confident on its
profitability underlying improvement in supply chain, merchandising and retail capabilities with
the new CEO’s retail-oriented initiatives. Reforms in supplier consolidation, SKU
streamlining, store network/format adjustments are expected to translate into
lower procurement costs, higher pricing power, a better product mix and therefore
enhanced profitability.

Upgraded image, more Our view: With an upgraded image, more recognized products and improved store
recognised products and profitability, Li Ning is expected to expand in higher-end market and take share
improved store profitability from existing market leaders.

Key risks: competition with foreign brands in the upmarket segment and domestic
peers in the mass-market segment; fashion risks around its premium & apparel
categories; execution risk in supply chain & other new initiatives; governance risks;
other uncontrollable risks such as unfavourable weather and epidemic patterns.
Other risks include further recurrence or more prolonged than expected impact
from Covid-19.

Luzhou Laojiao (568 CH - Rmb257.81Price - Outperform) - Terrance Liu

Luzhou Laojiao is likely to become the fastest-growing brand in premium segment
by 2030: A key concern for the long-term prospect of baijiu is the alienation
between young consumers and most leading brands. In contrast to its competitors,
Laojiao has been a pioneer in seizing the attention and love from youngsters with
innovative marketing campaigns and continuous efforts in consumer education.
Laojiao has opened several pop-up stores, Jiaolin Research Lab, in various cities all
around China since Aug 2020.

Become the fastest-growing Jiaolin Research Lab provides consumers with immersive experience to understand
brand in premium segment the brand and its products from a rejuvenated perspective. More interestingly,
Laojiao has launched various co-branded products well-received by youngsters,
ranging from perfume to chocolate. For instance, Laojiao launched baijiu-flavoured
ice cream, black out (断 片), in collaboration with a popular ice cream brand,
Chicecream (钟薛高), in Sep 2020. While it is hard to change the older generation’s
perception on baijiu brands, Laojiao may be able to seize the growth opportunity
with the younger generation in the next decade. With 2-3k pits from Ming dynasty,
we believe that Laojiao has ample production capacity to meet youngsters’
increasing demand for its quality baijiu.

46 [Link]@[Link] 18 May 2021

 
 
Prepared for: pdesai@[Link]
 Section 4: Our Gen Z consumer portfolio Asia consumer

Figure 77 Figure 78

Jiaolin Research Lab Co-branded ice cream with Chicecream

Source: Company Source: Company

Large potential in mid-to- Untapped potential in mid- to high-end segments: While the ultra-premium and
high-end segments premium baijiu segment is currently dominated by Moutai and Wuliangye, the mid-
to high-end segments are quite fragmented. As the ancestor of strong-flavoured
baijiu, Laojiao enjoys unparalleled brand equity in these segments compared to
second tier players. Hence, we believe that Laojiao’s potential in the mid- to high-
end segment has been underestimated. With continuously improving brand equity
and scale in the premium sector, Laojiao is likely to shift its marketing focus towards
mid- to high-end products, unlocking the potential in this field.

Margin expansion by Margin could expand on the back of enhanced brand equity: Brand equity is of
enhanced brand Equity tremendous importance for sales of baijiu. Historically, Laojiao has been ranked as
one of the top-three baijiu brands along with Moutai and Wuliangye. Due to
strategic mistakes a few year ago, Laojiao fell out of the top-three league. With
intensified competition during the past three years, Laojiao has to reserve a higher-
than-peers percentages of revenue for A&P activities to promote its products.
However, with new management on board in 2015, Laojiao has implemented
various revival measures, ranging from reorganization of selling system to
repurchase campaign for vintage products. We believe that these measures will be
effective in enhancing Laojiao’s brand equity gradually. With revived brand image
among consumers, we expect to see reduction in A&P spending and improvements
in its profit margin in coming years.

Our view: Given the rising consumption power of Gen-Z, we are positive on Laojiao,
given its strategic focus on consumer education, ample production capacity for high
quality baijiu and unparalleled brand equity.

Key risks: Failure to cultivate youngsters’ drinking habits, fierce competition from
second tier brands and emerging brands and management inconsistency are key
risks to our positive view.

18 May 2021 [Link]@[Link] 47

 
 
Prepared for: pdesai@[Link]
 Section 4: Our Gen Z consumer portfolio Asia consumer

China Feihe (6186 HK- HK$22.10 - BUY) - Terrance Liu

Vast potential for IMF Vast potential for IMF market consolidation: We expect that the decline in the
market consolidation birth rate will speed up IMF industry consolidation in the following years, benefiting
the market leaders including Feihe to grab market at the expenses of small regional
players, who still collectively control over 20% of market share. Despite its No.1
position in most of the provinces, Feihe’s market share of 17% combining online
and offline channels still implies substantial upside in light of the fragmented
market status. Benchmarking mature IMF markets including US and Europe where
top 3 brands taking up around 70%-90% of market shares, we expect that top 3
IMF brands in China will control 60-70% market share in the long term.

Revenue growth with more Expanding the shelf space with more new offering: Regarding its mid-term sales
new offering target of Rmb35bn by 2023, Feihe expects IMF business to remain as a key driver.
The company plans to enrich its product portfolio in the coming years, including
launching upgraded Organic Zhenzhi series in 2H 2021, introducing adult milk
powder before August 2021, releasing goat milk IMF at the beginning of 2022 and
a new edition of Astrobaby in 2023. We expect the company continue to focus on
premium and super premium products, gradually weeding out low-end IMF
products. The company could expand client base, strengthen its margin and grab
larger market share by developing a comprehensive product portfolio.

Children and adult milk Incubate the second and third growth engines for the long run: Feihe unveiled
formulas the next growth recently children and adult milk formulas as its next growth items in the long term
driver to reach its long-term target of 15% sales Cagr of 2024-2028. Currently, children
milk formula market is at the size of Rmb13bn, and is expected to grow to Rmb50bn
in the following years. In terms of adult milk formula, market size is expected to
reach Rmb60-70bn in 2028 from the current level of Rmb20bn. Feihe aims to lift
sales contribution of these two categories to 50% by 2024-2028 from high single
digits currently. In terms of margin impact, the company expects children and adult
milk formulas to have a lower GPM however having neutral OPM. We are
particularly sanguine as to the adult formula industry, given an increasing senior
population in China and their unique dietary culture preferring warm drinks rather
than cold ones.

Our view: We are structurally positive on Feihe given IMF market consolidation
potentials, favourable portfolio mix and product introduction, as well as its strong
new growth engines. Our 12M TP is HK$30 based on 25x 12-month forward PE.

Key risks: food safety issues, a pessimistic outlook on new births, rising
breastfeeding awareness, lack of expertise in new business fields.

Smoore (6969 HK - HK$55.55 - BUY) - Terrance Liu

E-cigarette penetration is Smoore is the largest vaping manufacturer in the world with 16.5% market share in
driving future growth 2019. According to F&S, the vaping device manufacturing sector is expected to
grow at 27.7% in 2019-2024, which will be mainly driven by the increased
penetration of e-cigarette worldwide. E-cigarette only accounts for c.5% of the
global tobacco products in 2019 but expect to hit around 10% by 2024. With
incremental regulation to be introduced going forward, we expect the downstream
market consolidation will drive the resources towards the market leaders like
Smoore who commands the economy of scale and leading R&D knowhow.

The key downside risks to our bullish view include any dramatic regulation changes,
any unfavourable scientific evidence against e-cig and any more advanced vaping
technology launched by key competitors.

48 [Link]@[Link] 18 May 2021

 
 
Prepared for: pdesai@[Link]
 Section 4: Our Gen Z consumer portfolio Asia consumer

Australia
Domino’s (DMP AU - A$106.47 - BUY) - Richard Barwick
We expect at least 6% Domino’s is targeting 5,550 stores by 2033 which represents more than a doubling
annual sales growth and implies at least 6% Cagr. The store target provides a tangible measure of long-
towards 2033 term growth and is a fundamental driver of our investment conclusion. Even in its
most mature market, Australia, Domino’s has a low single digit share of quick service
restaurant sales.

Domino’s is essentially a single product company; pizza. Should pizza fall out of
favour with consumers, rather than increasingly gain favour as we expect, then
Domino’s will likely fail to deliver on its targets.

Figure 79

Global: Market share of top-10 consumer food service players

(%) Company 2015 2016 2017 2018 2019 2020
1 McDonald's Corp 3.2 3.2 3.3 3.3 3.3 4.1
2 Yum! Brands Inc 1.7 1.7 1.7 1.7 1.8 2.2
3 Restaurant Brands International Inc 0.9 0.9 1.1 1.1 1.2 1.5
4 Starbucks Corp 0.8 0.9 1 1 1.1 1.2
5 Seven & I Holdings Co Ltd 0.6 0.7 0.7 0.7 0.8 1
6 CFA Properties Inc 0.3 0.3 0.3 0.4 0.4 0.7
7 Doctor's Associates Inc 0.7 0.7 0.7 0.6 0.6 0.7
8 Domino's Pizza Inc 0.4 0.4 0.4 0.5 0.5 0.7
9 Dunkin' Brands Group Inc 0.4 0.4 0.4 0.4 0.4 0.5
10 Inspire Brands Inc - - - 0.4 0.4 0.5
Source: CLSA, Euromonitor

Flight Centre (FLT AU - A$2.34 - BUY) - Mark Wade

We like Flight Centre in Along with the entire leisure and travel sector, the company has just endured the
travel and leisure sector toughest year in its 38-year history as a consequence of border restrictions imposed
to slow the spread of Covid-19. With second wave Covid infections in various
countries around the world and a vaccine still some way off, the market is wary of
how long it will take for the travel industry to recover. Therein lies the opportunity
for those patient, with travel almost certainly having recovered in full and Covid a
distant memory by 2030. Crucially, it is becoming clear that Flight Centre will
survive, is still relevant and massively under-earning until travel inevitably recovers.

Figure 80

Australia: Market share of top travel intermediaries

(%) Company 2015 2016 2017 2018 2019 2020
1 Flight Centre Travel Group Ltd 27.3 27.4 27.4 27.4 26.6 25.4
2 Helloworld Ltd 12.6 12.4 12.4 14.9 15.6 15.8
3 BCD Holdings NV 11.7 11.8 10.5 9.8 10.1 9
4 Booking Holdings Inc - - - 6.1 6.5 6.1
5 Carlson Wagonlit Travel Inc 5.9 5.9 5.9 5.8 5.7 5.6
6 Expedia Group Inc - - - 5.1 5.3 5.1
7 Corporate Travel Management Ltd 2 2 2 2.3 2.7 3
8 Webjet Ltd 2.7 2.7 2.5 2.8 2.9 2.8
9 Travellers Choice Ltd 1.3 1.3 1.3 1.3 1.3 1.2
10 Diethelm Keller Group 0.7 0.7 0.7 0.7 0.7 0.7
Source: CLSA, Euromonitor

18 May 2021 [Link]@[Link] 49

 
 
Prepared for: pdesai@[Link]
 Section 4: Our Gen Z consumer portfolio Asia consumer

Figure 81

Global: Market share of top travel intermediaries

(%) Company 2015 2016 2017 2018 2019 2020
1 [Link] International Ltd 5.2 6.2 7.6 9.6 9.8 12.4
2 Expedia Group Inc - - - 8.5 8.8 8
3 Booking Holdings Inc - - - 9.4 9.6 7.5
4 Airbnb Inc 1 1.5 2 2.6 3.4 3.9
5 American Express Co 3.7 3.6 3.5 3.5 3.6 2.9
6 BCD Holdings NV 3 2.9 2.8 2.8 2.8 2.6
7 Tongcheng elong Network Technology Co Ltd - - 1.5 1.7 1.9 2.6
8 TUI Group 2.7 2.5 2.4 2.5 2.5 2.3
9 JTB Corp 1.7 1.7 1.6 1.5 1.5 1.6
10 Carlson Wagonlit Travel Inc 2.1 1.9 1.9 1.8 1.8 1.6
11 Flight Centre Travel Group Ltd 1.5 1.5 1.5 1.4 1.4 1.4
Source: CLSA, Euromonitor

Flight Centre has large The company operates in a huge global corporate travel market that was worth
domestic share but tiny on US$1.5tn and growing at more than 4% pa before the onset of Covid. What’s more,
international level the market for leisure travel was far larger, trumping corporate by 4x in Australia
for example. Corporate travel agents today have only a market penetration of 40%,
with meaningful growth opportunity by converting corporate customers,
particularly small- to medium sized enterprises, who currently self-book. Flight
Centre has a large domestic market share of around 38% but remains tiny on an
international stage, where its share is <1% within a highly fragmented market. We
expect that Covid will accelerate market consolidation by threatening the very
existence of many small independent agents.

