Dongxing: Cash flow gives a signal of recovery earlier than profits. The main focus of repair in the food and beverage industry is directed towards the catering chain and B-end supply chain.

Dongxing released a research report stating that, generally speaking, cash flow provides an earlier signal of recovery compared to profit, especially in the industry bottom area. Cash flow changes directly reflect channel receivables, inventory turnover, and the pace of enterprise expansion. The total volume of the food and beverage industry is still bottoming out, but structural repair has appeared, with repair focused on the catering chain and B-end supply chain. It is recommended to focus on leading pre-processed food, beer, and seasoning products with strong cash flow repair. For snack foods, health products, and other C-end competitive sectors, it is advised to wait for operational cash flow, cash flow quality, and profit resonance. Key points from Dongxing: - The change in cash flow in 2026Q1 may be a signal of structural recovery in the food and beverage industry. - In 2026Q1, the operating net cash flow of the food and beverage industry increased from -28.98% in 2025Q4 to +20.21%, while free cash flow increased from -32.33% to +32.47% year-on-year. Both cash flow indicators turned positive simultaneously in 2026Q1. Combining 2025Q4 and 2026Q1 data without the Chinese New year impact, the year-on-year operating net cash flow was -27.17%, and free cash flow was -28.21%. With the performance of cash flow in 2026Q1, it indicates that the industry is in a phase of "marginal cash flow repair." Based on the change in free cash flow, this report uses the "Cash Flow Four Quadrant" to select the strength and weakness of sub-sectors in the food and beverage industry. According to the four-quadrant analysis framework, pre-processed food is the clearest direction in the first quadrant, and the seasoning industry saw a double increase in operating net cash flow and free cash flow in 2025Q4 and 2026Q1, so it is also observed in the first quadrant. Beer has negative free cash flow under the Chinese New year impact, therefore it is placed in the second quadrant for observation. Snacks had negative operating net cash flow and positive free cash flow under the Chinese New year impact, so it is placed in the third quadrant for observation. Baijiu had negative operating net cash flow and free cash flow under the Chinese New year impact, indicating that it is still in the phase of clearance and bottoming out, hence it is placed in the fourth quadrant for observation. Overall, the differentiation between B-end and C-end is the most important recovery structural feature of the food and beverage industry in 2026Q1. The high growth in cash flow for pre-processed foods compared to the cash flow pressure in some C-end categories like snacks and health products suggests that the current recovery is more from the repair of the catering supply chain, expansion of chain restaurants, and replenishment of channels. This trend is consistent with the faster growth in the catering and B-end business of listed food and beverage companies. Structurally, some cash flow indicators in pre-processed foods, beer, soft drinks, snacks, and seasoning fermented products have already improved. However, baijiu, meat products, dairy products, bakery products, and cooked foods are still affected by industry cycles, capital expenditure, or base disturbances. Risks warning: Macro-economic recovery falling short of expectations, catering demand recovery falling short of expectations, listed food and beverage companies' performance recovery falling short of expectations, etc.