CITIC SEC: The liquor sector has reached a bottom stabilization stage and has a high cost-performance ratio for allocation.

CITIC SEC released a research report stating that looking ahead to the second half of the year, the liquor sector has entered a stage of stabilization at the bottom. According to Wind, the current dividend yield of the liquor sector is approximately 4%, with some leading liquor companies offering yields exceeding 5%, indicating a high cost-performance ratio for allocation. With the recovery of liquor sales, inventory, and fundamentals, along with the catalysts from the Mid-Autumn Festival and National Day peak seasons, the sector is expected to see an uplift. For the beer sector, it is predicted that the industry will experience a moderate recovery in the second half of the year, and combined with the impact of a low base, there will be some fundamental recovery in the industry. CITIC SEC's main viewpoints are as follows: Stocks: In the first quarter of 2026, the Central Huijin Investment Company significantly reduced its holdings while the Central Huijin's position remained stable. From the perspective of the top ten shareholders, since 2026, the Central Huijin Investment Company has noticeably reduced its holdings in some leading liquor and beer stocks. According to the holdings of the Central Huijin Investment Company, from the end of 2022 to 2025, its holdings in leading liquor and beer stocks remained unchanged, but since 2026, there has been a decline in the number of shares held in certain leading liquor and beer stocks. In contrast, the liquor holdings of Huijin Asset Management remained relatively stable. As of the first quarter of 2026, the number of shares held by the Central Huijin Asset Management in some leading liquor and beer stocks remained unchanged. Overall, the reduction in holdings by the Central Huijin has had a significant impact on stock prices. ETF: Since 2026, the redemption volume of key broad-based ETFs has been substantial, leading to continuous net selling in the liquor sector. Twenty-three core broad-based ETFs were selected to conduct statistical data on subscription and redemption (excluding ten broad-based products that heavily invested in liquor stocks, including ChiNext ETF, Sci-Tech Innovation 50 ETF, and others), to assess the overall fund flow in the market. From the overall funding perspective, these broad-based ETFs have continued to encounter net redemptions throughout the year, with a cumulative net redemption amount reaching 1.59 trillion yuan by the end of July. In the first and second quarters of 2026, redemptions totaled 742.6 billion yuan and 346.5 billion yuan respectively, essentially completing significant redemptions. Meanwhile, after analyzing extreme large transaction data where the daily net subscription and redemption scale exceeded 10 billion yuan, it was found that the fluctuations of these abnormal funds were highly synchronized with the market performance of the CITIC liquor index. The peak of selling ended at the end of June, and a marginal improvement in funding is expected to drive a recovery in the liquor sector. The peak of ETF redemptions has basically ended, and with the completion of previous reduction pressures, marginal fund inflows may create strong catalysts. From July 1 to 30, 2026, the CITIC indices for liquor, baijiu, and beer rose by 13.8%, 13.9%, and 15.6% respectively, while during the same period, the Shanghai Stock Exchange 50, CSI 300, CSI 1000, and Sci-Tech Innovation 50 indices saw declines of -2.2%, -7.7%, -19.7%, and -25.3% respectively, meaning liquor stocks outperformed by 16.0%, 21.5%, 33.5%, and 39.1%. Risk factors: Macro consumption demand not meeting expectations; intensifying competition in the baijiu and beer industries; market performance of core baijiu product prices falling short of expectations; inventory risks in the baijiu industry's channels; slower-than-expected recovery in dining consumption; food safety issues, etc.