Steady-state 5% EPS Cagr By 2030 we assume that the travel sector has inevitably recovered from Covid and
resumed outpacing GDP growth. Flight Centre should be capable of holding its
share of the market, amounting to steady-state EPS growth of 5% Cagr to reach
EPS of A$2.41 per share in FY30. Appealing to investors in for the long haul, our
rating is BUY.

In terms of key risks, besides global conflict, recession or another pandemic, we

recognise that travel spend is somewhat sensitive to macroeconomic factors.
Declining sentiment will most likely result in a shift to lower value locations and/or
reduced duration, rather than the abandonment of leisure travel spending entirely.
A greater threat is substitution, with online distribution making it easier for
suppliers to connect directly with travellers. The threat of disintermediation is less
likely in the corporate market, where Flight Centre is increasingly focused along
with in-destination activities. Finally, Covid may trigger a permanent shift to video
meetings, in doing displace some, but certainly not all, face-to-face meetings that
once involved travel.

Philippines
AllHome (HOME PM - 6.99 - BUY) - Bennette Fajardo
AllHome has an aggressive AllHome has an aggressive store expansion growth on a fragmented and growing
store expansion growth home and garden specialty retailing category. The home and garden specialty
retailing category is a P198bn market with an expected growth of 6.9% over the
next four years. The market is largely fragmented with the top three players only
accounting for 30% of the total, as traditional formats dominate the market
especially outside Metro manila.

Market share is expected to AllHome’s market share is currently at 6%. With AllHome’s aggressive expansion
reach 17% in 2025 from 6% pipeline, the company’s market share is set rise from 6% in 2019 to 17% in 2025.
in 2019 This will propel the company from the 5th largest player to being at par with the
largest player in the home and garden specialty retailing category.

50 [Link]@[Link] 18 May 2021

 
 
Prepared for: pdesai@[Link]
 Section 4: Our Gen Z consumer portfolio Asia consumer

AllHome will be able to rapidly expand in strategic locations due to the vast
landbank and fast expansion of affiliate real estate companies. We can see 2031
EPS of P1.97/sh.

Competition is major Risks: Tougher than expected competition could lead to lower top-line and gross
concern margin figures. Increased competition may come from incumbents trying to retain
market share. Competition may also arise from possible new players with deeper
balance sheets. IKEA plans to open its first store in the Philippines in 2020. IKEA
plans to occupy around 65,000m2, which will target 5m households within 60
minutes distance. IKEA will only compete with one of the many categories that
AllHome carries.

Possible slowdown in the housing market could lead to lower demand from home
improvement. Housing market slowdown could stem from unexpected rise in
mortgage rates and slower OFW remittances

Lower-than-expected project launches of VLL may lower demand from the

immediate catchment area of AllHome.

Though online sales comprise a minimal portion of the home-improvement

category, e-commerce could threaten AllHome’s brick and mortar stores.

The company engages in related-party transactions with affiliates such as AllValue,

Golden Bria, and Vista Land.

Limited track record in the home improvement space leads to execution risk.

Jollibee (JFC PM - P3.90 - Underperform) - Joyce Anne Ramos

Penetration is still low We like that the company still has very low penetration rate of only 12% in the
at 12% Philippines, and its strong market leadership in the food industry space puts it in
good position to further grow its online delivery platform. Currently, the company
has a potential to continue to expand its domestic brands in the southern part of
the Philippines, whereas globally, it has a lot of room to continue rolling out more
stores both in the USA, Europe, and China. We believe that the company can easily
double its earnings in 10 years’ time,

Earnings is expected to The risk to our upside is a weak execution of store expansion and another loss-
double in next 10 years making acquisition by the company.
Figure 82

Market size of US$8.2bn in Consumer foodservice market in Philippines

2020 amid Covid (US$bn) Consumer Foodservice YoY growth (RHS) (%)
16 20

14 10
12
0
10
(10)
8
(20)
6
(30)
4

2 (40)

0 (50)
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Source: CLSA, Euromonitor

18 May 2021 [Link]@[Link] 51

 
 
Prepared for: pdesai@[Link]
 Section 4: Our Gen Z consumer portfolio Asia consumer

Thailand
CP All (CPALL TB - Bt57- BUY) - Suchart Techaposai
We prefer CPALL in the CPALL is the dominant chain grocery operator running 7-Eleven franchise in
chain grocery operator in Thailand to become #2 behind Japan in terms of total outlet presence. It also owns
Thailand 93% of the only Cash & Carry, Makro, in Thailand and 40% of the #1 multi-
formatted grocery operator, Tesco Lotus, following the acquisition due for
completion next year. It has also got a license to operate 7-Eleven franchise in
Cambodia and let Siam Makro to expand the business in four neighbouring
countries, Cambodia, Myanmar, India and China. While swamping with debts to
fund these two acquisitions in the past several years, its strong cash-generating
CVS business can afford and allow these two chain grocers to expand and grow
regionally to secure its firm footing as a serious regional grocery player in the
Greater Asean including India and South China.

Over the coming decade, we expect its 7-Eleven business to reach maturity on
outlet penetration with 20k outlets nationwide but to grow organically with rising
middle-class, while its Makro and Lotus to gain firmer footing in the region.

Japan
Unicharm (8113 JP - ¥4,265 - BUY) - Jun Kato
Structural benefited from Structural beneficiary: Unicharm is well positioned to benefit from the Ageing Asian
ageing Asian population population. By 2030, 12.5% of Asian population will be over 65 years and Unicharm
by being the leader in Japan adult incontinence, strong brand image and wide
variety of products has a big potential to grow sales and profit in this category
across Asia, especially in China. The company will also grow with its baby diaper and
feminine care across Asia and Africa.

Leader in multiple Strong positioning: Unicharm is the leader in babycare and feminine care in Japan,
categories across Asia Indonesia, Thailand and Vietnam. According to Euromonitor, it became the leader
in the very competitive Chinese feminine care market in 2019 with its good
marketing and sales strategies. This shows the good opportunity for Unicharm to
grow its adult incontinence products among Chinese ageing population.

Margins should continue improving: OPM for feminine care and adult incontinence
is higher at around 25-30% versus baby care and there is more brand loyalty.
Customer will also use feminine care and adult incontinence longer than babycare.
Increase revenue from adult incontinence products and better product mix will lead
to margin improvement for the company.

Key risks: Unicharm operates in over 80 countries and is well positioned to benefit
from the structural ageing population in Asia but new innovation from competitors,
increase in raw material costs and regulations changes are risks
Figure 83

Japan: Market share of top-10 tissue and hygiene makers

(%) Company Share 2015 2016 2017 2018 2019 2020
1 Unicharm Corp 22.7 23 23.1 24 23.6 23.2
2 Daio Paper Corp 12.6 12.6 14.4 14.8 15.6 16
3 Kao Corp 15.4 15.4 15.5 14.8 13.3 12.6
4 Kimberly-Clark Corp 8.5 8.5 8.6 8.7 9.2 9
5 Oji Paper Co Ltd 6.6 6.5 6.6 6.7 6.9 7
6 Procter & Gamble Co, The 5.3 5.1 4.8 3.7 3.5 3.3
7 Pigeon Corp 1.3 1.3 1.3 1.2 1.1 1.2
8 Asia Pulp & Paper Co Ltd 0.6 0.9 1 1.2 1.3 1.2
9 Livedo Corp 1.1 1.1 1.2 1.2 1.2 1.2
10 Hakujuji Co Ltd 1.3 1.3 1.2 1.2 1.2 1.2
Source: CLSA, Euromonitor

52 [Link]@[Link] 18 May 2021

 
 
Prepared for: pdesai@[Link]
 Section 4: Our Gen Z consumer portfolio Asia consumer

Kobe Bussan (3038 JP - ¥2,843 - BUY) - Nigel Muston

Kobe Bussan is a growing, franchised discount supermarket chain in Japan with a
store network of 874 stores nationwide.

Discount supermarket Even prior to Covid-19, we saw more and more Japanese consumers gravitating
became popular even towards discount supermarket chains like Kobe Bussan’s Gyomu Super. This was a
before Covid natural extension of the long running trend to “trade down” wherever possible with
retailers focused on this value end of the market, such as Nitori, Fast Retailing and
Pan Pacific International, seeing huge growth in market share over the past ten
years. The second stage of the VAT hike from 8% to 10% in October 2019 did not
lead to direct increases of food prices as unlike April 2014 when VAT rose from 5%
to 8% they are excluded. However, it did lead to a further fall in consumer
confidence, however, which has certainly had some positive a flow-on impact to
customer traffic for discounters.

Market share is expected to We estimate that Kobe Bussan will double its market share from roughly 3% in
be 6% in 2029 from current 2019 to 6% in 2029 as it grows its store network and SSS growth continues to
3% outpace the industry with its innovative private label offering continuing to
differentiate against peers. We expect discounters to grow share as a group and
see current share of roughly 8% between Kobe Bussan, PPIH and others rising to
17% by 2029. We forecast SSS growth for Kobe Bussan in FY10/21 of 3% which
will outperform versus industry growth of at best 2% and then after this we
forecast the gap to widen further with SSS growth rising to 5% in FY10/22 and
staying at the 3-4% level beyond this whilst the industry reverts to flat to 1%
growth levels. This type of mid-single-digit sustainable SSS growth is also not easy
to find in the world of Japan retail where even low single-digit growth will mean
outperformance versus peers.

Continue expansion in its The runway for store network growth is also very impressive. Store openings
store network should rise slightly YoY in FY10/21 to 49 stores and 12 closures and we see this
level as sustainable until FY10/29. This will take the store network to 1,209 stores
which will provide Kobe Bussan with even greater scale to pursue its unique
strategy. There will be more and smaller supermarket chains in regional Japan that
are happy to become franchisees of Gyomu Super as families struggle to find
suitable candidates to take over its business as owners age and children move to
the cities. President Numata himself has said that a longer-term store target of
1,500 stores would mean another eight years of growth post FY10/29 as well.
Figure 84

Market size of US$164bn in Japan: Supermarket retailing market size

2020 with 8% YoY growth 250 (US$bn) Supermarkets YoY (RHS) (%) 20
rate
15
200
10

150 5

0
100 (5)

(10)
50
(15)

0 (20)
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Source: CLSA, Euromonitor

18 May 2021 [Link]@[Link] 53

 
 
Prepared for: pdesai@[Link]
 Section 4: Our Gen Z consumer portfolio Asia consumer

Key risks
Online grocery pose These would include a faster than expected uptick in online grocery sales coinciding
potential risk with a large improvement in the consumption environment. In this case, there may
be less of a shift towards discounters and private label may not see an acceleration
in growth in sales as we currently expect. Further risks may come from the likes of
Aldi or Lidl opening stores in Japan, which we see as very unlikely at this point
given the complexities of operating in the Japanese market. Their focus up until
now have been on disrupting cozy markets such as Australia and we have not seen
much in the way of expansion into Asia. Elsewhere, as a franchised business there
may be risks arising from declining levels of motivation from employees.

