Tianfeng: The food sector is only minimally affected by tariffs. Stimulating consumption policies may drive the fundamentals and valuation of the sector to recover.

Tianfeng released a research report stating that the impact of reciprocal tariffs on the food sector is limited, and white wine companies are basically not involved in overseas markets. Among popular products, beer, snacks, seasonings, dairy products, and food service supply chains are mainly focused on domestic sales. While some companies in the health industry may be affected by overseas sales, the impact is still within a controllable range. The bank believes that with the implementation of future consumer stimulus policies, the demand for dining and nightlife is expected to recover, driving an increase in beer sales volume and prices. With the peak season approaching, attention to the sector is increasing, and it is recommended to focus on companies such as Tsingtao Brewery (600600.SH) and Beijing Yanjing Brewery (000729.SZ). Tianfeng's main points are as follows: Key EventsOn April 2nd, Trump announced that the United States will impose so-called "reciprocal tariffs" on its trading partners. China has stated that it will take resolute countermeasures to safeguard its own interests. The impact of reciprocal tariffs on the food sector is limited, and white wine companies are basically not involved in overseas markets. Among popular products, beer, snacks, seasonings, dairy products, and food service supply chains are mainly focused on domestic sales. While some companies in the health industry may be affected by overseas sales, the impact is still within a controllable range. Beer sector: Low overseas proportion, limited impact. Beer companies generally have a low proportion of overseas income (limited transportation radius), and their raw materials include barley, rice, aluminum cans, cardboard boxes, and glass (not imported from the United States). Therefore, the impact of the tariff event is expected to be very limited. The bank believes that with the implementation of future consumer stimulus policies, the demand for dining and nightlife is expected to recover, driving an increase in beer sales volume and prices. With the peak season approaching, attention to the sector is increasing, and it is recommended to focus on companies such as Tsingtao Brewery and Beijing Yanjing Brewery. Snack foods: Cost side may be slightly affected, overall impact is limited. Income side: Domestic snack foods are mainly sold domestically, with some companies also selling overseas (mainly in Southeast Asia and other Asian regions, with a smaller presence in North America). In terms of overseas income proportion (24H1), Gan Yuan Foods (1.61% proportion, mainly in Southeast Asia), Qia Qia (8.5% proportion), and Jin Zi (0.81% proportion). Cost side: The main costs of snack foods include nuts, poultry, soybeans, edible oil, and white sugar. In 2024, China imported nuts worth about $2.4 billion, with about 34% imported from the United States (pistachios, American large almonds, the proportion of American imports of walnuts is high), involving snack companies Three Squirrels Inc. and Chacha Food (With a nut income proportion of about 51% for Three Squirrels Inc.24 years/23% for Chacha Food), with Chacha Food importing nuts from the United States in a relatively small proportion, and overall, the impact of the tariff on the procurement cost of nuts for the company is limited. The bank believes that with the continuous release of overall product category benefits and channel dividends in the snack sector, the resilience of strong companies is expected to be evident, and it is recommended to focus on companies such as WL DELICIOUS/Yanker Shop Food (002847.SZ)/Ganyuan Foods (002991.SZ)/YouYou Foods (603697.SH)/Jinzai Food Group (003000.SZ). Food service supply chain: Low overseas proportion, limited impact. 1. Pre-made dishes: Most companies have a low overseas proportion, and are expected to be minimally affected by the tariff event. 2. Seasonings: The cost side may be slightly affected, with a limited overall impact. Income side: Seasonings are mainly sold domestically in China, with a small volume of overseas sales. In terms of overseas proportion: Haitian/Jonjee Hi-Tech Industrial And Commercial Holding/Tian Wei are relatively small, with negligible contributions in their financial reports. In 2024, Angel Yeast Co., Ltd.'s overseas income accounted for about 38%. Cost side: Seasonings' main raw materials include soybeans, white sugar, packaging materials, etc. In 2024, the import amount of soybeans into China was 375.1 billion yuan (accounting for 76% of total grain imports), mainly used for breeding and oil extraction. In terms of source country, in 2024, China's soybean imports mainly came from Brazil (accounting for about 70%). China's largest source of sugar imports is also Brazil (accounting for 88%). And major seasoning companies in China such as Haitian mainly use non-genetically modified soybeans grown domestically, so the bank expects the impact of the U.S. tariff on costs to be limited. The bank believes that with the recovery of downstream dining under future stimulus consumption policies, there will be a fundamental and valuation recovery, and it is recommended to focus on companies such as YIHAI INTL/Sichuan Teway Food Group (603317.SH)/Foshan Haitian Flavouring and Food (603288.SH)/Jonjee Hi-Tech Industrial And Commercial Holding (600872.SH)/Ligao Foods Co., Ltd (300973.SZ)/Anjoy Foods Group(603345.SH). Dairy: Low proportion of exports to the U.S., limited impact. Currently, only Mengniu and Yili, the two major leading companies, have international competitiveness and a significant amount of overseas business. 1) Mengniu: Its overseas business reached 4.716 billion yuan in 2024 (accounting for 5.32% of revenue), mainly focused on Southeast Asian markets, so the bank believes that the impact of the U.S. tariff on its business is relatively small. 2) Yili: Its overseas business is mainly in Southeast Asia, with a small volume of business in the U.S. The bank believes that in the off-season for dairy consumption, there may be an increase in the culling of dairy cows in the upstream, and the additional tariffs may push up prices of crops such as corn and soybeans, further increasing pressure on livestock farming, potentially accelerating the process of restructuring in the dairy industry and stabilizing raw milk prices. Health industry: Overseas sales of health companies may be affected, but still within a controllable range. Upon review, ShandongBailong Chuangyuan Bio-Tech & Sirio Pharma's overseas business revenue is relatively high, with the following details: 1) Shandong Bailong Chuangyuan Bio-Tech: historical tariffs can be passed on downstream. In 23 years, the company's overseas revenue accounts for around 51%, with competitors including UK's Tailei, France's Rogier, and Japan's Matsuya Chemical. The competitors in these countries also face varying levels of tariff pressures. Based on the historical experience in 2019, the company's products sold to the US have tariffs borne by the customers. The bank expects strong growth potential from capacity expansion in this round of negotiations between the company and its customers.Sirio Pharma: The proportion of overseas income of Company 24H1 exceeds half, but the proportion of China's production and export business to the United States in total revenue is less than 15%. The company actively communicates with customers to jointly share tax burden through adjusting terminal prices and other methods, and the overall impact amount is relatively controllable. The bank believes that: it is recommended to pay attention to the opportunities for stock repair in the sector after the oversold market, and focus on strong alpha companies Shandong Bailong Chuangyuan Bio-Tech and Sirio Pharma, as well as the industry leaders Weihai Baihe Biology Technological and CPT in the domestic demand opportunities. Risk warning: Domestic demand growth is lower than expected; uncertainty in the actual implementation of tariffs; increased uncertainty in import and export trade.