Hua Chuang Securities: Food and Beverage Bottoming Out, Position in Leading Players for Recovery

Hua Chuang Securities released a research report stating that the food and beverage sector's beta is bottoming out; position in leading players for recovery and capture segmented opportunities. Current industry holdings have hit a new low, and the consensus is that bottoming signals are becoming clear. Focus on two types of opportunities: First, from the perspective of genuine operating quality and market position, combined with dividend yield, "seed" a batch of high-quality blue-chip white horses whose fundamentals have actually emerged from winter but whose share prices are still enduring severe cold; second, capture segmented elasticity opportunities, with yeast protein, algal oil substitution, and reform expectations worth focusing on. The main views of Hua Chuang Securities are as follows: Baijiu: Under a low base in Q3, continued decline and clearing are expected, with financial statements accelerating toward the bottom. Baijiu remains in a clearing and bottoming phase in Q3, with industry risks fully reflected in financial statements. The extent of statement adjustments at most liquor companies remains greater than the actual decline in sell-through, and industry inventory, especially terminal-channel inventory, continues to destock. On the payment collection side, most liquor companies continued to slow the pace of payment collection and shipments in Q3, channels no longer accept inventory stuffing, and payment collection progress is generally slower than the same period in previous years. On the sell-through side, Q3 double-festival sell-through fell short of expectations year-on-year and still declined by double digits; only leading brands and some base-type sub-high-end brands can maintain normal shipment turnover. By scenario, high-end Moutai and Wuliangye maintain steady sell-through under the current price system, the business group-buying scenario corresponding to sub-high-end remains relatively weak, and mass-price-band household consumption still has some resilience. Looking ahead, under the low base in Q4, some companies are expected to turn positive. By price band, in 26Q3 Moutai and mass-market baijiu companies in the RMB100 price band are expected to show relatively greater resilience in financial statements, while other liquor companies are expected to continue clearing. Specifically, by price band: High-end: Moutai remains relatively steady, while Luzhou Laojiao is still clearing substantially. Moutai's Q3 revenue is expected to rise 0.5% year-on-year, with profit down 3% year-on-year; Wuliangye Yibin's revenue/profit are expected to fall 25%/30% year-on-year in Q3, and Luzhou Laojiao -50%/-70% year-on-year in Q3. Base-type sub-high-end: Q3 continued clearing, with second-tier liquor companies' financial statements turning positive first. Fenjiu's revenue/profit are expected to fall 18%/25% year-on-year in Q3, Yanghe -30%/loss (about -RMB340 million) year-on-year in Q3, Gujing +2%/-80% year-on-year in Q3, Jiangsu King's Luck Brewery Joint-Stock +10%/+12% year-on-year in Q3, and Jinhui Liquor -3%/-15% year-on-year in Q3. Expansion-type sub-high-end: Q3 sell-through remained under pressure, with financial statements accelerating clearing. Shede's revenue/profit are expected to fall 25%/-300% year-on-year in Q3, and Sichuan Swellfun -20%/-50% year-on-year in Q3. Mass consumer goods: Overall volume stable, with internal divergence. In July/August/September 2026, total retail sales of consumer goods rose 0.6%/0.4%/1.1% year-on-year, respectively, of which catering revenue rose 1.4%/1.1%/2.1% year-on-year, respectively; the overall consumption recovery pace in Q3 remained mild, with a slight acceleration in September. The mass consumer goods sector shows stable overall volume and internal divergence. By sub-sector, dairy demand continued a steady recovery driven by double-festival stocking, liquid milk sell-through improved quarter by quarter, and combined with the reduced impact of tax payments in the second half, leading players' profits are expected to improve; the soft drinks industry remains under pressure, competition in traditional major single products has intensified and growth has slowed, while healthy categories such as sugar-free tea continue to expand; casual snacks warmed sequentially in Q3, with emerging channels such as snack mass retailers and membership supermarkets growing rapidly; demand