ZOZO (3092 JP - ¥3,470 - BUY) - Oliver Matthew

Fashion leader enters online Zozo has grown within fashion since its establishment, and now its expansion into
cosmetics and luxury luxury and cosmetics should provide further upside to grow. ZOZO has achieved a
market Cagr of 19% from FY3/12 to FY3/20. Although company share looks steady in the
e-commerce apparel market, the shift towards ecommerce in apparel should further
enable its growth.

We expect 15% top line Japan’s ecommerce sales of cosmetics related product is about 14%, which is low
growth and more than 10% compared to 20.8% of Apparel and Footwear. We expect cosmetics sales contribute
Op to GMV about 10bn JPY to its GMV in FY3/22 and 44bn in FY3/25. While ecommerce
market for luxury seems small for now, ZOZO’s image of fashion leader should
position it well when penetrating the new market. We believe the EC shift in Japan
and new growth field in cosmetics and luxury should enable it to achieve 15%
growth towards 2030. And we see OPM (OP/GMV) can reach beyond 10% level in
the longer term.
Figure 85

Japan: Market share of top-10 apparel and footwear ecommerce players

Company Share (%) 2015 2016 2017 2018 2019 2020
1 3rd Party Merchants 33.5 32.6 32.4 31 31.3 32.4
2 Zozo Inc - - - 20.8 21.3 21
3 Amazon Japan Co Ltd 7.7 8.2 8.5 9 9.5 9.9
4 Fast Retailing Co Ltd 3.8 4.4 4.3 5.1 6.2 7.8
5 Japan Consumers Cooperative Union 5.9 6.1 6.1 6.1 5.7 5.6
6 AEON Group 0.6 0.7 0.9 1.2 1.6 2.2
7 Dinos Cecile Co Ltd 3.1 2.8 2.6 2.4 2.2 2.2
8 Senshukai Co Ltd 4 3.5 3.1 2.5 1.7 1.7
9 Seven & I Holdings Co Ltd 1.5 1.8 1.9 1.8 1.6 1.4
10 Japanet Takata Co Ltd 0.6 0.6 1.1 1 1 0.9
Source: CLSA, Euromonitor

India
Hindustan Unilever (HUVR IB - Rs 2,376 - BUY) - Chirag Shah
GSK acquisition provides GSK acquisition provides huge growth headroom; synergy benefits already visible:
room for synergies HUL’s GSK acquisition effective 1 Apr 2020 is well timed bet when company has
seen accelerated adoption of category, given consumer focus on preventive than
curative care (savings in brand spend to educate and push brand). In the eight
months since business takeover HUL has a) strengthened the product efficacy with
added zinc and vitamins, b) it has leveraged opportunity with new SKU across both
Horlicks and Boost offering and c) Boost is now pushed aggressively pan-India vs
earlier focus on south markets. Incrementally company is looking to leverage its
wide direct outlet reach, which will be live by Q4FY20, constrained by IT integration
(difficult to accelerate in the lockdown setting). We see company is placed well to
drive category salience across categories unlike present skew towards, children.
With multiple tailwinds at place, portfolio is likely to sustain double digit growth
over medium term (post supply chain integration) and see margin expansion of
1200—1300bps since deal announcement, benefit of 600-700bps already in place.

54 [Link]@[Link] 18 May 2021

 
 
Prepared for: pdesai@[Link]
 Section 4: Our Gen Z consumer portfolio Asia consumer

Figure 86

Hindustan Unilever’s share in India retailing market

Company Share (%) 2015 2016 2017 2018 2019 2020

Beauty and Personal Care 24.5 23.4 23.0 22.4 22.0 21.4

Home Care 34.6 34.3 35.0 35.5 36.0 35.4

Hot Drinks 19.4 19.4 19.7 20.6 37.0 36.9

Packaged Food 0.7 0.6 0.6 0.6 0.6 0.5

Soft Drinks 0.8 0.7 0.7 0.7 0.6 0.5

Source: CLSA, Euromonitor

Balanced portfolio make it About 83% of portfolio comprising health & hygiene products straddling across
agile to deal with any price points: HUL’s portfolio has high skew towards current wave of health, hygiene
setting and immunity. It also has portfolio across price straddle, which make HUL agile to
deal with any setting. Interestingly company has sustained premiumisation trend
even in pandemic with low unit packs (LUPs). It has recently launched Nature
Protekt brand to address consumer need of home care with organic / natural
ingredients. While some of the hygiene trend like hand sanitiser is likely to fade,
HUL has always been calculative with its approach. Pandemic has also boosted
prospects of its core Soap offering, which has been an area of concern for
Unilever. Company has able to recoup growth in both Lifebuoy and Lux, during
pandemic period. Foods as a portfolio has also seen good acceleration/penetration
from in-home consumption. Unlike in the past, pandemic is likely to accelerate
adoption of packaged offering and shift from unorganised, where HUL is placed
well to benefit. We see this as a long term trend.

Company has been front Ahead of the curve in leveraging technology, digital transformation and new
runner in adoption of digital category endeavour: Company has been front runner in predicting trend, where
transformation adoption of digital much ahead of time has been key differentiator vs other FMCG
companies. HUL has been collating consumer data for long and few years back to
leverage better the consumer data, it has created Winning in Many India project,
under which India is divided into many India and company has gone regional in
terms of meeting consumer needs. Another important project it has embarked is
eB2B (Shikhar app) and eD2C projects (My Kirana app), where it has seen grater
adoption in the pandemic. Unlike peers / other companies in this space, HUL is
focusing on creating eco system, recent endeavour it took is to support channel
partner with financial need with tie up with SBI (where it is leveraging cloud data
collated over the years). The company has recently started direct store supplies in
select markets, which in our view further strengthen its distribution moat.

Our view: Given long-term category and country potential and management actions
to accelerate growth, we are structurally positive on HUL, given a favourable
portfolio mix, better execution, and upside from the acquired nutrition business.
Our Sep’21 TP is Rs2,600 target, based on 57x Sep-22 earnings.

Weak consumer sentiment; Key risks: Weak consumer sentiment (if the economy remain distress, looks unlikely
inflation could be risk given potential and actions in place), sharp increases in commodity prices (inflation
of mid-single digit is positive, anything above high-single digit will have negative
effect), and a pickup in competitive intensity (given the largest player, we do not
see any material threat from MNC, but cannot rule out any pressure from home
grown companies like Patanjali) are key risks to our positive view.

18 May 2021 [Link]@[Link] 55

 
 
Prepared for: pdesai@[Link]
 Section 4: Our Gen Z consumer portfolio Asia consumer

Asian Paints (APNT IS – Rs2,782.75 - Outperform) - Chirag Shah

‘Value focus’ to help aid ‘Value focus’ to help aid market share gains for Asian Paints: In the last three years,
market share gains for Asian paints has strengthened its franchisee in the value end (key offerings: primer,
Asian Paints: under coats and entry point emulsion), which is largely a reflection of a) vouching
demand opportunity in value end (wise strategy amid economic slowdown), b) up
trade consumer from unorganised (c.35% of the category) and c) expanding
penetration in rural markets (in long term can look to up trade consumer). Value-
end offerings though have lower realisations, but are largely at par with company
gross margin (largely 3rd party sourced). We see attempt in the value end is
structural, where company has created base of large pool of customers, where it
sees up trade opportunity in future.

Shifting from product Asian Paints is aggressively investing in ‘services’ capability across segments: Asian
centric to service oriented Paints is making an aggressive shift from a ‘product-centric’ company to a ‘service-
oriented brand’. The company is focusing on enhancing its service capabilities
across segments to providing ‘end-to-end’ solutions to customers and positioning
itself as a comprehensive décor solutions provider. Asian Paints is scaling up its
service capabilities across painting & waterproofing service, Kitchen & bathroom
services, waterproofing, and interior décor segments.

Asian Paints has gradually Looking at wider home décor needs & also looking to scale-up kitchen and bath:
expanded to lightening, Asian Paints has gradually expanded from paint to services and now the lightening,
furnishing and furniture furnishing and furniture segments. Management is looking to address the in-
between wall needs, while paints continues to be its core. The attempt is to provide
a holistic experience to consumers addressing all their decoration needs. The
company is in process of adding large format stores - Asian Paints Homes / Beautify
homes. . Under AP homes, Asian Paints train contractors, enables 3D previews for
consumers and provides execution services. It has 14 shops in operation now.
Management will look to improve its services portfolio (bath fittings, waterproofing
etc.) capabilities and scale-up both the kitchen and bath segment. Overall focus is
to provide one stop solution to consumers. With addition of new revenue stream,
its revenue potential, substantially expanded. Most of the offerings though are
large, but unorganised.

Our View: We continue to see Asian Paints’ initiatives to drive market share gains
through a widening presence in the value segment with expanding distribution
reach, service capabilities and its ability to create new segments aiding its market
share gains. We see its transformation strategy as the right approach to consolidate
its positioning in the home décor space. Asian Paints is our preferred pick in the
discretionary segment given structural opportunity. We have Sep’21 TP of Rs2,285,
based on 60x Sep’22 earnings

Key risks: Muted volume growth (despite efforts, if economy goes into recession,
than it may see volume pressure), inflation in prices of key inputs (sharp inflation
will not bode well with consumer, but low to mid-single digit inflation is positive),
INR depreciation (as raw material are largely imported, rupee depreciation will
prove costly and affect gross margin), and sharp price declines are key risks to our
positive view.

56 [Link]@[Link] 18 May 2021

 
 
Prepared for: pdesai@[Link]
 Section 4: Our Gen Z consumer portfolio Asia consumer

Dabur (DABUR IS - Rs534.35- BUY) - Chirag Shah

Heightened thrust on Till 1998, Dabur was known as healthcare company, which with professionals at the
healthcare and herbal helm from 1998 shifted focus to FMCG verticals, which fructified well with steady
offerings double digit growth momentum. However, after slowdown in topline from FY15
and change in management in FY19, company focus shifted to healthcare segment
scale up and focus on herbal play in FMCG segments. Along with modernizing
Ayurveda products, Dabur is strengthening its portfolio and distribution networks
to help spur expansion. We expect the healthcare segment to lead growth for the
company, with this part of the business contributing 39% of FY23CL revenue (from
32% in FY20).

Numerous growth drivers The new leadership has identified eight strategic pillars to help drive the business
forward, which in a way helping company its core category positioning with steady
market share gains. Key strategic pillars include putting in place a “power brand”
architecture that ensures the best prospects get the right attention, accelerating
the pace of innovation, connecting with millennials, improved cash and cost
management, and a strong focus on technology and environmental, social and
governance (ESG) issues.

Growth potential in The Ayurveda opportunity (a wide, growing market): According to Dabur, the
Ayurveda market overall Ayurvedic market was Rs345bn (US$4.7bn) in CY19 (it saw a Cagr of 18%
over CY15-CY19), with 76% of this represented by Ayurvedic products, implying an
Rs275bn market (US$3.8bn) for Ayurveda offerings. We think Dabur has a presence
in only 44% of the market, and in the categories in which it is present, it has about
a 46% share.

