Haitong Securities International·2025-11-10 08:26Investment Rating - Investment advice favors growth targets in beverages, food ingredients, and snacks, while revising expectations for Chinese baijiu [6][18]. Core Insights - The report highlights a focus on low valuation and high dividend yielding stocks within the soft drink sector, indicating potential for fundamental and valuation recovery as competition eases and consumer power improves [10][18]. - Chinese baijiu sector shows a significant decline in Q3, with revenues down 18% year-on-year and net profits down 22%, indicating a need for destocking and potential for market stabilization [7][18]. - The report emphasizes the importance of innovative supply and channel strategies among liquor companies to seek growth despite demand pressures [8][18]. Summary by Sections Investment Recommendations - Focus on flexible targets in Chinese baijiu such as ZJLD, Shede Spirits, and Luzhou Laojiao, while mid-term stable targets include Wuliangye and Kweichow Moutai [6][18]. - In the beverage sector, key growth targets include Eastroc Beverage and Nongfu Spring, alongside high dividend, low valuation options like Uni-President China and Want Want China Holdings [6][18]. - Snack and food ingredient growth targets include Three Squirrels and Guilin Seamild Foods, while beer targets include Tsingtao Brewery and China Resources Beer Holdings [6][18]. Baijiu Sector Analysis - Q3 reports indicate a significant revenue decline for the baijiu sector, with Moutai emphasizing high-quality growth and announcing a new dividend and buyback plan to boost market confidence [7][8][18]. - The report notes that the industry is still in a destocking phase, with potential for capital markets to bottom out early despite ongoing demand pressures [7][18]. Consumer Goods Sector Insights - The soft drink sector is highlighted for its high return on equity (ROE) and good cash flow characteristics, making it a quality dividend asset [10][18]. - Recent performance of Uni-President China shows a profit of RMB 2.01 billion for Q3, marking a 23.06% year-on-year increase, indicating strong growth potential [11][18].