Shenwan Hongyuan Group: Performance divergence in the food and beverage industry in 2024, with opportunities emerging for both popular and premium products.

Shenwan Hongyuan Group released a research report stating that the fourth quarter of 2024 net profit forecasts for 41 key food and beverage A-share listed companies show that the industry's performance is showing differentiation trends. The liquor industry is showing signs of bottoming out during the Spring Festival, but still needs to be verified. Combining current valuations and dividend levels, leading companies have long-term investment value from a dividend yield perspective, and it is recommended that long-term funds gradually increase their allocation. Mass market fundamentals are bottoming out, with two types of opportunities emerging. Key points from Shenwan Hongyuan Group are as follows: Significant differences in fourth quarter 2024 performance of food and beverage companies In terms of net profit growth rate, only one company, Eastroc Beverage, is expected to have a growth rate exceeding 50%; there are 5 companies with growth rates between 20%-50%, including Henan Shuanghui Investment & Development, Sichuan Teway Food Group, and others; while 21 companies have growth rates below 20%, such as Inner Mongolia Yili Industrial Group (18%), Foshan Haitian Flavouring and Food (15%), Chongqing Fuling Zhacai Group (15%), and others. Companies showing year-on-year profit turnarounds are Xinjiang Tianrun Dairy and Ligao Foods Co., Ltd. Companies reducing losses compared to the previous year include Tsingtao Brewery and Beijing Yanjing Brewery. Companies experiencing a decline in performance include Sichuan Swellfun, Shanghai Bairun Investment Holding Group, and others. Liquor: Signs of industry bottoming out are emerging, but need time to verify After the peak season of the Spring Festival, most companies reduced their collection tasks before the Spring Festival, so it is important to pay attention to the performance of the off-peak season after the Spring Festival. The second quarter is a critical period, and if leading companies can adhere to their current pricing strategies and stabilize prices in the off-peak season, the bottoming out characteristics of the industry will be further confirmed. If the overall environment continues to be under pressure and inventory pressures persist, the fundamentals may experience a second dip. Maintain the view of "don't break to build" for the year, with pressure still significant in Q1 2025 sales, but if the economy improves in the second half of 2025 and the industry's inventory cycle adjusts, the fundamentals of the industry are expected to bottom out and stock prices will lead the fundamental adjustments. Combining current valuations and dividend levels, leading companies have medium and long-term investment value from a dividend yield perspective, and it is recommended that long-term funds gradually increase their allocation. Mass Market: Bottoming out of fundamentals, looking for two types of investment opportunities in industries and themes. 1. In 2025, mass food companies will streamline their operations, set more rational business goals, and see improvements in revenue and profitability; on the other hand, the rise of new retail formats brings rapid growth in some new product categories, driven by new consumption concepts such as self-pleasure, health, and convenience, providing growth opportunities for some new product categories; at the sub-industry level, the dairy industry has two logical approaches to capacity digestion and improvement of the structure. 2. From a policy support perspective, focus on areas benefiting from consumer vouchers, childbirth support policies, and encouragement of mergers and acquisitions. Investment recommendation: Key recommendations in the liquor sector are Shanxi Xinghuacun Fen Wine Factory (600809.SH), Wuliangye Yibin (000858.SZ), Kweichow Moutai (600519.SH), and Jinhui Liquor.(603919.SH) Tianzhihang Spirits Co., Ltd., (600559.SH) Hebei Hengshui Laobaigan Liquor Co., Ltd., (603198.SH) Anhui Yingjia Distillery Co., Ltd., (603369.SH) Jiangsu King's Luck Brewery Joint-Stock Co., Ltd.Key recommendations for the mass market sector include Inner Mongolia Yili Industrial Group (600887.SH), Tsingtao Brewery (600600.SH), Jinzai Food Group (003000.SZ), Toly Bread Co., Ltd. (603866.SH), Jonjee Hi-Tech Industrial And Commercial Holding (600872.SH), Chongqing Fuling Zhacai Group (002507.SZ), MENGNIU DAIRY (02319), and New Hope Dairy (002946.SZ). Risk warning: Food safety issues; economic downturn affecting demand for liquor and consumer goods.