Huachuang Securities: The food and beverage sector had a successful start and a smooth conclusion, maintaining steady growth throughout the year.

Hua Chuang Securities released a research report stating that the performance of the liquor sector during the Spring Festival was stable, with a good start to the year. Sales during the Spring Festival peak season were stable, with some regions experiencing demand for adjustments to their products during the festival. Inventory levels of top brands were good, and post-holiday replenishment proceeded in an orderly manner. As the market gradually enters the off-peak season, many liquor enterprises such as Jiangsu King's Luck Brewery Joint-Stock (603369.SH) and Shanxi Xinghuacun Fen Wine Factory (600809.SH) have raised prices, boosting the confidence of distributors. It is expected that batch prices will further increase. Mass market operations are stable and improving, with overseas enterprises showing more positive expectations. Costs are expected to continue to decrease this year, combined with further cost management improvements, profit levels are expected to continue to rise. It is suggested to select structurally flexible stocks, take advantage of oversold opportunities, and restructure the pricing of leading companies. Key points from Hua Chuang Securities: Liquor Sector: Sales during the Spring Festival were stable, with a good start to the year. Sales during the peak Spring Festival season were stable, with some regions experiencing demand for adjustments to their products during the festival. Inventory levels of top brands were good, and post-holiday replenishment proceeded in an orderly manner. With the shift to the off-peak season, several liquor enterprises have raised prices, boosting distributor confidence. Specific feedback from companies and regions is as follows: At the enterprise end: Jiangsu King's Luck Brewery Joint-Stock had better sales feedback than expected, with stable pricing and reasonable channel inventory levels. Jiangsu King's Luck Brewery Joint-Stock, Fnji, Jinnnchn, and other liquor companies have raised prices, boosting distributor confidence, and expected further price increases. At the regional end: 1) The Eastern region had stable sales during the Spring Festival, with good pre-holiday payment progress, but slower post-holiday payments and relatively weak replenishment demand. In terms of brand, Moti's momentum remains strong, Wuliangye Yibin's high-end products perform well, Jinnnchn's growth is slightly weaker, Gjng, Jiangsu King's Luck Brewery Joint-Stock, and Yngh still have room for expansion in the Su and Anhui regions. 2) Sales in the Jiangsu region maintained good growth, with a smooth start to the year, stable overall demand in Jiangsu Province, and strong sales feedback from Jiangsu King's Luck Brewery Joint-Stock, high brand recognition for Wuliangye Yibin, stable gifting demand, and market potential for Fnji. Mass Market: Operations are stable and improving, with more positive expectations for overseas enterprises. The Spring Festival period benefited from an extended holiday and a strong flow of returning home, creating a positive overall consumption atmosphere. However, with buying power still constrained and expectations of moderate demand recovery, mass market enterprises remain cautiously optimistic about their annual operations, steadily advancing new products, channel planning, and internal adjustments to accumulate growth momentum. Enterprises with overseas potential, such as Xin L and Jnyo, have more optimistic expectations and actively accelerate order placements. At the enterprise feedback: 1) New Hope Dairy: The five-year strategic plan is steadily advancing, short-term operations are basically in line with expectations, and VIPs have signed with major B-end customers, and will start supplying goods soon. 2) Junyao: Taste dynamics are steadily recovering, and probiotics BC resonate, with ample growth potential. 3) Chngp: Continuously cultivating and upgrading, strengthening channel construction in 2024, the comprehensive ton production cost reduction due to the amortization of the Foshan factory is slightly lower than the industry average, but price and volume benefits are still expected to grow steadily. 4) Xin L: Strong performance in orders, with high growth expected in Q1. 5) Lgo: The performance during the Spring Festival is in line with expectations, improvements are expected in 2024, and efforts to optimize efficiency are in progress. 6) n Jng: A good start to the Spring Festival, double-digit growth is expected for the whole year in 2024, and profits are expected to remain at a high level. 7) Hirng: Capacity is accelerating release, with profits expected to improve. 8) Rchn: Steady stock-up during the Spring Festival, with potential for increased volume from major customers. 9) Chngung: Plant extracts maintain stability, and new business gradually improves. Please refer to the detailed feedback from each company in the text. Investment strategy: Consolidate the bottom, layout value. The sector's performance during the Spring Festival opening was stable and improving, further solidifying the bottom of operations, to some extent dispelling the market's previous pessimistic expectations. Currently, the leading market price-earnings ratio or free cash flow/market value and other valuation indicators are at a long-term low, but in fact, their business models have excellent free cash flow generation capabilities, and constantly improving competitiveness drives the concentration of market share, bringing about stable growth. Therefore, the current valuation is in the value bottom layout interval. In the short term, the Sugar and Liquor Fair in March-April and the annual report Q1 verification may serve as a catalyst, following the pace of demand recovery. Looking at specific sectors: Liquor sector: Valuation continues to recover, value layout preferred to the "Old Top Four". After the Spring Festival, the warmth of the liquor sector continues, with all indicators showing steady performance. Liquor companies continue to be active, with many major products raising prices, boosting channel confidence, and price levels expected to rebound. Looking ahead, the consumption and business resilience of the liquor sector still exist, and the long-term running logic of the liquor industry reconstruction remains sufficient, continuously squeezing out famous liquors. Specific targets include: firstly, focusing on the core leading companies with certainty such as Moti (sufficient underlying operations, stable performance, and highlighted long-term value), Fnji (expected to continue inertia-based rapid growth, with Spring Festival price recovery); secondly, calculating the bottom line value, looking for oversold recovery, recommending Wuliangye Yibin (excellent Spring Festival sales, high bottom line value) and Lojio (good inventory digestion during the Spring Festival, certainty of operations and consistency in financial statements); continue to recommend regional leaders such as Jiangsu King's Luck Brewery Joint-Stock and Gjng (relatively prosperous market, strong performance certainty). Mass market sector: Select structurally flexible stocksSeize the oversold opportunity, and redefine the pricing of leading companies. Firstly, the beverage sector with clear and flexible mid-term logic, including Dongpeng (strong energy with sufficient reserves, high growth sustainability guaranteed), Zhongju (turnaround in difficulty); secondly, the short-term oversold and clear medium-to-long-term logic of the beer and restaurant supply chain, including CR Beer, Qingdao Beer, Lihua, and Anjing; thirdly, the switch of pricing paradigm for consumption leaders in the middle and low speed era, selecting high dividend yield leaders with excellent free cash flow, recommending Yili, and paying attention to Shuanghui and others.Risk Warning: Terminal demand recovery is lower than expected, industry competition intensifies, and price increases are not achieved as expected.