Industrial: Valuation of the food and beverage sector has fallen with sufficient safety margin. Preferred assets are those with stable performance, dividends as a base, valuation recovery, and assets that are both offensive and defensive.

Industrial released a research report stating that the current market volatility has intensified, and the previously extremely differentiated track style is facing a repair window. Finding high-winning rate assets has become a cost-effective investment theme. On one hand, the chips structure in the food and beverage sector is becoming cleaner, institutional holdings are at historical lows, sector valuations have dropped significantly, and there is a relatively adequate safety cushion. On the other hand, many high-quality consumer companies have stable operating foundations, outstanding cash flow generation capabilities, continuously optimized dividend policies, and high dividend yields that can provide solid absolute return guarantees. If the improvement in demand margins in the future, returns from valuation repairs can also be earned. Industrial's main points are as follows: Building a dividend asset research framework from five dimensions 1) Profit stability: Focus on the fluctuation amplitude of the net profit attributable to the mother over the past five years. Select targets with fewer instances of significant performance declines and controlled fluctuations in profitability. Stable performance is the basis for long-term dividends. Other observation indicators include gross profit margin, stability of net profit margin, and historical fluctuations in return on equity (high net profit margin, high ROE brought by high net profit rate, greater stability). 2) Is the cash flow ample: Use the indicator of net cash flow from operating activities/net profit attributable to the mother. A value consistently greater than 1 indicates that book profits can be transformed into real cash, providing a source of funds for dividends. 3) Healthiness of the balance sheet: Prefer targets with a low debt-to-asset ratio, a small scale of interest-bearing debt, and sufficient cash on hand. Targets with low debt pressures can avoid being passively squeezed for dividend funds. 4) Capital expenditure needs: Judging the pressure of expansion through capital expenditure/net cash flow from operating activities. A ratio of less than 30% generally indicates that the industry is in a mature stage and does not need to continuously consume cash for expansion. Surplus cash flow can be used for shareholder returns. A ratio within 30%-60% indicates relatively low capital expenditure pressure. 5) Historical dividend continuity: Examine whether the dividend rate has steadily increased in the past three years, while paying attention to the company's medium to long-term shareholder return plans, to avoid one-time high dividends and unsustainable dividends. The liquor sector is at the bottom of the business cycle, market expectations are fully priced in, limited downside in stock price, strong attractiveness in dividend yield. From the market, financial statement, and chip dimensions, the liquor sector has already reached a bottom: 1) Demand-side sales have improved since the beginning of the year, with the possibility of achieving year-on-year growth in the second half of the year. At the same time, the risk of batch price cuts by the majority of companies in the industry is further narrowing, and prices have basically entered a stable range; 2) The 26H1 liquor company earnings are expected to continue declining, with a significant overall clearance effort, the financial statement level has essentially bottomed out, and performance confidence has increased; 3) The sector's stock prices have fallen by over 60% since the peak in 2021, breaking through the lows after the impact of the 25Q2 policy and before the stimulation of the 924 policy. The current valuations are at the 27% and 14% percentile levels since 2012 and 2016, respectively. Fund holdings continue to decline, with the overweight allocation of the liquor sector in 26Q2 dropping to 2.09%/a decrease of -2.42% compared to the previous quarter), with relatively clean chips. Although the short-term fundamentals have not fully recovered, the top liquor companies have strong brand barriers, ample cash on hand, continue to increase shareholder returns, support stock prices, and have potential value from an absolute return perspective. Among them, Kweichow Moutai has strong stability, a dividend yield of 4%+, and is suitable as a core asset for allocation; Luzhou Laojiao, Shanxi Xinghuacun Fen Wine Factory, Anhui Gujing Distillery, Jiangsu King's Luck Brewery Joint-Stock, Anhui Yingjiagongjiu, etc., have dividend yields generally ranging from 4% to 7%, with low valuations. If the fundamental signals on the right side are established in the future, there will be potential for valuation recovery gains. The mass consumer goods sector also has many targets with dividend yields of 4%+, which can be roughly divided into three categories based on industry characteristics and company attributes: 1) Steady performance targets, such as Cheng De Lolo, Henan Shuanghui Investment & Development, Chongqing Brewery, Inner Mongolia Yili Industrial Group, Tsingtao Brewery, etc. (ranked by dividend yield. The same below), the industry is in a mature development stage, the competitive landscape is basically stable, the leading companies have deep moats, operating cash flow is consistently abundant, high dividend policy is sustainable, performance volatility is small, suitable for funds seeking stable returns; 2) Targets with relatively superior performance growth, such as YouYou Foods, Zhongyin Babi Food, Qianhe Condiment And Food, Sichuan Teway Food Group, Jinzai Food Group, Shanghai Bolex Food Technology, Anjoy Foods Group, etc., although there is some historical performance volatility, it is expected that the compound growth rates of revenue and profit in the next three years will reach double digits, while maintaining a reasonable capital expenditure and maintaining a high level of dividends; 3) Companies with high dividend rates but relatively weaker performance stability, such as Ganso Co., Ltd, Zhe Jiang Li Zi Yuan Food, Chacha Food, Toly Bread Co., Ltd, etc., profits are easily affected by factors such as raw material prices, industry competition, and channel impacts, continuous monitoring of changes in cash flow is required. Investment advice: Use the dividend framework to screen out three types of absolute return assets The priority is to allocate core assets with strong performance stability. Recommend Kweichow Moutai, Inner Mongolia Yili Industrial Group, Henan Shuanghui Investment & Development, Chongqing Brewery, Tsingtao Brewery, which continue to provide stable dividend income and resist market volatility. Secondly, consider dividends as a base and valuation recovery, recommending Shanxi Xinghuacun Fen Wine Factory, Anhui Gujing Distillery, Luzhou Laojiao, etc., with a solid foundation and full expectations, with potential for valuation recovery gains as performance improves in the future. Thirdly, consider both offense and defense, recommending Anjoy Foods Group, Qianhe Condiment And Food, and paying attention to Shanghai Bolex Food Technology, Sichuan Teway Food Group, which have both growth attributes and dividend protection. Risk warning: Consumer recovery falls short of expectations, intensified industry competition, significant fluctuations in raw material prices, food safety risks.