in the catering supply industry remained flat in Q3, but leading players performed well, with companies possessing strong alpha such as Yihai and Anjoy maintaining relatively fast growth. On costs, raw material cost trends continued to diverge, with PET, corrugated paper, soybeans, and fresh milk prices rising year-on-year, while white sugar and pork prices continued to fall year-on-year. Dairy and meat products: Revenue continued steady growth, with reduced impact from tax payments. Q3 liquid milk demand recovered steadily and the impact of tax payments weakened. Yili's Q3 revenue/profit are expected to rise 3%/0% year-on-year, respectively, Tianrun +8%/+131% year-on-year (already disclosed), New Hope Dairy +5%/+11% year-on-year, and Shuanghui -5%/-12% year-on-year. Casual and functional food & beverages: Soft drink demand under pressure, snacks improved sequentially. In Q3, due to weak demand and intensified industry competition, the overall beverage market remained under pressure and leading players' growth slowed; Dongpeng's Q3 revenue/profit rose 3%/1% year-on-year. Snack consumption improved slightly sequentially; Yanjin's Q3 is expected at -2%/-8% year-on-year, Qiaqia +6%/+79% year-on-year (already disclosed), and Ganyuan +7%/-20% year-on-year. Bakery: Angel +15%/+17% year-on-year, Toly -2%/-10% year-on-year. Health products: Sirio -19%/-22% year-on-year (already disclosed), By-health +18%/+23% year-on-year (already disclosed). Condiments: Leaders remained steady, second-tier companies improved. Haitian's Q3 revenue/profit are expected to rise 1%/-7% year-on-year, Jonjee +14%/+40% year-on-year, Qianhe +15%/+20% year-on-year, Tianwei +15%/+10% year-on-year, Baoli +12%/+12% year-on-year, and Zhacai +2%/+0% year-on-year. Quick-frozen food: Revenue resilience remains, with multiple factors disturbing profit. Anjoy's Q3 revenue/profit are expected to rise 13%/15% year-on-year, respectively, Ligao +8%/-20% year-on-year, Qianwei +9%/-15% year-on-year, and Babi -6%/-3% year-on-year. Investment recommendation: The food and beverage sector's beta is bottoming out; position in leading players for recovery and capture segmented opportunities. Current industry holdings have hit a new low, and the consensus is that bottoming signals are becoming clear. Focus on two types of opportunities: First, from the perspective of genuine operating quality and market position, combined with dividend yield, "seed" a batch of high-quality blue-chip white horses whose fundamentals have actually emerged from winter but whose share prices are still enduring severe cold; second, capture segmented elasticity opportunities, with yeast protein, algal oil substitution, and reform expectations worth focusing on. Specifically: Alcoholic beverages: Accelerated clearing, bottom gradually becoming clear, prioritize targets with a clear bottom. Liquor companies continued to relieve pressure and destock in Q3, and the industry as a whole is still bottoming. For the full year, liquor companies are moving from passive response to proactive adjustment; the opportunity lies in expectations bottoming and stabilizing after Moutai wholesale prices stabilize. In terms of cycle rhythm, 2026 will see proactive adjustment and accelerated clearing; 2027 will see the inflection point gradually become clear and sequential improvement. Top recommendation is Moutai, a leader that has weathered cycles; next, attention to Gujing and Jiangsu King's Luck Brewery Joint-Stock, whose inventory bottoming pace is relatively fast; strategic attention to Wuliangye Yibin and Fenjiu, whose operations are steadily improving, and Luzhou Laojiao, an elasticity name under a low base. Mass consumer goods: Dairy steady, dig for gold in segments. First, prefer dairy; an improving dairy cycle benefits downstream dairy companies; recommend Yili, Mengniu, and New Hope Dairy, with attention to Youran and Modern Farming; second, segmented elasticity; core recommendation is Angel Yeast Co.,Ltd., driven by accelerated yeast protein, with attention to Xiamen Kingdomway Group, catalyzed by El Nino-driven accelerated algal oil substitution, and FuJian YanJing HuiQuan Brewery on reform expectations; third, the catering supply chain industry landscape is improving successively; prefer leaders Yihai, Anjoy, and Haitian, with attention to Tianwei, Jonjee, and Qianhe. Risk warnings: Post-holiday consumer demand pullback, inventory digestion weaker than expected, intensified competition, etc.