Gain share, drive Strategy - Gain share, drive penetration: Dabur’s strategy can be put into two
penetration are its baskets: Gain share in well-penetrated categories such as hair oil, toothpaste and
strategies shampoo, and drive further penetration in categories where it has high market
share, such as juices, chyawanprash (an Ayurvedic health supplement made up of a
super-concentrated blend of nutrientrich herbs and minerals) and honey.
Figure 87

India: Market share of top-10 consumer health players

Company Share (%) 2015 2016 2017 2018 2019 2020
1 Herbalife Nutrition Ltd - - - 6.7 7.9 8.4
2 GlaxoSmithKline Plc 6.3 6.2 6.1 6 7 7.2
3 Dabur India Ltd 6.3 5.4 5.3 5.4 5.5 5.8
4 Emami Ltd 5.8 5.6 5.7 5.6 5.6 5.5
5 Procter & Gamble Co, The 4.1 4 3.9 4.7 4.6 4.7
6 Amway Corp 4.7 4.4 4.4 4.3 3.9 3.8
7 Johnson & Johnson Inc 3.9 3.7 3.5 3.3 3.1 3
8 Reckitt Benckiser Group Plc (RB) 2.9 2.8 2.8 2.8 2.8 2.8
9 Himalaya Drug Co, The 2.5 2.5 2.5 2.5 2.6 2.7
10 Kraft Heinz Co 4.4 4.2 4 2.4 2.5 2.5
Source: CLSA, Euromonitor

We see Dabur is a long term Our view: We have been positive on Dabur given its differentiated herbal and
strategic play healthcare play in Indian consumer. Post the pandemic with rising healthcare
awareness and people increased inclination towards Ayurveda, we see Dabur is a
clear winner. We see Dabur is a long term strategic play, where company has so far
placed offering in the mass-end and incremental thrust would be to drive
premiumisation, which will aid margin and valuation. We value Dabur at 52x
FY23CL PE, a 30% premium to the five-year average as we expect the stock to
continue to rerate as cost savings get ploughed back into incubating new products
and management realises its vision, giving investors increased confidence in the
longevity of earnings growth beyond FY23.

18 May 2021 [Link]@[Link] 57

 
 
Prepared for: pdesai@[Link]
 Section 4: Our Gen Z consumer portfolio Asia consumer

Key risks: We see risks to our estimates from: A sudden slowdown in India’s rural
market (Dabur’s growth has been highly influenced by the rural market, where it
has strong supply chains); a sudden reversal of preventive healthcare trends;
increased competition in the core business (Dabur in the past has been prone to
multiple competitive challenges, especially for haircare); sharp inflation in core
raw materials; and sustained weakness in international markets (Dabur has a
relatively better margin business in the Middle East which has been struggling
with macro factors).

Jubilant Foodworks (JUBI IN – Rs2816.15 - Outperform) - Chirag Shah

Aggressive expansion Pandemic pave wav to expand landscape: Jubilant Foodworks’ management has been
continues amid Covid at the forefront to widen the canvas with not only aggressive expansion of core
business but also expanding brand and cuisine offerings and geographical reach. In a
delayed Q1FY21, management had cleared its ambition of expanding cuisine
offerings highlighting expected shrinkage in the restaurant industry of 25-30% from
Covid pandemic. Within months of pandemic, it has launched Chef Boss brand, ready
to cook gravy. After successfully positioning its offering in Chinese cuisine under
Hong’s Kitchen (7 stores in north India, though yet to scale up), company has ventured
into most popular Biryani cuisine in India, under new brand Ekdum!. Same month, it
has acquired 10.76% stake of Barbeque-Nation Hospitality Limited, which in a way is
financial investment, but given the dine-in learnings it will get, stands strategic. In
Feb’21, company has expanded its reach beyond Asia pacific region with the
acquisition of 32.81% stake in DP Eurasia, which expanded its wings to countries like
Turkey and Russia. Recently in Mar’21, the company has entered into a master
franchise and development agreement with Restaurant Brands International Inc for
Popeyes Restaurants in India, Bangladesh, Nepal, and Bhutan.

Figure 88

Jubilant Foodwork’s share in India foodservice market

Company Share (%) 2015 2016 2017 2018 2019 2020
Chained Consumer Foodservice 11.9 10.9 10.4 10.2 10.6 11.9
Cafés/Bars 0.4 0.4 0.5 0.4 0.4 0.7
Limited-Service Restaurants 11.2 10.4 10.1 10.2 10.8 11.4
Source: CLSA, Euromonitor

Company is promoting its Leveraging delivery expertise in the core business, where expansion sustain but in
contact-less delivery and compact form: Jubilant Foodworks has been able to leverage the consumer need
safety precautions for safe option. Company has leveraged mass media to promote its contact-less
delivery and safety precautions. This has helped consumers in reverting to out of
home food options. This has helped company driving 18.5% YoY growth in delivery
and 64.3% growth in takeaway in Q3FY21. To leverage the opportunity,
management launched drive-in pickup in November 2020. Management’s
incremental focus is to optimise stores, addressing needs across channels (delivery,
takeaway and dine-in); as such focused openings would be in high streets and
residential areas with stores sized at about 800 sf. In 1HFY21, the company closed
105 stores on similar lines. Reimaging existing stores are to resume as operations
return to normal. For FY21, management plans to open 100 stores. Management
plans to open a slightly bigger store format of around 1,200-1,300 sf in new towns
where higher dine-in demand is expected.

Host of brands and geographies add wings to Jubilant: As discussed above, Jubilant
now has host of brands like Dominos, Popeyes, Dunkin Donuts, Hong’s Kitchen,
Ekdum! And Chef Boss. While key food cuisine it caters are Pizza, Biryani, Burger,
fried kitchen, Chinese, and hot beverages. We believe, management need to be

58 [Link]@[Link] 18 May 2021

 
 
Prepared for: pdesai@[Link]
 Section 4: Our Gen Z consumer portfolio Asia consumer

Host of brands enhance its careful with expansion, where execution will be critical. While Dunkin Donuts
offerings format had limited success, we expect good success in Chinese, Biryani and Fried
kitchen segment, where it has limited pan-India competition. Consumer focus on
hygiene and safety will help Jubilant scale up franchisee faster. While the company
would be exploring expanding reach via restaurants format (which will address,
dine-in, delivery and takeaway), we think it should take cloud kitchen route to reach
wider consumer base. Host of brands and cuisines will help company creating
supper app for delivery and setting up food courts. Important to note, Jubilant has
best delivery execution in the country and most efficient delivery fleet.

Our view: The Company has significantly transformed the perspective of the
company with added revenue stream. As most of the actions are nascent, it’s
difficult to capture in the model. However all the initiative has potential and can be
growth pillar for the company. As such we ascribe 70x PE valuation multiple, to
arrive at Mar’23 TP of Rs3,000. Post 30% run-up in the stock price in last 6 months,
we see new initiatives are in the price (though upside from execution remains), as
such maintain Outperform.

Key risks: We see risks to our estimates from: Sharp inflation in raw material prices,
Its inability to manage new initiative (a similar performance to Dunkin Donuts),
heightened competitive intensity, high consumer adoption of aggregator platform
(provide access to wide user base), weakness in Macro, effect of pandemic on user
base.

Korea
LG H&H (051900 KS - ₩1,518,000 - Outperform) - Oliver Matthew
While listed in Korea, and having significant businesses in beverage as the Coca-
Cola bottler for Korea, and also being the leader in many Household Good markets
in Korea, we see the company is a great proxy play on the growth of luxury China
cosmetics.

WHOO, its largest brand is WHOO, its largest brand is growing in importance, where performance is
growing in importance dominated by China consumer demand, contributed ₩2.6 trillion in sales in 2020
(33% of total sales), and we expect to reach ₩3.3 trillion in 2021 (39% of sales).

WHOO is clearly driving the company’s profit growth; margins are not disclosed,
but we estimate it contributed ₩650bn in OP in 2020, and ₩830bn in 2021CL, or
53% of total OP in 2020 and 62% in 2021CL.

DFS as an important The company has done a tremendous job in leveraging the DFS channel to boost
channel to expand in China its presence in China. This has enabled it to build a stronger position beyond
traditional retail channels than many competitors. We see that the OPM of LG H&H
has increased to reflect a bigger portion of China sales and profits, and we expect
this to continue in the future, though with more shift to ecommerce in China, and
less reliance on DFS channel.

RISKS: We see two main risks, firstly during the next ten years we would expect a
change in CEO and this management transition will be very important as Suk Cha
has been a stellar performer and will be a tough act to follow, still the company
strategy is clear and implementation can continue for the next decade. Second, it is
inevitable there will be a period of rising competition and channel shift for the China
cosmetics business, and the company will need to manage this with great skill to
continue to achieve margin appreciation.

18 May 2021 [Link]@[Link] 59

 
 
Prepared for: pdesai@[Link]
 Section 4: Our Gen Z consumer portfolio Asia consumer

Studio Dragon (253450 KS - ₩95,800 - BUY) - Christopher Kim

Over 100 IPs to tap into Greater addressable market and demand: The Netflix-driven dynamics of the global
large addressable market OTT market is, rather quickly, reshaping and Korea has become a key battleground
for these OTT players to secure content that is able to play multiple markets while
offering a great bang for the buck. Netflix announced its plan to double-down in
2021 in content spend while others, namely Disney+, have challenged the throne
of Netflix as they’ve declared their launches in Korea. Chinese players, such as iQIYI
and Tencent Video, have begun to show greater interest in Korean content lately,
as they seek breakthroughs in Southeast Asia, not to mention recent signs of
optimism for removal of restrictions on Korean content in China that would open
up a whole new opportunity for Studio Dragon who has over 100 IPs in its library
of content to sell in China.

Strong demand for Korean Largest capacity to capitalise on rising demand for content: With the largest
contents production capacity, Studio Dragon is best positioned to capitalise on rising demand
for Korean content explained above, including demand in China upon the end of
Chinese government’s restrictions on Korean content in the mainland. The company
has clear competitive advantages in key areas of the business, such as captive
distribution channels, largest content creator network and capital to finance large-
scale productions. Such qualities enable the company to continually expand its IPs
and meet rising demand, while lack of such qualities makes it difficult for smaller
peers to retain IP and expand capacity. OTT players will need to secure content to
retain their users and we expect Studio Dragon to be a major long-term beneficiary.

ASP increase and margin Visible margin expansion on the back of greater bargaining power: Rising demand
expansion in the long-term and a clear market-leading position ultimately equals greater bargaining power for
Studio Dragon. The company experienced ASP growth of 29% in 2020, primarily on
demand from Netflix alone. Now with more OTT players expanding globally and
thus interested in Korean content that have proven the worth to global audiences,
Studio Dragon will enjoy greater leverage over the OTT players down the line. This,
therefore, supports a positive ASP as well as margin trajectory in the long-term, as
the OTT market dynamics shifts from platform-driven to more content-driven,
similar to what we’ve seen in the US that led to severe competition to secure
content and, as a result, high content costs for the OTT players.

Key risks: OTT players have been ramping up production of original content, IP
ownership of which is retained by OTT players, and reduce licensing IPs from
production studios. Some investors are concerned that Studio Dragon may end up
being more of a ‘subcontractor’ for Netflix and OTT players, as the company’s ability
to accumulate its own IPs and its long tail IP distribution model would be
significantly undermined.

