Huachuang Securities: Performance differentiation in the off-season of the food and beverage industry, industry leaders actively seeking change.

Huachuang Securities released a research report stating that current uncertainties such as consumption demand and cost fluctuations still exist. High-quality enterprises are actively seeking new paths for transformation, and product innovation and diversified layout are steadily recommended. It is optimistic about enterprises that actively seek change and have outstanding product strength to increase market share. The signal of the industry bottom is becoming clearer, with differentiation in Baijiu, and performance is king for mass market products. The fundamentals of the current sector are more clear at the bottom, with market expectations and positions gradually building at the bottom. It is more important to focus on the fundamentals and prioritize targets that are leading the way in recovery to the right side. Huachuang Securities' main points are as follows: Feedback on alcohol: Off-season demand continues to be weak, alcohol companies generally deepen internal skills and improve cost-effectiveness Since April, it has entered the off-season, with overall weak demand for alcohol, price pressures, alcohol companies generally reducing channel costs, and improving operational efficiency. Specifically, in terms of product categories, the sales in the Baijiu industry are expected to decrease by double digits since April, with leading Maotai showing relatively strong performance in terms of quantity and price, and most brands seeing a slight decrease in wholesale prices. The sales of Huangjiu have grown, with leading companies actively pursuing high-end and young products, which has shown some initial effects and relatively controllable channel inventory. Feedback on mass market products: Off-season demand in Q2 of 26 is stable, with performance expected to continue to improve First, the deepening of channel reforms, traditional supermarkets gradually stabilize customer flow, and member stores and snack retailers become the core engine of growth. Companies are moving away from blind expansion of outlets to focus on existing stores and opening up new channels. Second, the continuous optimization of product structures, with companies actively exploring new growth curves. Third, the profitability of leading enterprises is steadily improving, with the net profit margin of Salt Lake and New Hope Dairy expected to stabilize and increase in 26. Alcohol: Fundamentals are accelerating at the bottom, focus on turning points, and prefer Maotai for the whole year After the holiday, overall demand for Baijiu is weak, with alcohol companies generally increasing their investment in cost and improving operational efficiency. Looking at the whole year of 26, alcohol companies transition from passive response to active adjustment, focusing on Maotai after the wholesale price stabilizes, expecting a bottoming out. In terms of the cycle, the 25H2 sector overcorrects and increases pressure, 26H1 alcohol companies actively adjust and see some light, and 26H2 is expected to gradually improve with turning points. It is recommended to prioritize Maotai as a leader throughout the cycle, followed by focusing on Gujing and Jiangsu King's Luck Brewery for faster bottoming rhythm, continuously recommend Wuliangye Yibin and Fenjiu for stable operations, and pay attention to the elasticity of low-base rebound varieties such as Laojiao. Mass market products: Performance is king, prefer leading companies in the food supply and dairy industry First, structural demand recovery, the catering supply chain and the dairy industry have marginally improved, excellent companies gain market share, and some companies are entering the inventory replenishment stage; second, cost pressure may be reflected in H2, with flavoring ingredients facing the most pressure, and the dairy industry rotation benefits downstream dairy industry leaders. In terms of targets, the catering supply chain recommends Haitian, and prefers Anjing, Yihai, and Babbei; focuses on Zhongju and Tianwei for continued improvement, and the dairy industry recommends Mengniu, Yili, and New Hope Dairy. In addition, the mass retail format and the beverage market are still strong, recommending farmers and Dongpeng as they approach the peak season, and paying attention to BUSYMING and Wanchen; continuously recommending overseas high-growth stocks such as Angel, and strategically recommending CHINA RES BEER, etc. Risk warning: Continuously weak macroeconomic demand, increasing industry competition, rising costs leading to short-term profit pressures.