Haitong Securities International·2025-08-04 09:33Investment Focus - The report highlights a focus on structural opportunities driven by policy catalysis, particularly in essential consumer sectors such as dairy products and liquor, while cautioning against the risks in the soft drink sector [7]. Demand Analysis - In July, among the eight tracked essential consumer sectors, six maintained positive growth, while two experienced negative growth. The sectors with single-digit growth included dining (+4.4%), soft drinks (+2.7%), frozen foods (+1.7%), condiments (+1.1%), dairy products (+1.1%), and beer (+0.6%). The declining sectors were high-end and above liquor (-4.0%) and mass-market liquor (-3.9%) [3][9]. - The report notes that five sectors saw a deterioration in growth rates compared to the previous month, while three improved. The new alcohol ban and adverse weather conditions were identified as significant negative factors affecting demand [3][9]. Price Trends - In July, most liquor wholesale prices stabilized after a period of decline. Specific prices included Feitian at 1915/1880/655 yuan for different packaging, with year-on-year declines of 665/500/155 yuan. The price of Wuliangye was 930 yuan, showing a slight increase of 10 yuan from the previous month [3][22][24]. - The report indicates that the prices of liquid milk and beer saw a reduction in discount rates, while soft drink discounts increased, with stable prices for infant formula, convenience foods, and condiments [4][19]. Cost Analysis - The report states that the spot cost index for various sectors, including dairy, soft drinks, frozen foods, and beer, generally decreased in July, while futures cost indices showed mixed results. For instance, the spot cost index for dairy products fell by 2.92% [4]. Fund Flow - As of the end of July, net inflows into Hong Kong Stock Connect amounted to 124.1 billion yuan, with the essential consumer sector's market capitalization share rising to 5.05%. The food additives sector saw a decrease in share, while the dairy sector experienced an increase [5]. Valuation Insights - By the end of July, the historical PE ratio for the food and beverage sector was at 16% (20.2x), remaining stable from the previous month. The report notes that the median valuation for leading A-share companies was 20x, a decrease of 1x from the previous month [6]. Sector Recommendations - The report recommends focusing on sectors benefiting from policy support, particularly dairy and liquor, while being cautious about the soft drink sector's marginal deterioration. Specific companies to watch include China Feihe, Yili, Mengniu, Master Kong, Uni-President, Yanghe, WH Group, and China Foods [7].