Indonesia
Mayora Indah (MYOR IJ - Rp2,510 - Not Covered)
Mid-single-digit level Cagr From industry perspective, confectionery and coffee should grow more or less in
expected in the next 10Y line with GDP growth hence at around mid-single-digit level Cagr in the next 10-
[Link] has proven its ability to sustain and gain market share in its competitive
category, on top of successful penetration into outside Indo (half of business is now
for export market)

60 [Link]@[Link] 18 May 2021

 
 
Prepared for: pdesai@[Link]
 Section 4: Our Gen Z consumer portfolio Asia consumer

Figure 89

Indonesia: Market share of top-10 hot drinks makers

Company Share (%) 2015 2016 2017 2018 2019 2020
1 Kapal Api Group 28 29.4 29.3 29 28.9 28.9
2 Nestlé SA 10.9 10.6 10.7 11.1 11.1 11.1
3 Mayora Indah Tbk PT 9.2 9.7 10 10.5 10.5 10.5
4 Java Prima Abadi PT 9.6 9.6 9.9 9.9 10 10
5 Sari Incofood Corp PT 5 4.9 4.6 4.3 4.2 4.1
6 Unilever Group 4.1 3.8 3.8 3.8 3.8 3.8
7 Sinar Sosro PT 3.5 3.3 3.1 2.9 2.9 2.9
8 Royal FrieslandCampina NV 2.2 2.3 2.4 2.5 2.6 2.6
9 Wings Corp 2.6 2.6 2.6 2.5 2.5 2.5
10 Kalbe Farma Tbk PT 2.3 2.2 2.4 2.5 2.5 2.5
Source: CLSA, Euromonitor

Key risk include: new strong local player entrance into their existing competitive
category which might potentially create price war

Unicharm Indonesia (UCID IJ - Rp1,650 - Not Covered)

Well positioned in baby We see that the company has a very strong position in Baby Diapers, and can use
diaper market this to expand its presence further in ecommerce channels, and in Feminine Care
as well as Health Care products over time. As of 2020, amongst the staple
companies in Indonesia, UCID has the highest online contribution of 11% to sales
in (vs 8% in 2019), whilst others still hover around <5% to sales. The company
should be able to sustain its ecommerce market share given more standardized and
less fragmented nature of Baby Diapers, Feminine Care and Health Care.

Cheaper brands benefited During the pandemic, Unicharm saw a down-trading shift towards its cheaper
from down-trading in Covid brands for Baby Diapers and Health Care, namely Fitti and Certainty, which saw a
3356% YoY and 2500% YoY growth in 2020. The company also released new
products such as Unicharm 3D mask, MamyPoko antiseptic variant and wet wipes
directly imported from Japan, following growing demand for more hygiene
products.

Adult diapers will drive Going forward, Health Care (adult diapers) would be the next growth driver, as the
future growth company believes that Health Care market is still underpenetrated due to pricing
issue. Further education and cooperation with hospitals will be required to push
these categories. Unicharm also plans to improve its product mix by launching new
SKU for its high premium category to increase ASP by 3-4% and improve GPM.
Unicharm guides sales growth this year will be driven by its Health Care products
(Lifree) with sales growth of 25% YoY, Feminine Care (c.10% YoY) and Baby Diapers
(c.10% YoY).

The company also saw a positive catalyst from the growth of minimarket during the
lockdown, as people tend to shop at nearby minimarts from the mobility
restrictions. Currently, minimarket contributes 35% to sales (vs. GT 45% and others
20%) and Unicharm has been allocating more promotional efforts into the channel.

18 May 2021 [Link]@[Link] 61

 
 
Prepared for: pdesai@[Link]
 Section 4: Our Gen Z consumer portfolio Asia consumer

Singapore
Thai Beverage (THBEV SP - S$0.70 - Outperform) - Horng Han Low
We like the company for its exposure to Vietnam and Thailand and strong brand
portfolio across the region.

Expand its four business ThaiBev operates through four segments: spirits, beer, non-alcohol beverages and
with footprint across Asia food. Its portfolio includes brands Chang beer, Sangsom rum and Oishi green tea.
It also owns a 28% stake in Fraser and Neave, which is involved in the beverage and
property markets, and a 28% stake in Frasers Centrepoint, a Singapore-based real
estate developer. ThaiBev also owns 53.6% stake in Sabeco, Vietnam's leading beer
company.

Leading spirits player in ThaiBev leads Thailand's spirits market with a more than 80% share. Thailand's beer
Thailand market is highly concentrated, with most of the business split between two major
players: ThaiBev and Boon Rawd. This is a core cash cow which gives the company
the resources to expand its business in other markets.

Figure 90

Our 2030 Gen Z portfolio

Company Stock code Market Price PE EV/Ebitda Div yld EPS growth
cap (lccy) (x) (x) (%) (%)
(US$m)
21CL 22CL 21CL 22CL 21CL 22CL 21CL 22CL
Covered
AllHome HOME PM 542 7.0 18.1 12.6 10.1 7.6 1.1 1.7 46.6 43.7
Asian Paints APNT IS 36,420 2,782.8 85.0 80.8 54.1 52.4 0.6 0.6 20.3 5.3
China Feihe 6186 HK 25,474 22.1 22.6 18.4 14.5 11.5 1.6 2.3 (0.4) 23.0
CP All CPALL TB 16,328 57.0 43.2 20.4 13.1 9.1 1.2 2.4 (26.5) 111.5
Dabur DABUR IS 12,902 534.4 47.8 42.6 37.8 33.1 0.7 0.8 13.1 12.3
Domino's DMP AU 7,117 106.5 40.9 34.9 21.1 18.2 1.7 2.0 17.9 17.1
Fast Retailing 9983 JP 84,333 86,090 45.5 41.5 16.7 15.1 0.6 0.7 14.5 9.7
Flight Centre FLT AU 2,336 15.3 50.3 14.7 9.0 4.7 1.3 4.5 - 241.5
Hindustan Unilever HUVR IB 76,171 2,376 57.5 49.2 42.9 36.7 1.6 1.8 20.2 17.0
Jollibee JFC PM 3,897 167.2 36.7 25.2 7.5 5.3 0.9 1.3 - 45.7
Jubilant Food JUBI IN 5,065 2,816.2 191.6 79.4 51.6 33.0 0.1 0.4 (39.4) 141.4
Kobe Bussan 3038 JP 7,187 2,843 33.1 28.8 18.1 15.9 0.9 1.0 23.2 15.0
LG H&H 051900 KS 21,101 1,518,000 28.0 24.2 15.4 13.2 0.9 1.0 14.0 15.6
Li Ning 2331 HK 20,644 68.1 53.6 40.6 35.4 25.7 0.7 1.0 55.2 32.6
Luzhou Laojiao 000568 CH 56,390 257.8 49.9 39.5 35.7 28.3 1.3 1.8 25.7 26.3
Shiseido 4911 JP 27,441 7,697 114.9 37.5 26.3 15.0 0.6 0.8 - 206.5
Smoore Intl 6969 HK 39,474 55.6 49.4 36.5 40.2 29.3 1.0 1.4 109.8 35.7
Studio Dragon 253450 KS 2,551 95,800 43.8 32.8 13.9 12.5 - - 107.9 33.5
ThaiBev THBEV SP 12,632 0.7 16.6 14.6 13.0 11.5 3.0 3.4 12.7 7.4
Unicharm 8113 JP 24,279 4,265 28.4 25.1 13.0 11.6 1.0 1.2 72.1 13.2
Zozo 3092 JP 10,118 3,470 30.4 27.0 19.0 16.4 1.6 1.8 12.7 12.6
Not Covered
Mayora Indah¹ MYOR IJ 3,929 2,510.0 23.5 20.3 13.6 12.1 1.4 1.6 15.9 15.9
Unicharm Indonesia¹ UCID IJ 450 1,650.0 14.0 10.5 5.5 4.7 1.8 2.4 48.1 32.4
¹ Estimate data from FactSet. Source: CLSA, Bloomberg, FactSet

62 [Link]@[Link] 18 May 2021

 
 
Prepared for: pdesai@[Link]
 Section 4: Our Gen Z consumer portfolio Asia consumer

