GF SEC: Rebuilding supply and demand, turning point in the catering industry gradually emerging.

GF SEC released a research report stating that the meal supply industry has entered a critical period of structural transformation, with companies transitioning from "passive supporters" to "active drivers". Currently, industry capital expenditures have become more cautious, price wars are slowing down, and under an optimized competitive landscape, leading companies are gradually abandoning the previous extensive capacity expansion and channel distribution strategies. The leading companies in the meal supply industry have shown a trend of improvement in performance since Q3 2025, indicating that while the industry has not entered a period of high expansion, it has passed the worst stage and is currently in a stabilizing and recovering process, with potential for gradual performance and valuation enhancement. The main points of GF SEC are as follows: Supply side: Peak capital expenditures have passed, structural adjustment opportunities are emerging The meal supply industry has entered a critical period of structural transformation, with companies transitioning from "passive supporters" to "active drivers". On the one hand, the scale of the meal supply industry continues to grow under the drive of the expansion of the catering industry, the increase in chain rate, and the rapid growth of delivery services. On the other hand, in the past few years, industry consolidation has accelerated due to the downturn in the downstream catering industry and the imbalance between supply and demand. Currently, industry capital expenditures have become more cautious, price wars are slowing down, and under an optimized competitive landscape, leading companies are gradually abandoning the previous extensive capacity expansion and channel distribution strategies, shifting towards core efficiency services for large B companies, precision operational management for small and medium B companies, and actively achieving quality and efficient growth through product innovation and customization. Demand side: Overall trend resonates with CPI, standout cyclical properties Looking back at history, when CPI transitions from negative to positive or enters an upward channel, market expectations of consumption recovery often drive funds towards cyclical sectors such as the dining supply chain, with company stock prices typically performing ahead of improved performance. This trend was particularly evident during the food CPI uptrend after 2019. The October CPI in 2025 turned positive year-on-year, indicating a mild recovery in consumer demand and creating a macro environment of fundamental improvement for the meal supply sector. At the same time, the industry's leading performance has shown a trend of improvement since Q3 2025, indicating that while the industry has not entered a period of high expansion, it has passed the worst stage and is currently in a stabilizing and recovering process, with potential for gradual performance and valuation enhancement. Low valuation, high safety margin GF SEC points out that the valuation of the meal supply sector has fallen to historically low levels and the sector continues to be underweighted, providing a high safety margin and emotional recovery space. Leading companies are building momentum. (1) Frozen baking: the industry maintains high growth, with a CAGR of 22.1% from 2020 to 2025. Leading Ligao Foods Co., Ltd has multiple favorable factors at play, with its frozen baking business benefiting from new product launches and channel expansion, offering broad growth prospects; its cream business benefits from anti-subsidy regulations, accelerating domestic substitution; (2) Quick frozen: the marginal impact of price wars in the industry has significantly weakened, with Anjoy leading and pulling ahead of competitors in management, channels, and capacity. In 2025, the company has a rich reserve of new products, and is expected to enjoy the double dividends of industry growth and market share increase in the future, further strengthening its advantage. (3) Compound seasoning: currently, the penetration rate of compound seasoning in China is only 25.4%, compared to over 50% in mature markets such as Europe, the United States, and Japan, indicating ample room for growth and strong future momentum. Optimistic about the long-term development of Western compound seasoning leader Shanghai Bolex Food Technology and Chinese compound seasoning leaders Sichuan Teway Food Group, Qingdao Richen Food. Investment Recommendations The sector is currently in a phase of low valuation and institutional underweighting, with stable demand at the bottom and gradual improvement in policy environment. Significant reduction in industry capital expenditures and a shift from price wars to a more rational competitive situation. In addition, with leading companies taking proactive actions in new products and channels (membership-based supermarkets/new retail), mergers and acquisitions, and research and development, they have a high level of certainty and resilience. It is recommended to "look at large caps for allocation and small caps for flexibility", focusing on the performance improvement of Anjoy Foods Group (603345.SH), Ligao Foods Co., Ltd (300973.SZ), Qianhe Condiment And Food (603027.SH), as well as the growth flexibility brought by new channels and category expansions of Sichuan Teway Food Group (603317.SH), GUOQUAN (02517), and Zhengzhou Qianweiyangchu Food Co., Ltd (001215.SZ). Risk Warning Macroeconomic performance falls short of expectations, raw material costs rise, and food safety risks.