Wanlian Securities: Significant improvement in profits in the consumer goods manufacturing industry at the beginning of the year. It is recommended to focus on food and beverage, commercial retail, and textile and clothing sectors.

Wanlian Securities released a research report stating that overall, in January-February 2026, the total profits of industrial enterprises above designated size in the country increased by 15.2% year-on-year, achieving a good start to the year. Among them, the performance of the consumer goods manufacturing industry's profits varied, with significant improvements in the profit margins of sectors such as food, agro-food, and textiles, while sectors such as furniture, tobacco, and alcoholic beverages experienced increased pressure on profit margins. Recommendations include: 1) Food and Beverage: the valuation of the food and beverage sector is at a historically low level, with room for recovery. 2) Retail: in the era of consumer stratification, the emotional consumption track of trendy toys, traditional gold, and domestic beauty makeup is booming. 3) Textile and Apparel: factors such as policy support, increased health consciousness, and the rise of outdoor sports driven by events economy are leading to rapid growth in demand for functional clothing. Key points from Wanlian Securities are as follows: Profits of industrial enterprises above designated size in January-February increased rapidly, with accelerated revenue growth From a profit perspective, in January-February 2026, the total profits of industrial enterprises above designated size in the country reached 1.02456 trillion yuan, an increase of 15.2% year-on-year, showing a significant acceleration compared to the full year of 2025, achieving a good start to the year. From a revenue perspective, influenced by factors such as accelerated production and rising product prices, industrial enterprises above designated size in the country achieved operating income of 20.84 trillion yuan, an increase of 5.3% year-on-year in January-February 2026. Profits of several consumer goods manufacturing industries, such as food manufacturing and textiles, have shown significant improvements, while industries such as furniture and tobacco have seen a deterioration in profits In January-February 2026, influenced by factors such as market demand and costs, the profits of the consumer goods manufacturing industry have shown differentiation. Looking at specific industries, among the 13 major consumer goods manufacturing industries, 4 industries, including agricultural and sideline food processing, food manufacturing, textiles, and paper and paper products, achieved year-on-year profit growth, with growth rates of 8.0%, 13.1%, 12.6%, and 6.1% respectively, while profits of the other 9 industries declined year-on-year. Compared to the full-year growth rates in 2025, profits in several industries such as food manufacturing, agricultural and sideline food processing, textiles, textile and apparel, and paper have shown improvements. For example, the profit growth rate of the food manufacturing industry has turned from negative to positive, increasing from -4.6% year-on-year in 2025 to +13.1% in January-February 2026, a 17.7 percentage point increase; the profit growth rate of the textiles industry has turned from negative to positive, increasing from -12.0% year-on-year in 2025 to +12.6% in January-February 2026, a 24.6 percentage point increase; and the profit growth rate of the agricultural and sideline food processing industry has increased from 3.2% to 8.0%, a 4.8 percentage point increase. In addition, the profits in the furniture manufacturing, tobacco products, and alcoholic beverages and refined tea manufacturing industries have deteriorated. For example, the profit in the furniture manufacturing industry has decreased from -12.1% year-on-year in 2025 to -40.0% in January-February 2026, a 27.9 percentage point decrease; the profit in the tobacco products industry has moved from positive to negative, decreasing from +4.5% to -7.8%, a 12.3 percentage point decrease; and the profit decline in the alcoholic beverages and refined tea manufacturing industry has expanded from -9.1% to -17.2%, an 8.1 percentage point decrease. Risk factors: risks include macroeconomic recovery falling short of expectations, trade friction risks, and policy intensification falling short of expectations.