Figure 91
Consumer players: Peer valuations
Company Rating Stock code Market cap PE (x) EV/Ebitda (x) EPS growth (%) ROE (%)
(US$) 2021 2022 2021 2022 2021 2022 2021 2022
AllHome BUY HOME PM 0.54 18.1 12.6 10.1 7.6 46.6 43.7 10.4 13.6
China Feihe BUY 6186 HK 25.47 22.6 18.4 14.5 11.5 (0.4) 23.0 37.4 36.7
CP All BUY CPALL TB 16.33 43.2 20.4 13.1 9.1 (26.5) 111.5 15.0 27.8
Dabur BUY DABUR IS 12.90 47.8 42.6 37.8 33.1 13.1 12.3 23.9 23.3
Domino's BUY DMP AU 7.12 40.9 34.9 21.1 18.2 17.9 17.1 48.8 48.7
Flight Centre BUY FLT AU 2.34 50.3 14.7 9.0 4.7 - 241.5 6.2 19.3
H&H BUY 1112 HK 2.32 10.5 8.8 7.5 6.3 27.7 20.0 22.6 24.9
Hengan BUY 1044 HK 7.66 11.2 10.6 8.6 7.9 (1.8) 5.9 22.4 22.0
Hindustan Unilever BUY HUVR IB 76.17 57.5 49.2 42.9 36.7 20.2 17.0 19.9 22.3
ITC BUY ITC IB 35.70 16.5 15.0 11.6 10.5 18.8 10.5 23.2 23.9
Kobe Bussan BUY 3038 JP 7.19 33.1 28.8 18.1 15.9 23.2 15.0 31.4 33.8
Kose BUY 4922 JP 8.76 34.9 22.0 16.0 10.8 116.4 58.8 11.2 16.3
Max's BUY MAXS PM 0.13 40.4 12.8 6.7 5.8 - 216.5 2.4 7.1
Pan Pacific International BUY 7532 JP 12.78 20.2 18.4 10.6 9.4 15.9 10.0 15.2 14.8
Seven & I BUY 3382 JP 40.07 19.1 15.2 6.6 5.2 23.9 25.5 8.3 10.2
Shakey's Pizza BUY PIZZA PM 0.25 24.6 14.8 10.9 8.1 - 66.3 10.4 15.5
Shenzhou BUY 2313 HK 33.85 32.9 28.3 26.8 23.1 28.6 16.8 22.4 23.0
Shiseido BUY 4911 JP 27.44 114.9 37.5 26.3 15.0 - 206.5 5.5 15.7
Smoore Intl BUY 6969 HK 39.47 49.4 36.5 40.2 29.3 109.8 35.7 39.8 43.7
Studio Dragon BUY 253450 KS 2.55 43.8 32.8 13.9 12.5 107.9 33.5 9.6 11.6
Unicharm BUY 8113 JP 24.28 28.4 25.1 13.0 11.6 72.1 13.2 17.2 17.1
Wilcon BUY WLCON PM 1.49 34.0 25.6 14.8 11.8 47.3 32.9 13.2 15.8
Yili BUY 600887 CH 37.11 26.5 22.2 18.9 15.8 28.1 19.1 28.7 31.2
Zozo BUY 3092 JP 10.12 30.4 27.0 19.0 16.4 12.7 12.6 51.5 41.8
Asian Paints O-PF APNT IS 36.42 80.8 66.0 52.4 44.2 5.3 22.4 24.6 26.8
Asics O-PF 7936 JP 3.78 56.7 35.0 15.1 11.5 - 61.9 6.1 9.5
Fast Retailing O-PF 9983 JP 84.33 52.1 45.5 18.7 16.7 86.9 14.5 16.5 16.8
Godrej Consumer O-PF GCPL IB 11.74 47.6 40.1 35.2 30.1 2.3 18.9 18.2 19.5
HomePro O-PF HMPRO TB 5.62 28.9 24.2 16.8 14.4 18.1 19.6 26.9 29.0
Jubilant Food O-PF JUBI IN 5.07 79.4 65.9 33.0 28.0 141.4 20.5 33.3 31.1
Kweichow Moutai O-PF 600519 CH 392.25 47.5 41.1 30.8 26.4 16.5 15.7 31.2 31.2
LG H&H O-PF 051900 KS 21.10 28.0 24.2 15.4 13.2 14.0 15.6 17.8 17.8
Li Ning O-PF 2331 HK 20.64 53.6 40.6 35.4 25.7 55.2 32.6 27.4 29.4
Luzhou Laojiao O-PF 000568 CH 56.39 49.9 39.5 35.7 28.3 25.7 26.3 31.0 35.2
Nestle India O-PF NEST IB 22.41 67.5 56.3 42.8 36.4 16.9 19.8 113.1 120.7
President Chain Store O-PF 2912 TT 10.10 26.7 24.5 11.5 10.5 1.5 8.8 27.5 28.6
Rakuten O-PF 4755 JP 18.79 - - 50.1 (46.4) - - (28.2) (12.2)
ThaiBev O-PF THBEV SP 12.63 16.6 14.6 13.0 11.5 12.7 7.4 17.2 16.9
iQIYI U-PF IQ US 10.13 - - 13.2 8.5 - - (66.9) (59.3)
Jollibee U-PF JFC PM 3.90 36.7 25.2 7.5 5.3 - 45.7 12.4 16.4
Yanghe U-PF 002304 CH 43.48 37.6 32.2 25.9 22.2 0.4 16.8 18.8 20.4
Amorepacific SELL 090430 KS 15.14 53.2 47.9 24.4 22.3 979.3 11.0 8.2 8.5
Corporate Travel SELL CTD AU 1.83 64.1 29.3 23.3 13.9 - 119.1 4.6 9.6
Webjet SELL WEB AU 1.37 - 55.4 70.7 21.4 - - (2.6) 5.6
Not Covered
Mayora Indah MYOR IJ 3.93 23.5 20.3 13.6 12.1 15.9 15.9 18.8 18.8
Abbott ABT US 207.87 23.2 21.6 17.9 17.0 101.4 7.5 22.0 21.6
Yaoko 8279 JP 2.48 17.8 16.4 9.4 8.9 1.0 8.9 11.4 11.2
Unilever Indonesia UNVR IJ 15.7 14.96 29.3 27.2 20.4 19.6 1.8 7.6 141.3
Indofood CPB ICBP IJ 6.74 14.3 12.7 11.0 10.1 1.9 12.7 20.1 20.0
Estee Lauder EL US 68.57 41.4 35.6 26.1 23.3 15.8 16.1 39.9 40.3
Flex FLEX US 8.79 10.4 9.6 6.8 6.2 40.3 8.6 22.4 21.5
Philip Morris PM US 152.44 16.1 14.6 12.5 11.6 17.5 10.4 - -
Beijing Enlight Media 300251 CH 5.9 5.58 36.9 31.8 34.6 30.0 234.6 16.3 9.7
P&G PG US 337.98 23.1 21.6 18.4 17.6 5.9 7.2 32.1 35.6
Kansai Nerolac KNPL IN 4.10 47.3 38.1 - - 19.9 24.2 14.2 16.0
INDITEX ITX SM 122.30 31.3 27.1 14.2 13.0 191.1 15.4 20.7 22.7
H&M HMB SS 37.13 34.6 24.0 10.8 9.2 715.8 44.2 16.5 22.1
Shanghai Jahwa 600315 CH 5.95 71.7 48.6 47.0 34.8 23.0 47.5 7.7 10.4
L'Oreal OR FP 242.04 43.1 39.4 25.8 23.9 29.4 9.5 15.1 15.5
Nike NKE US 173.28 34.1 29.0 31.2 26.0 27.0 17.5 29.0 21.8
Adidas ADS GR 72.24 39.0 29.9 18.7 15.5 244.1 30.5 20.7 24.1
Diageo DGE LN 111.03 26.2 23.8 22.0 20.1 11.4 10.2 36.0 37.7
United Spirits UNSP IN 5.62 90.3 41.8 - - (32.5) 115.9 11.0 19.2
Lotte Chilsung 005300 KS 1.31 20.9 18.5 9.4 9.1 - 12.9 5.6 6.1
Mr DIY Group MRDIY MK 5.83 45.9 36.9 25.5 20.9 55.7 24.6 44.6 42.4
Source: CLSA, Bloomberg, FactSet

18 May 2021 [Link]@[Link] 63

 
 
Prepared for: pdesai@[Link]
 Important disclosures Asia consumer

Companies mentioned
Abbott Labs (N-R) Facebook (N-R)
3rd Party Merchants (N-R) Fancl (N-R)
Adidas (N-R) Fast Retailing (9983 JP - ¥92,790 - O-PF)¹
Aeon (8267 JP - ¥3,025 - SELL)¹ FCT (FCT SP - S$2.41 - O-PF)¹
Airbnb (N-R) Flex (N-R)
Aldi (N-R) Flextronics (N-R)
Alibaba (BABA US - US$226.78 - BUY)¹ Flight Centre (FLT AU - A$14.46 - BUY)¹
AllHome (HOME PM - P7.70 - BUY)¹ Fraser & Neave (N-R)
Amazon (N-R) Fraser and Neave (N-R)
Amazon Japan (N-R) Frasers Centrepoint (N-R)
Amex (N-R) Godrej Consumer (GCPL IB - RS709.8 - O-PF)¹
Amorepacific (090430 KS - ₩276,500 - SELL)¹ GSK (N-R)
Amway (N-R) H&H (1112 HK - HK$28.00 - BUY)¹
Anta Sports (2020 HK - HK$145.00 - BUY)¹ H&M (N-R)
Aoyama Trading (N-R) Hakujuji Co Ltd (N-R)
Asia Pulp & Paper Co Ltd (N-R) Helloworld (N-R)
Asian Paints (APNT IS - RS2,549.1 - O-PF)¹ Hengan (1044 HK - HK$50.25 - BUY)¹
Asics (7936 JP - ¥1,761 - O-PF)¹ Herbalife Nutrition Ltd (N-R)
Barbeque-Nation Hospitality Limited (N-R) Himalaya Drug Co, The (N-R)
BCD Holdings NV (N-R) Hindustan Unilever (HUVR IB - RS2,389.1 - BUY)¹
Beijing Enlight Media (N-R) HLA (N-R)
Bestseller A/S (N-R) HomePro (HMPRO TB - BT14.0 - O-PF)¹
Booking Holdings Inc (N-R) Hong ’s Kitchen (N-R)
Boon Rawd (N-R) IKEA (N-R)
Bosideng (N-R) Inditex (N-R)
Bosideng International Holdings Co Ltd (N-R) Indofood (N-R)
Carlson Wagonlit Travel Inc (N-R) Indofood CBP (N-R)
Certainty (N-R) Inspire Brands Inc (N-R)
CFA Properties Inc (N-R) iQIYI (IQ US - US$14.21 - U-PF)¹
China Feihe (6186 HK - HK$21.80 - BUY)¹ ITC (ITC IB - RS202.8 - BUY)¹
Colgate (N-R) Jahwa (N-R)
Cook Innoventure (N-R) Jala (Group) Co Ltd (N-R)
Corporate Travel (CTD AU - A$16.80 - SELL)¹ Japan Consumers Cooperative Union (N-R)
CP All (CPALL TB - BT61.2 - BUY)¹ Japanet Takata Co Ltd (N-R)
Ctrip (N-R) Java Prima Abadi PT (N-R)
Dabur (DABUR IS - RS545.2 - BUY)¹ Johnson & Johnson (N-R)
Daio Paper (N-R) Jollibee (JFC PM - P176.00 - U-PF)¹
Dayou Auto (N-R) JTB Corp (N-R)
DHC Corp (N-R) Jubilant Food (JUBI IN - RS2,824.7 - O-PF)¹
Diageo (N-R) Kalbe Farma Tbk PT (N-R)
Diethelm Keller Group (N-R) Kansai Nerolac (KNPL IN - RS557.0 - SELL)¹¹¹
Dinos Cecile Co Ltd (N-R) Kao (4452 JP - ¥6,946 - BUY)¹
Doctor's Associates Inc (N-R) Kapal Api Group (N-R)
Domino's (DMP AU - A$106.41 - BUY)¹ Kimberly-Clark (N-R)
DP Eurasia (N-R) Kobe Bussan (3038 JP - ¥2,907 - BUY)¹
Dr Pepper Snapple (N-R) Kose (4922 JP - ¥15,980 - BUY)¹
Dunkin' Brands (N-R) Kraft Heinz (N-R)
Ekdum! (N-R) Kweichow Moutai (600519 CH - RMB1,959.00 - O-PF)¹
eLong (N-R) LG H&H (051900 KS - ₩1,581,000 - O-PF)¹
Emami (HMN IS - RS485.4 - O-PF)¹ Li Ning (2331 HK - HK$69.70 - O-PF)¹
Estee Lauder (N-R) Lidl (N-R)
Expedia (N-R) Lifebuoy (N-R)

64 [Link]@[Link] 18 May 2021

 
 
Prepared for: pdesai@[Link]
 Important disclosures Asia consumer

Lion (4912 JP - ¥2,049 - O-PF)¹ Shanghai Pehchaolin Daily Chemical Co Ltd (N-R)
Livedo Corp (N-R) Shenzhou (2313 HK - HK$180.10 - BUY)¹
L'Oreal (N-R) Shimamura (N-R)
Lotte Chilsung (N-R) Shiseido (4911 JP - ¥7,925 - BUY)¹
Luzhou Laojiao (000568 CH - RMB239.88 - O-PF)¹ Sinar Sosro PT (N-R)
LVMH (N-R) Smoore Intl (6969 HK - HK$52.80 - BUY)¹
Makro (MAKRO TB - BT36.8 - BUY)¹ Softbank Group (9984 JP - ¥10,040 - BUY)¹
Max's (MAXS PM - P5.92 - BUY)¹ Starbucks (N-R)
Mayora Indah (N-R) Studio Dragon (253450 KS - ₩103,200 - BUY)¹
McDonald (N-R) Super Retail (SUL AU - A$12.01 - BUY)¹
McDonald's (N-R) TAL Edu (TAL US - US$54.19 - BUY)¹
Mizuno (8022 JP - ¥2,230 - U-PF)¹ Tata Group (N-R)
MR D.I.Y. (MRDIY MK - RM3.87 - BUY)¹ Tencent (700 HK - HK$610.50 - BUY)¹
Nestle India (NEST IB - RS16,727.0 - O-PF)¹ Tesco Lotus (N-R)
Netflix (N-R) ThaiBev (THBEV SP - S$0.71 - O-PF)¹
New Oriental Edu (EDU US - US$14.50 - O-PF)¹ Titan (TTAN IB - RS1,467.8 - SELL)¹
Nike (N-R) Tongcheng-Elong (780 HK - HK$18.00 - O-PF)¹
Ningbo Peacebird Group Co Ltd (N-R) Travellers Choice Ltd (N-R)
Oji Paper (N-R) [Link] (TCOM US - US$38.92 - BUY)¹
Onward Kashiyama (N-R) TSI Holdings Co Ltd (N-R)
P&G (N-R) TUI Group (N-R)
Pan Pacific International (7532 JP - ¥2,345 - BUY)¹ Twitter (N-R)
Patanjali (N-R) Unicharm (8113 JP - ¥4,256 - BUY)¹
Peak Sport (N-R) Unicharm Indonesia (N-R)
Philip Morris Intl (N-R) Unilever (N-R)
Pigeon (N-R) Unilever Indo (N-R)
Pola Orbis (4927 JP - ¥2,795 - BUY)¹ United Spirits (UNSP IB - RS543.6 - O-PF)¹
Popeyes (N-R) Vista Land (VLL PM - P3.41 - SELL)¹
President Chain Store (2912 TT - NT$268.5 - O-PF)² Wacoal Holdings Corp (N-R)
Qiaodan (N-R) Walt Disney (N-R)
Rakuten (4755 JP - ¥1,332 - O-PF)¹ Webjet (WEB AU - A$4.45 - SELL)¹
RBI (N-R) Webjet Ltd (N-R)
Reckitt Benckiser (N-R) Wilcon (WLCON PM - P18.36 - BUY)¹
Rohto Pharma (N-R) Wings Corp (N-R)
Royal FrieslandCampina NV (N-R) World Co Ltd (N-R)
Sabeco (N-R) Wuliangye Yibin (000858 CH - RMB276.44 - O-PF)¹
Sangsom (N-R) Yanghe (002304 CH - RMB183.30 - U-PF)¹
Sari Incofood Corp PT (N-R) Yaoko (N-R)
Sea Limited (SE US - US$244.90 - BUY)¹ Yili (600887 CH - RMB39.65 - BUY)¹
Semir Group (N-R) Yum! Brands (N-R)
SENSHUKAI (N-R) Zee Entertainment (Z IB - RS182.2 - BUY)¹
Seven & I (3382 JP - ¥4,772 - BUY)¹ Zozo (3092 JP - ¥3,580 - BUY)¹
Shakey's Pizza (PIZZA PM - P7.46 - BUY)¹

