Minsheng Securities: The performance of the food and beverage sector is steadily growing, with most sub-sectors showing improved profitability.

In its research report, Wanlian Securities stated that the food and beverage industry has shown strong resilience, coupled with a general decrease in upstream raw material prices, the performance of the food and beverage industry is expected to maintain steady growth. Wanlian Securities recommends focusing on the following: 1) Baijiu (Chinese white spirits): With inventory gradually clearing, continued consumption recovery, and restored investor confidence, baijiu companies that have experienced valuation drops but maintain strong fundamentals are expected to see a valuation recovery. It is recommended to focus on high-end, mid-high-end, and leading baijiu companies with more certain growth prospects. 2) Beer: The decrease in raw material prices is expected to alleviate cost pressures, and the Chinese beer industry is currently undergoing a product structure upgrade. It is expected that the profitability of the beer industry will continue to improve. The beer industry's landscape remains stable, with increasing industry concentration. It is recommended to focus on leading beer companies that continue the trend towards high-end products and have significant room for profitability improvement. 3) Consumer goods: Consumer demand for mass-market food and beverage products is relatively strong, with clear performance differences. It is recommended to focus on leading companies in sectors such as soft drinks, snacks, and beer with better performance. Key points from Wanlian Securities' analysis: Overall: The food and beverage sector has shown steady growth in revenue and net profit. In the first half of 2024, the revenue of the food and beverage sector reached 553.045 billion yuan (YoY +3.61%), and net profit attributable to shareholders reached 128.188 billion yuan (YoY +13.96%). Revenue and net profit growth rates ranked 9th and 7th, respectively, among the 31 primary sub-industries according to the Shanghai Composite Index. Although revenue growth has decreased by 6.03 percentage points compared to the previous year, it has still increased compared to the previous year, while net profit growth has decreased by 0.94 percentage points compared to the previous year. Gross profit margins and net profit margins have increased year-on-year, and cost ratios remain stable. Revenue growth: Soft drinks, baijiu, and snacks have shown considerable revenue growth, with condiments, soft drinks, and... In terms of turnover, soft drinks, snacks, and seasoning fermentation products have seen an increase in performance, achieving double growth in revenue and net profit attributable to shareholders; dairy, meat products, and pre-processed foods have seen a decrease in revenue compared to the same period last year, but net profit attributable to shareholders has increased; other alcoholic beverages and health products saw negative growth in revenue and net profit attributable to shareholders in the first half of 2024. Among other alcoholic beverages, Wei Long Grape Wine and Gansu Mogao Industrial Development achieved revenue and net profit growth of more than 20%; in the soft drinks category, Eastroc Beverage achieved revenue and net profit growth of more than 40%; in the snack category, Three Squirrels Inc. achieved high-speed growth of more than 75% in revenue and net profit, Jinzai Food Group, Yanker Shop Food, and Ganyuan Foods achieved revenue and net profit growth of more than 20%; in the seasoning fermentation products category, Lianhua Health achieved high growth of more than 25% in revenue and net profit, Zhongjing Food and Qingdao Richen Food achieved revenue and net profit growth of more than 10%; in the meat products category, Jinzi Ham Co., Ltd. achieved revenue and net profit growth of more than 10%; in the health products category, Sirio Pharma achieved high growth of more than 25% in revenue and net profit.Investment advice: The food and beverage industry has shown strong resilience, coupled with a general decrease in upstream raw material prices, and the performance of the food and beverage industry is expected to maintain steady growth. Suggestions to focus on: 1) Baijiu (white spirits): With gradually clearing inventory, continued consumer recovery, and restored investor confidence, Baijiu companies that have experienced valuation declines but still have good fundamentals are expected to see a valuation recovery. It is recommended to focus on high-end, mid-to-high-end, and real estate liquor market leaders with stronger growth certainty. 2) Beer: The decrease in raw material prices is expected to alleviate cost pressures, and the Chinese beer industry is currently undergoing a phase of product structure upgrading. It is expected that the profitability of the beer industry will continue to improve. Currently, the beer industry structure remains stable, and industry concentration is increasing. It is recommended to focus on beer market leaders that continue the trend towards high-end and have a large room for profitability improvement. 3) Mass market products: The demand for mass market food is relatively strong, and performance differentiation is also quite obvious. It is recommended to focus on leading companies in the mass market such as soft drinks, snacks, and beer with good performance. Risk factors: 1. Policy risks; 2. Food safety risks; 3. Risks of economic growth falling below expectations.