China Galaxy Securities: Optimistic about the overseas development of the consumer industry in 2026, focusing on individual stocks such as company in the sub-segment competition.

China Galaxy Securities released a research report stating that the future correlation between the consumer sector and major online promotions such as Double Eleven will gradually decrease. The consumer industry needs to focus on the mid- to long-term goals of consumption in the "Fifteen-Five" plan; in the short term, focus on consumption-related policies for 2026 in December 2025. The bank holds an optimistic view on the development of overseas business in the consumer industry in 2026. In terms of consumer stocks, attention should be paid to high dividend quality companies in the market style switching process (from high to low) and companies with alpha in various sub-sectors. The main points of China Galaxy Securities are as follows: The gradual realization of national subsidy reduction, social retail growth continues to slow down 1) In October, year-on-year social retail growth was +2.9%, with a decrease in growth rate compared to the previous month by 0.07 percentage points, and a monthly decrease in growth rate since May. 2) As national subsidies are reduced, in October, the year-on-year social retail for household appliances and audio-visual equipment was -14.6%, with a significant decline; other categories benefiting from national subsidies continued to grow well, such as cultural office supplies (including computers), furniture, communication equipment, and daily necessities (including electric bicycles, wearable smart devices) with year-on-year social retail growth rates of +13.5%, +9.6%, +23.2%, and +7.4%, respectively. The difference in the base period of the same period last year has a significant impact. Since September 2024, the promotion of national subsidies has started. The home appliance industry has strong execution power and immediate effects, while other consumer sub-sectors significantly lag behind home appliances in execution. Significant growth in the jewelry industry, with improved growth rates in clothing, footwear, textile products, and cosmetics 1) In October, year-on-year social retail growth in the jewelry industry surged by 37.6%. Unlike the continuous rise in gold prices in 2024, consumer sentiment is completely different, with the increase in gold prices stimulating consumer enthusiasm for buying gold for value appreciation. In October, the CPI rose by 0.2% compared to the previous month and the same period last year, with the significant price increase in gold jewelry playing an important role. 2) In October, year-on-year social retail growth in clothing, footwear, and textile products was +6.3%, gradually improving against the backdrop of colder weather in the northern regions. 3) Year-on-year social retail growth in cosmetics is also gradually improving, with a +9.6% increase in October. Early promotions for Double Eleven were effective. 4) In October, year-on-year social retail growth in catering was +3.8%, with slow growth but showing signs of improvement. The food delivery war has led to some diversion of customers from dining in restaurants. National Day and Mid-Autumn Festival holidays overlap with early promotions for Double Eleven 1) In 2025, there were 8.88 billion domestic trips during the National Day and Mid-Autumn Festival holidays, an increase of 1.23 billion trips compared to the 7-day National Day holiday in 2024; the total expenditure on domestic trips reached 809.06 billion RMB, an increase of 108.189 billion RMB compared to the 7-day National Day holiday in 2024, but the daily consumption growth was weak. More young people chose to travel, with many opting for electric car self-driving tours and outdoor activities. Camping and electric car camping have become more popular, leading to a decrease in average per capita consumption. 2) Early sales for Double Eleven started in 2025. Jingdong, Tmall/Taobao started their Double Eleven promotions on October 9th and October 15th, respectively, for 2025. Overall, the Double Eleven promotions for Douyin, Suning, Jingdong, and Taobao/Tmall in 2025 are expected to last for 57 days, 44 days, 37 days, and 31 days respectively, compared to 29 to 35 days for the platforms in 2024. According to Xingtu data, from October 7th to November 11th, 2025, the total sales amount for the Double Eleven shopping festival reached 1.695 trillion RMB, a 14.2% increase compared to the previous year, generating 5.798 billion parcels with an average order value of 279.21 RMB. However, the growth was mainly due to statistical adjustments. Decline in October consumer exports widens, affecting overall exports 1) Due to the impact of US tariffs, exports to the US have been declining continuously since April 2025, leading to capacity relocation. From April to October 2025, the export value of consumer goods continued to decline. In October, the year-on-year decline in monthly exports for most consumer product categories expanded, with a total decline of 15.6% compared to the same period last year, leading to a 1.1% year-on-year decline in China's overall exports. 2) On October 10th, US President Trump announced that starting from November 1st, a 100% tariff would be imposed on all Chinese imports. Although this policy has not been implemented, it reflects the arbitrary changes in US tariff policies towards Chinese imports. Leading consumer companies are generally prepared for the possibility of changes in future tariff policies and are accelerating their global capacity deployment. Risk Warning Risk of national subsidy reduction; risk of insufficient consumer demand; risk of market competition.