¹ Covered by CLSA; ² Covered by CLST

Analyst certification
The analyst(s) of this report hereby certify that the views expressed in this research report accurately reflect my/our
own personal views about the securities and/or the issuers and that no part of my/our compensation was, is, or will
be directly or indirectly related to the specific recommendation or views contained in this research report.

18 May 2021 [Link]@[Link] 65

 
 
Prepared for: pdesai@[Link]
 Important disclosures Asia consumer

Important disclosures
The policy of CLSA, CLSA Americas, LLC ("CLSA Americas") and CL distribution: BUY / Outperform - CLST: 91.18%, Underperform / SELL
Securities Taiwan Co., Ltd. (“CLST”) is to only publish research that is - CLST: 8.82%, Restricted - CLST: 0.00%. Data as of 31 Mar 2021.
impartial, independent, clear, fair, and not misleading. Regulations or Investment banking clients as a % of rating category: BUY / Outperform
market practice of some jurisdictions/markets prescribe certain - CLST: 0.00%, Underperform / SELL - CLST: 0.00%, Restricted - CLST:
disclosures to be made for certain actual, potential or perceived 0.00%. Data for 12-month period ending 31 Mar 2021.
conflicts of interests relating to a research report as below. This There are no numbers for Hold/Neutral as CLSA/CLST do not have
research disclosure should be read in conjunction with the research such investment rankings. For a history of the recommendation, price
disclaimer as set out at [Link]/[Link] and the targets and disclosure information for companies mentioned in this
applicable regulation of the concerned market where the analyst is report please write to: CLSA Group Compliance, 18/F, One Pacific
stationed and hence subject to. Investors are strongly encouraged to Place, 88 Queensway, Hong Kong and/or; (c) CLST Compliance (27/F,
review this disclaimer before investing. 95, Section 2 Dun Hua South Road, Taipei 10682, Taiwan, telephone
Neither analysts nor their household members/associates/may (886) 2 2326 8188). EVA® is a registered trademark of Stern, Stewart
have a financial interest in, or be an officer, director or advisory board & Co. "CL" in charts and tables stands for CLSA estimates, “CT” stands
member of companies covered by the analyst unless disclosed herein. for CLST estimates, "CRR" stands for CRR Research estimates and “CS”
In circumstances where an analyst has a pre-existing holding in any for Citic Securities estimates unless otherwise noted in the source.
securities under coverage, those holdings are grandfathered and the Charts and tables sourced to CLSA in this report may include data
analyst is prohibited from trading such securities. extracted from CLSA’s automated databases, which derive their
Unless specified otherwise, CLSA/CLSA Americas/CLST or its original data from a range of sources. These can include: companies;
respective affiliates, did not receive investment banking/non- analyst estimates/calculations; local exchanges and/or third-party
investment banking income from, and did not manage/co-manage a data or market pricing providers such as Bloomberg, FactSet or IBES.
public offering for, the listed company during the past 12 months, and Additional information on data sources for specific charts or tables
it does not expect to receive investment banking compensation from can be obtained by contacting the publishing analysts.
the listed company within the coming three months. Unless This publication/communication is subject to and incorporates
mentioned otherwise, CLSA/CLSA Americas/CLST does not own 1% the terms and conditions of use set out on the [Link] website
or more of any class of securities of the subject company, and does ([Link] Neither the
not make a market, in the securities. (For full disclosure of interest for publication/communication nor any portion hereof may be reprinted,
all companies mention on this report, please refer to sold, resold, copied, reproduced, distributed, redistributed, published,
[Link] for details.) republished, displayed, posted or transmitted in any form or media or
The analysts included herein hereby confirm that they have not by any means without the written consent of CLSA, CLSA Americas
been placed under any undue influence, intervention or pressure by and/or CLST. CLSA, CLSA Americas and/or CLST has/have produced
any person/s in compiling this research report. In addition, the this publication/communication for private circulation to
analysts attest that they were not in possession of any material, non- professional, institutional and/or wholesale clients only, and may not
public information regarding the subject company at the time of be distributed to retail investors. The information, opinions and
publication of the report. Save from the disclosure below (if any), the estimates herein are not directed at, or intended for distribution to or
analyst(s) is/are not aware of any material conflict of interest. use by, any person or entity in any jurisdiction where doing so would
As analyst(s) of this report, I/we hereby certify that the views be contrary to law or regulation or which would subject CLSA, CLSA
expressed in this research report accurately reflect my/our own Americas, and/or CLST to any additional registration or licensing
personal views about the securities and/or the issuers and that no requirement within such jurisdiction. The information and statistical
part of my/our compensation was, is, or will be directly or indirectly data herein have been obtained from sources we believe to be
related to the specific recommendation or views contained in this reliable. Such information has not been independently verified and we
report or to any investment banking relationship with the subject make no representation or warranty as to its accuracy, completeness
company covered in this report (for the past one year) or otherwise or correctness. Any opinions or estimates herein reflect the judgment
any other relationship with such company which leads to receipt of of CLSA, CLSA Americas, and/or CLST at the date of this
fees from the company except in ordinary course of business of the publication/communication and are subject to change at any time
company. The analyst/s also state/s and confirm/s that he/she/they without notice. Where any part of the information, opinions or
has/have not been placed under any undue influence, intervention or estimates contained herein reflects the views and opinions of a sales
pressure by any person/s in compiling this research report. In person or a non-analyst, such views and opinions may not correspond
addition, the analysts included herein attest that they were not in to the published view of CLSA, CLSA Americas, and/or CLST. Any
possession of any material, nonpublic information regarding the price target given in the report may be projected from one or more
subject company at the time of publication of the report. The analysts valuation models and hence any price target may be subject to the
further confirm that none of the information used in this report was inherent risk of the selected model as well as other external risk
received from CLSA's Corporate Finance department or CLSA's Sales factors. Where the publication does not contain ratings, the material
and Trading business. Save from the disclosure below (if any), the should not be construed as research but is offered as factual
analyst(s) is/are not aware of any material conflict of interest. commentary. It is not intended to, nor should it be used to form an
Key to CLSA/CLSA Americas/CLST investment rankings: BUY: investment opinion about the non-rated companies.
Total stock return (including dividends) expected to exceed 20%; O- This publication/communication is for information purposes only
PF: Total expected return below 20% but exceeding market return; U- and it does not constitute or contain, and should not be considered as
PF: Total expected return positive but below market return; SELL: an offer or invitation to sell, or any solicitation or invitation of any
Total return expected to be negative. For relative performance, we offer to subscribe for or purchase any securities in any jurisdiction
benchmark the 12-month total forecast return (including dividends) and recipient of this publication/communication must make its own
for the stock against the 12-month forecast return (including independent decisions regarding any securities or financial
dividends) for the market on which the stock trades. instruments mentioned herein. This is not intended to provide
"High Conviction" Ideas are not necessarily stocks with the most professional, investment or any other type of advice or
upside/downside, but those where the Research Head/Strategist recommendation and does not take into account the particular
believes there is the highest likelihood of positive/negative returns. investment objectives, financial situation or needs of individual
The list for each market is monitored weekly. recipients. Before acting on any information in this
Overall rating distribution for CLSA (exclude CLST) only Universe: publication/communication, you should consider whether it is
Overall rating distribution: BUY / Outperform - CLSA: 75.04%, suitable for your particular circumstances and, if appropriate, seek
Underperform / SELL - CLSA: 24.96%, Restricted - CLSA: 0.60%; Data professional advice, including tax advice. Investments involve risks,
as of 31 Mar 2021. Investment banking clients as a % of rating and investors should exercise prudence and their own judgment in
category: BUY / Outperform - CLSA: 11.40%, Underperform / SELL - making their investment decisions. The value of any investment or
CLSA: 2.16%; Restricted - CLSA: 0.60%. Data for 12-month period income my go down as well as up, and investors may not get back the
ending 31 Mar 2021. full (or any) amount invested. Past performance is not necessarily a
Overall rating distribution for CLST only Universe: Overall rating guide to future performance. CLSA, CLSA Americas, and/or CLST

66 [Link]@[Link] 18 May 2021

 
 
