Benzinga | Oct 21, 2021 12:10PM EDT

Goldman Sachs Urging Investors To Take A Bet On China's Pet Market, But Which Firms To Look At?

Summary

* Goldman Sachs is urging investors to take a bet on China's pet market;

* China is projected to have 248 million urban pet dogs and cats by 2024, compared to 172 million in the United States;

* China's leading pet company Boqii (NYSE:BQ) in strategic partnership with the country's largest hotel franchise;

* Boqii is becoming a consolidator in China's $30 billion pet market;

According to the Financial Times, Goldman Sachs recently urges investors to take a bet on China's $30bn pet market and the prospect that the country's city-dwelling youth will opt for well-fed cats and dogs over a new baby boom. Great news, but where should I look into for a start?

What's trending in China's pet market?

Unrelenting growth. Easy to answer. The US investment bank predicts the growing trend of singlehood and childlessness and the mounting pressure on the younger generation have accelerated pet families' expansion in China. Both of these demographic groups, said Goldman, have a high correlation with higher per pet spending than elsewhere in the world.

That is, China's booming pet market shows no sign of abating. Here are the facts: according to the National Bureau of Statistics of China (NBS China), most people who have pet dogs or cats in China are the elderly and the younger generations, living alone in the urban cities and desperately seeking for companions. China is projected to have 248 million urban pet dogs and cats by 2024, compared to 172 million in the United States.

Even against the backdrop of the COVID-19 pandemic, which drags the world economy into a downturn, the consumption market of the pet industry saw a 4.1 billion yuan increase in 2020, totaling 206.5 billion yuan. China's pet market is expected to reach 600 billion yuan by 2023, according to iiMedia Research.

Who leads the race?

There's this one stock currently undervalued: Boqii Holding Limited (NYSE:BQ), a leading pet-focused platform in China. This week the company announced a new strategic partnership with world-leading hotel group Huazhu Group Limited (NASDAQ:HTHT) to provide pet-friendly stays in its Vue Hotels & Resorts.

FYI, Huazhu is the largest hotel franchise in China, man, bigger than Marriott. Why choose Boqii?

For Huazhu, it's a smart move to partner with pet specialists like Boqii when seeking market growth among pet parents. Founded 13 years ago as an online encyclopedia for pet lovers, Boqii has spearheaded the growth of China's pet economy by catering to an increasingly affluent group of animal lovers, especially among women, millennials and married couples. Despite the rally, the pet company has expanded to areas like offline stores, pet food, training, and health care, and is now becoming a consolidator in China's pet market.

Why does the partnership matter?

The partnership between two companies could be another promising sign of China's booming pet industry.

The question is whether Boqii could make use of a large number of pet communities on its platform and provide valuable insight into the needs and expectations of pet parents, including those for holiday accommodation. At least Huazhu has got confidence in the pet specialist.

For both companies, the plan is to jointly develop solutions to make staying in the hotels an easy and joyful experience for pets and pet parents alike. Somehow it's thrilling to expect what two giants in its niche could achieve together. Chances are that both companies will achieve market dominance among their Chinese peers.