Huayuan Securities: The food and beverage sector is recovering with differentiation. Pay attention to the stability of ROA and the structural trend of prosperity.

HuaYuan Securities released a research report stating that in terms of the recovery pace of the food and beverage industry, at the current point in time, soft drinks and snacks > catering supply chain > condiments, dairy products, beer > liquor. Emphasis on ROA. The adjustment of stable enterprise and recovery starting point sectors may present opportunities for valuation repair. It is believed that in these sectors, searching for sub-sectors where "price" or "volume" is still prosperous is the optimal choice, with price being the first logical choice and volume being the second. Key points of HuaYuan Securities: Reviewing the recovery pace of different consumer sectors, there are both differences and similarities. Differences stem from industry supply and demand, industry chain structure, etc., while similarities are reflected in mainstream phenomena of competitive markets with businesses increasing sales to digest capacity and improve operations efficiency to adapt to market changes. It is believed that ROA is a forward-looking indicator for consumer companies' operational recovery, while analyzing different sub-sectors. Through ROA, combined with the performance of enterprises and channels, the industry's recovery pace is judged. The stages of enterprise and channel adjustments are summarized as follows: 1) supply exceeds demand -> 2) enterprises and channels engaged in price wars in a competitive market -> 3) channel profits are compressed or even face losses, with high channel inventory -> 4) channel cash flow tightens -> 5) enterprises assist channels in destocking, reduce costs and improve efficiency, leading to either declining revenue or decreasing net profit margin -> 6) channel profits turn around, leading to a new balance of supply and demand in channels -> 7) enterprises' year-on-year revenue growth turns positive. In terms of industry recovery pace, at the current point in time, soft drinks and snacks > catering supply chain > condiments, dairy products, beer > liquor. Analyzing the differentiation of consumption sectors in Japan in the 1990s and dissecting the underlying logic of counter-trend growth industries. Investment strategy: From a price perspective: The upward trend of CPI may become the "macro narrative" for traditional industries with high penetration rates and is likely to drive sector valuation repair, such as liquor, beer, dairy products. These are still expected to attract incremental funds, especially "dividend+" funds. Recommendations include focusing on Kweichow Moutai, Luzhou Laojiao, Shanxi Xinghuacun Fen Wine Factory; emphasis on YOURAN DAIRY, CHINA SHENGMU, with a focus on Inner Mongolia Yili Industrial Group, MENGNIU DAIRY, TSINGTAO BREW. From a volume perspective: 1) In terms of cost-effective consumption, high-efficiency supply chain operators gain volume growth, such as catering supply chain, recommended companies include Zhongyin Babi Food, Anjoy Foods Group, GUOQUAN, Sichuan Teway Food Group, YouYou Foods; for soft drinks, recommended companies are Eastroc Beverage, NONGFU SPRING, CR BEVERAGE. 2) Industries with low penetration rates may pass through cycles. A case study from Japan suggests focusing on Shanghai Bairun Investment Holding Group for low-alcohol beverages; functional food sectors, besides penetration rate logic, can also enhance brand premiums through specialization, precise positioning, recommended companies include Beijing Scitop Bio-tech, Guilin Seamild Foods, Sirio Pharma. 3) Expanding into new markets, with a focus on Angel Yeast Co., Ltd., and considering Shandong Bailong Chuangyuan Bio-Tech. Risk warning: Risks include demand recovery falling short of expectations, food safety risks, and significant fluctuations in raw material costs.