Prepared for: pdesai@[Link]
 Important disclosures Asia consumer

do/does not accept any responsibility and cannot be held liable for distributed by CAPL in Australia to "wholesale clients" only. This
any person’s use of or reliance on the information and opinions material does not take into account the specific investment
contained herein. To the extent permitted by applicable securities objectives, financial situation or particular needs of the recipient. The
laws and regulations, CLSA, CLSA Americas, and/or CLST accept(s) no recipient of this material must not distribute it to any third party
liability whatsoever for any direct or consequential loss arising from without the prior written consent of CAPL. For the purposes of this
the use of this publication/communication or its contents. paragraph the term "wholesale client" has the meaning given in
To maintain the independence and integrity of our research, our section 761G of the Corporations Act 2001. CAPL’s research
Corporate Finance, Sales Trading, Asset Management and Research coverage universe spans listed securities across the ASX All
business lines are distinct from one another. This means that CLSA’s Ordinaries index, securities listed on offshore markets, unlisted
Research department is not part of and does not report to CLSA issuers and investment products which Research management deem
Corporate Finance department or CLSA’s Sales and Trading business. to be relevant to the investor base from time to time. CAPL seeks to
Accordingly, neither the Corporate Finance nor the Sales and Trading cover companies of relevance to its domestic and international
department supervises or controls the activities of CLSA’s research investor base across a variety of sectors.
analysts. CLSA’s research analysts report to the management of the India: CLSA India Private Limited, incorporated in November 1994
Research department, who in turn report to CLSA’s senior management. provides equity brokerage services (SEBI Registration No:
CLSA has put in place a number of internal controls designed to manage INZ000001735), research services (SEBI Registration No:
conflicts of interest that may arise as a result of CLSA engaging in INH000001113) and merchant banking services (SEBI Registration
Corporate Finance, Sales and Trading, Asset Management and Research No.INM000010619) to global institutional investors, pension funds
activities. Some examples of these controls include: the use of and corporates. CLSA and its associates may have debt holdings in the
information barriers and other controls designed to ensure that subject company. Further, CLSA and its associates, in the past 12
confidential information is only shared on a “need to know” basis and in months, may have received compensation for non-investment
compliance with CLSA’s Chinese Wall policies and procedures; banking securities and/or non-securities related services from the
measures designed to ensure that interactions that may occur among subject company. For further details of “associates” of CLSA India
CLSA’s Research personnel, Corporate Finance, Asset Management, please contact Compliance-India@[Link].
and Sales and Trading personnel, CLSA’s financial product issuers and Singapore: This report is distributed in Singapore by CLSA
CLSA’s research analysts do not compromise the integrity and Singapore Pte Ltd to institutional investors, accredited investors or
independence of CLSA’s research. expert investors (each as defined under the Financial Advisers
Subject to any applicable laws and regulations at any given time, Regulations) only. Singapore recipients should contact CLSA
CLSA, CLSA Americas, CLST, their respective affiliates, officers, Singapore Pte Ltd, 80 Raffles Place, #18-01, UOB Plaza 1, Singapore
directors or employees may have used the information contained herein 048624, Tel: +65 6416 7888, in respect of any matters arising from,
before publication and may have positions in, or may from time to time or in connection with, the analysis or report. By virtue of your status
purchase or sell or have a material interest in any of the securities as an institutional investor, accredited investor or expert investor,
mentioned or related securities, or may currently or in future have or CLSA Singapore Pte Ltd is exempted from complying with certain
have had a business or financial relationship with, or may provide or requirements under the Financial Advisers Act (Chapter 110), the
have provided corporate finance/capital markets and/or other services Financial Advisers Regulations and the relevant Notices and
to, the entities referred to herein, their advisors and/or any other Guidelines issued thereunder (as disclosed in Part C of the Securities
connected parties. As a result, you should be aware that CLSA, CLSA Dealing Services – Singapore Annex of the CLSA terms of business),
Americas, and/or CLST and/or their respective affiliates, officers, in respect of any financial advisory services that CLSA Singapore Pte
directors or employees may have one or more conflicts of interest. Ltd may provide to you. MCI (P) 024/12/2020
Regulations or market practice of some jurisdictions/markets prescribe United States of America: Where any section of the research is
certain disclosures to be made for certain actual, potential or perceived compiled by US analyst(s), it is distributed by CLSA Americas. Where
conflicts of interests relating to research reports. Details of the any section is compiled by non-US analyst(s), it is distributed into the
disclosable interest can be found in certain reports as required by the United States by CLSA solely to persons who qualify as "Major US
relevant rules and regulation and the full details are available at Institutional Investors" as defined in Rule 15a-6 under the Securities
[Link] Disclosures and Exchange Act of 1934 and who deal with CLSA Americas.
therein include the position of CLSA, CLSA Americas, and CLST only. However, the delivery of this research report to any person in the
Unless specified otherwise, CLSA did not receive any compensation or United States shall not be deemed a recommendation to effect any
other benefits from the subject company, covered in this transactions in the securities discussed herein or an endorsement of
publication/communication, or from any third party. If investors have any opinion expressed herein. Any recipient of this research in the
any difficulty accessing this website, please contact United States wishing to effect a transaction in any security
webadmin@[Link] on +852 2600 8111. If you require disclosure mentioned herein should do so by contacting CLSA Americas.
information on previous dates, please contact The European Union (“EU”) and the United Kingdom: In these
compliance_hk@[Link]. jurisdictions, this research is a marketing communication. It has not
This publication/communication is distributed for and on behalf been prepared in accordance with the legal requirements designed to
of CLSA (for research compiled by non-US and non-Taiwan analyst(s)), promote the independence of investment research, and is not subject
CLSA Americas, and/or CLST (for research compiled by Taiwan to any prohibition on dealing ahead of the dissemination of investment
analyst(s)) in Australia by CLSA Australia Pty Ltd (ABN 53 139 992 research. The research is disseminated in these countries by either
331/AFSL License No: 350159); in Hong Kong by CLSA Limited CLSA (UK) or CLSA Europe BV. CLSA (UK) is authorised and regulated
(Incorporated in Hong Kong with limited liability); in India by CLSA by the Financial Conduct Authority. CLSA Europe BV is authorised and
India Private Limited, (Address: 8/F, Dalamal House, Nariman Point, regulated by the Authority for Financial Markets in the Netherlands.
Mumbai 400021. Tel No: +91-22-66505050. Fax No: +91-22- This document is directed at persons having professional experience in
22840271; CIN: U67120MH1994PLC083118; SEBI Registration No: matters relating to investments as defined in the relevant applicable
INZ000001735 as Stock Broker, INM000010619 as Merchant Banker local regulations. Any investment activity to which it relates is only
and INH000001113 as Research Analyst,; in Indonesia by PT CLSA available to such persons. If you do not have professional experience in
Sekuritas Indonesia; in Japan by CLSA Securities Japan Co., Ltd.; in matters relating to investments you should not rely on this document.
Korea by CLSA Securities Korea Ltd.; in Malaysia by CLSA Securities Where the research material is compiled by the UK analyst(s), it is
Malaysia Sdn. Bhd.; in the Philippines by CLSA Philippines Inc (a produced and disseminated by CLSA (UK) and CLSA Europe BV. For the
member of Philippine Stock Exchange and Securities Investors purposes of the Financial Conduct Rules in the United Kingdom and
Protection Fund); in Singapore by CLSA Singapore Pte Ltd and solely MIFID II in other European jurisdictions this research is prepared and
to persons who qualify as an "Institutional Investor", "Accredited intended as substantive research material.
Investor" or "Expert Investor" MCI (P) 024/12/2020; in Thailand by For all other jurisdiction-specific disclaimers please refer to
CLSA Securities (Thailand) Limited; in Taiwan by CLST and in the EU [Link] The analysts/contributors to
and United Kingdom by CLSA Europe BV or CLSA (UK). this publication/communication may be employed by any relevant CLSA
Australia: CLSA Australia Pty Ltd (“CAPL”) (ABN 53 139 992 entity or CLST, which is different from the entity that distributes the
331/AFS License No: 350159) is regulated by ASIC and is a Market publication/communication in the respective jurisdictions.© 2021 CLSA
Participant of ASX Limited and CHI-X. This material is issued and and/or CL Securities Taiwan Co., Ltd. (“CLST”).

18 May 2021 [Link]@[Link] 67

 
 
Prepared for: pdesai@[Link]
 Research & sales offices
[Link]

Australia - Melbourne India Pakistan Thailand

CLSA Australia Pty Ltd CLSA India Private Limited Alfalah CLSA Securities (Private) Ltd CLSA Securities (Thailand) Ltd
Level 30 8/F, Dalamal House 8 th Floor, Bahria Complex III 16/F, M. Thai Tower
35 Collins Street Nariman Point M.T. Khan Road, Karachi All Seasons Place
Melbourne VIC 3000 Mumbai 400021 Pakistan 87 Wireless Road,
Tel: +61 2 8571 4200 Tel: +91 22 6650 5050 Tel: +92 21 3564 5090-95 Pathumwan, Bangkok 10330
Fax: +61 2 9221 1188 Fax: +91 22 2284 0271 Fax: +92 21 3564 5096 Tel: +66 2 257 4600
Fax: +66 2 253 0532

Australia - Sydney Indonesia Philippines The Netherlands

CLSA Australia Pty Ltd PT CLSA Sekuritas Indonesia CLSA Philippines, Inc CLSA Europe B.V.
Level 35 Sequis Tower, Suite 16-01 19/F, Tower 2 World Trade Center
Grosvenor Place Jl. Jend. Sudirman No. 71 The Enterprise Center Tower B, Level 7
225 George Street Jakarta 12190 6766 Ayala corner Paseo de Roxas Strawinskylaan 729
Sydney NSW 2000 Tel: +62 21 5088 7888 Makati City 1077XX Amsterdam
Tel: +61 2 8571 4200 Fax: +62 21 724 7795 Tel: +63 2 860 4000 Tel: +31 20 2048300
Fax: +61 2 9221 1188 Fax: +63 2 860 4051

China - Beijing Japan Singapore United Kingdom

CLSA Limited - Beijing Rep Office CLSA Securities Japan Co. Ltd CLSA Singapore Pte Ltd CLSA (UK)
26/F, CITIC Securities Tower 16/F, Shiodome Sumitomo Building 80 Raffles Place, No.18-01 12/F, Moor House
No.48 Liangmaqiao Road 1-9-2, Higashi-Shimbashi UOB Plaza 1 120 London Wall
Chaoyang District Minato-ku, Tokyo 105-0021 Singapore 048624 London EC2Y 5ET
Beijing 100026 Tel: +81 3 4578 8000 Tel: +65 6416 7888 Tel: +44 20 7614 7000
Tel: +86 10 5965 2088 Fax: +81 3 4578 8080 Fax: +65 6533 8922 Fax: +44 20 7614 7070
Fax: +86 10 5965 2018

China - Shanghai Korea Sri Lanka USA - New York

CLSA Limited - Shanghai Rep Office CLSA Securities Korea Ltd CT CLSA Securities (PVT) Ltd CLSA Americas, LLC
Room 1815, Unit 1806 30/F, One IFC 4-14 Majestic City, 1301 Avenue of The Americas
18th Floor, China Fortune Tower 10 Gukjegeumyung-ro 10 Station Road, 15th Floor,
No.1568 Century Avenue Yeongdeungpo-gu Colombo 4, Sri Lanka New York 10019
Pudong New District Seoul, 07326 Tel: +94 11 255 2290 to 2294 Tel: +1 212 408 5888
Shanghai 200122 Tel: +82 2 397 8400 Fax: +94 11 255 2289 Fax: +1 212 261 2502
Fax: +82 2 771 8583

Hong Kong Malaysia Taiwan * CLST is an exclusive Taiwan

CLSA Limited CLSA Securities Malaysia Sdn Bhd CL Securities Taiwan research provider to CLSA
18/F, One Pacific Place Suite 20-01, Level 20 Company Limited*
88 Queensway Menara Dion 27/F, 95, Section 2
Hong Kong 27 Jalan Sultan Ismail Dun Hua South Road
Tel: +852 2600 8888 50250 Kuala Lumpur Taipei 10682
Fax: +852 2868 0189 Tel: +60 3 2056 7888 Tel: +886 2 2326 8188
Fax: +60 3 2056 7988 Fax: +886 2 2326 8166

CLSA Sales Trading Team

Australia +61 2 8571 4201 Philippines +63 2 860 4030
Hong Kong +852 2600 7003 Singapore +65 6416 7878
India +91 22 6622 5000 Taiwan* +886 2 2326 8124
Indonesia +62 21 5088 7777 Thailand +66 2 257 4611
Japan +81 3 4580 5169 UK +44 207 614 7260
Korea +82 2 397 8512 US +1 212 408 5800
Malaysia +60 3 2056 7852 CLSA is certified ISO14001

Research subscriptions
To change your report distribution requirements, please contact your CLSA sales representative or email us at cib@[Link].
You can also fine-tune your Research Alert email preferences at [Link]

© 2021 CLSA Limited (“CLSA”) and/or CL Securities Taiwan Co. Ltd (“CLST”).
Key to CLSA/CLST investment rankings: BUY: Total stock return (including dividends) expected to exceed 20%; O-PF: Total expected return below 20% but
exceeding market return; U-PF: Total expected return positive but below market return; SELL: Total expected return to be negative. For relative performance, we
benchmark the 12-month total forecast return (including dividends) for the stock against the 12-month forecast return (including dividends) for the market on which
the stock trades. • "High Conviction" Ideas are not necessarily stocks with the most upside/downside but those where the Research Head/Strategist believes there
is the highest likelihood of positive/negative returns. The list for each market is monitored weekly. 15/01/2021

 
 
Prepared for: pdesai@[Link]