Guosen: The holiday season is helping to boost sector prosperity, and we continue to have a positive outlook on high-quality companies in niche markets.

Guosen released a research report stating that the disturbance of rising oil prices affects travel expectations, leading to adjustments in previously strong sectors such as hotels and scenic spots; individual stocks are performing well supported by certainty in earnings expectations. In sub-industries, Qingming data shows resilient growth, short-term oil price sentiment disturbance, optimism for a combination of diversified transportation, and the continuation of the May Day holiday combined with the Spring Festival holiday to boost the leisure tourism market; attention is paid to the performance of tea drinks after an increase in the base, and the preference for leading companies in the catering industry. Current policies are focusing on optimizing holidays and expanding scenes to boost the development of domestic services. Guosen's main points are as follows: Market Review From March to now, the A-share social service sector fell by 10%, and the Hong Kong stock social service sector fell by 7%. The previously strong travel chain is making up for the decline, with some strong individual stocks leading the way. From March 1 to April 14, the A-share consumer service sector fell by 10.13%, underperforming the Shanghai and Shenzhen 300 by 9.93 pct; the Hong Kong consumer service sector fell by 6.69%, underperforming the Citic Hong Kong Stock Connect Index by 2.78 pct. The disturbance of rising oil prices affects travel expectations, leading to adjustments in previously strong sectors such as hotels and scenic spots; individual stocks such as Shanghai Action Education Technology and GUOQUAN are performing well supported by certainty in earnings expectations. Industry Tracking The consumer market is relatively stable, with service consumption outperforming goods consumption, and the price increase for travel in March is gradually slowing down. From January to February, China's total retail sales of consumer goods increased by 2.8% year-on-year, relatively stable. Structurally, in January-February, service consumption/goods consumption/catering consumption increased by 5.6%/2.5%/4.8% respectively; the growth in education and entertainment expenditures in 2025 has remained in double digits, and optional service consumption is showing structural prosperity. In March, service prices rose by 0.8%, a decrease of 0.8 percentage points from the previous month; the price increases for travel agency fees, hotel accommodation, airline tickets, and transportation rentals fell between 0.9% and 3.3%. Sub-industries Travel chain: Qingming data shows resilient growth, short-term oil price sentiment disturbance, optimism for a diverse transportation combination, and the combination of May Day holiday and Spring Festival holiday extending to boost the leisure tourism market. During the Qingming holiday, domestic travel volume/income increased by 6.8%/6.6% year-on-year. In the short term, the rise in oil prices and the reduction of flights by some international airlines have triggered concerns about travel costs in the market, suppressing sector performance sentiment; however, considering the diverse alternative domestic transportation, the entry of silver-haired tourists into the prosperity cycle, and the extension of the Spring Festival holiday system in many places extending the demand for parent-child travel, the overall outlook for leisure travel is positive. The sector recommends trading opportunities for scenic spots driven by calendar effects and events, as well as leading hotels benefiting from improved supply-demand patterns; in addition, the OTA sector's valuation has fallen back to a historically low range, with a focus on the pace of anti-monopoly regulation landing. Chain catering and tea drinks: Tea drinks are concerned about same-store performance after an increase in the base, while chain catering prioritizes leading companies. Against the backdrop of decreasing subsidies for takeout and gradually increasing base figures starting in Q2, same-store performance for tea drinks has become a core indicator to confirm the quality of the brand, and priority is given to leading chain tea and catering companies with strong product capabilities, supply chains, and profitability attributes. Among them, companies with three protective measures are expected to have relatively higher returns: 1) Extending operating hours and customer base through category expansion, store type adjustments, etc., to offset high base disruptions; 2) Actively managing channel structures (moderately adjusting the proportion of takeout, differentiating pricing on the takeout end); 3) Continuation of high-quality store opening pace or solid stock performance with steady progress in new brand development. In terms of platforms, attention is focused on the progress of quarterly profitability recovery for leading players as competition slows down. Education: Choose empowering employment-related quality leaders, focus on trading opportunities during the peak season before the college entrance examination. With the expectation of boosting domestic demand, we continue to favor education sectors that empower employment, and taking into account the seasonal characteristics of operations, we recommend leading companies in the entrepreneur training sector, such as Shanghai Action Education Technology and CHINA EAST EDU. In addition, it is suggested to pay attention to potential seasonal prosperity trading opportunities in personalized tutoring businesses related to the countdown to the college entrance examination for Xueda(Xiamen)Education Technology Group. Investment Recommendation Currently, policies are being implemented from various dimensions such as holiday optimization and scene expansion to boost the development of domestic services. In the current economic environment and market style, it is recommended to allocate to companies such as Hubei Three Gorges Tourism Group, Wuhan Sante Cableway Group, Anhui Jiuhuashan Tourism Development, HWORLD-S, Shanghai Jin Jiang International Hotels, , BTG Hotels, GUMING, HAIDILAO, GUOQUAN, YUM CHINA, China Tourism Group Duty Free Corporation, Shanghai Action Education Technology, CHINA EAST EDU, Xueda(Xiamen)Education Technology Group, etc. Risk Warning: Systemic risks such as macroeconomic conditions and epidemics; policy risks; risks of lower-than-expected acquisitions, shareholder reductions, changes in market fund styles, etc.