China Galaxy Securities: The defensive and configuration value of the consumption sector stands out, it is recommended to pay attention to high-quality industry leaders.

China Galaxy Securities released a research report stating that the consumer sector is showing strong defensive attributes in the current market environment, with increased dividend levels and dividend yield providing support. The focus is on the consumer stimulus policies in the second half of the year. The worst period for real estate may have passed, which is beneficial for stabilizing residents' financial expectations and improving consumption. Maotai has continuously raised prices on the Maotai platform, which is indicative of market trends. Currently, the defensive and allocation value of the consumer sector is highlighted, and it is recommended to pay attention to high-quality industry leaders. Key points from China Galaxy Securities: Defensive and allocation value highlighted in the consumer sector 1) Since 2021, the SW consumer index has been under pressure in the market, with declines of 8.05%/14.63%/13.24% in 2021-2023, stabilization in 2024-2025 at -1.14%/+2.72%, mainly driven by consumer stimulus policies such as trade-in policies during this period. Since the beginning of 2026, the market style has favored technology, combined with weak consumer fundamentals, leading to a 16.81% decline in the SW consumer sector. 2) The consumer sector is showing strong defensive attributes in the current market. From early July to July 17th, the Shanghai and Shenzhen 300/ChiNext/ChiNext 50 indices declined by 9.04%/21.05%/22.30%, while the SW consumer index rose by 1.09% this month, showing significant relative returns. 3) After a long adjustment period, the consumer sector's holdings are low, and chips have been significantly cleared. As of 26Q1, the consumer sector holdings (SW textiles/applicances/agriculture/light industry/commerce/social services/food and beverages) accounted for 8.50% of the total market value of actively managed fund's top holdings, significantly lower than the peak of 23.46% in 22Q4. 4) The current consumer sector has seen an increase in dividend levels, with dividend yield providing support. As of July 17, 2026, the dividend yields of SW food and beverages/home appliances over the past 12 months were 4.34%/3.95%, respectively, while the other SW consumer sectors had low absolute dividend yields due to industry characteristics, but still at relatively high levels in recent years. Focus on the strength of consumer stimulus policies in the second half of the year 1) Since July 2024, the government has been stimulating consumption with various policies. Since the beginning of 2026, the stimulus policies for consumption have been weaker than in 2025, leading to a decline in consumption subsidies, and the market has reacted sufficiently to this. 2) From January to June 2026, consumption business saw a poor performance, up by 1.3% year-on-year. Against this backdrop, on July 13th, the State Council issued the approval of the "Expanding Consumption in the 'Fifteenth Five-Year Plan'" article, which basically continues the train of thought of the previous "Fifteenth Five-Year Plan," making systematic deployments in 6 aspects and 28 key tasks. By 2030, the overall scale of the consumption market will continue to expand, with a significant increase in the residents' consumption rate, rapid growth in the total retail sales of consumer goods in society, reaching around 60 trillion yuan (CAGR 3.7% from 2025 to 2030). Stabilizing rebound in the primary housing market signals leading consumer recovery 1) In recent years, the long-term decline in housing prices has led to a decline in residents' wealth and purchasing power. The primary housing market began to rebound in 2026Q1, with increased transactions in 2026Q2. According to data from the China Index Research Institute, a "mini spring" market appeared in some core cities in March, with transactions in Shanghai/Beijing second-hand homes up by +6%/+3% year-on-year on high base numbers; 20 cities saw a year-on-year increase in transactions of second-hand homes in April/May/June, with Shanghai increasing by +24%/+31%/+23% respectively, and Beijing and Shenzhen also showing positive trends. 2) The prices of second-hand homes in first-tier cities have started to rebound from the bottom. According to data from the National Bureau of Statistics, since March 2026, the sales price index of second-hand residential properties in first-tier cities among the 70 large and medium cities has changed from a decline to a continuous rise, with increases of +0.4%/+0.4% / +0.4%/+0.3% from March to June. This indicates that the worst period for real estate may have passed, which is beneficial for stabilizing residents' financial expectations and improving consumption. Maotai has raised prices multiple times this year, a signal that high-end liquor consumption has bottomed out In recent years, the wholesale prices of high-end liquor have continued to decline, with Maotai's prices acting as a leading indicator of consumer market trends. Since 2026, Maotai has continuously raised prices on its platform, indicating market trends. The prices on Maotai's platform are lower than those on public e-commerce platforms, making it a lever for the company to rapidly increase sales and capture demand from customers. Since the increase in sales volume on Maotai's platform in 2026, public platforms have been able to maintain a relative premium, indicating that there is no excess inventory of Maotai. Starting from midnight on July 18, the retail price of a 500ml bottle of 53% vol Maotai on the Maotai platform was raised from 1539 yuan/bottle to 1639 yuan/bottle, and the sales contract price was raised from 1269 yuan/bottle to 1369 yuan/bottle, an increase of 100 yuan per bottle. The continuous price hikes indicate that Maotai's current sales pressure is not significant. Risk warning: Risks of policies being implemented below expectations; risks of insufficient consumer demand; risks of intensified market competition.