Group 1: Tongcheng Travel (同程旅行) - The company is expected to achieve a year-on-year revenue growth of 9% and profit growth of 13% in Q3, indicating stable growth despite weak performance in the travel industry due to overseas disruptions [1] - The target price for Tongcheng Travel is set at HKD 25.50, representing a potential upside of 17.6% from the current price of HKD 21.68, maintaining a "Buy" rating [1] Group 2: Tmall International (滔搏国际) - For the first half of the 2026 fiscal year, Tmall International's revenue is projected to decline by 5.8% year-on-year, with a net profit decrease of 9.8% to RMB 790 million, which is in line with expectations [2][3] - The company aims to maintain a flat year-on-year net profit for the full year, with an improvement in net profit margin, despite ongoing sales pressure and increased discounts [2][3] Group 3: Market Overview - The Hang Seng Index closed at 26,160, reflecting a year-to-date increase of 27.24% [4] - Major commodities such as Brent crude oil and gold have shown price fluctuations, with Brent down 11.53% year-to-date and gold up 56.64% [4] - The report highlights the performance of various global indices, with the S&P 500 up 15.47% year-to-date and the Nasdaq up 20.17% [4] Group 4: Economic Data Releases - Upcoming economic data releases include the U.S. durable goods orders for September, expected to decline by 2.7%, and China's manufacturing PMI for October, anticipated to be at 49.80 [5]

Core Viewpoint - The consumption industry has shown strong long-term performance, but it is currently experiencing a downturn due to high valuations in previous years and weak fundamentals [11][23][41]. Group 1: Classification of the Consumption Industry - The consumption industry is closely related to daily life and is well-known, typically divided into two categories: essential consumption and discretionary consumption [4][5]. - Essential consumption includes necessary goods such as food and beverages, while discretionary consumption includes items that enhance quality of life, such as automobiles and home appliances [6][7]. Group 2: Long-term Performance of the Consumption Industry - Over the past 20 years, the consumption industry has performed well, with both essential and discretionary consumption yielding returns that rank among the highest in the market [12]. - Essential consumption has the highest returns among all industries in the A-share market, while discretionary consumption also significantly exceeds the average market return [12]. Group 3: Historical Bull and Bear Markets - The consumption industry has experienced four bull and bear market cycles since the end of 2004, with notable periods of growth and decline [14][16]. - The first cycle (2004-2008) saw a significant rise followed by a sharp decline due to the financial crisis, with the consumption index dropping over 70% in one year [18]. - The second cycle (2008-2014) included a recovery driven by government stimulus, but faced challenges from rising interest rates and food safety concerns [18]. - The third cycle (2014-2018) was marked by a rebound due to interest rate cuts, but ended with a downturn influenced by trade policies [18]. - The fourth cycle (2018-2025) began with rapid growth but has recently entered a phase of decline [18][19]. Group 4: Current Market Conditions - The consumption industry is currently in a relatively low phase, with the A-share consumption index showing only slight increases compared to the broader market [20][19]. - The downturn is attributed to high valuations in 2021 and ongoing weak fundamentals, leading to a dual impact of declining valuations and profit growth [23][26]. Group 5: Investment Considerations - When investing in the consumption industry, it is crucial to buy during periods of low valuation and hold until high valuation [35]. - It is advisable to limit investment in individual sectors to 15%-20% to manage volatility [36]. - Regular updates on valuation metrics are available through specific platforms for informed investment decisions [37][41].

Investment Rating - The report maintains a cautious investment stance on the consumer sector, particularly highlighting concerns over low-income consumer behavior and the impact of tariffs on essential goods [4]. Core Insights - The consumer confidence index has declined, with the Michigan Consumer Sentiment Index dropping to 58.6 in August from 61.7 in July, marking a 5% decrease and falling below market expectations [7]. - Retail sales data remains resilient, with July retail sales reaching $726.28 billion, a year-on-year increase of 3.9% [7]. - Inflation remains moderate, with the Consumer Price Index (CPI) rising 0.2% month-on-month and 2.7% year-on-year in July, slightly below expectations [9]. - Employment data shows a significant downward revision, with only 73,000 non-farm jobs added in July, far below the expected 110,000 [14]. Macroeconomic Overview - Consumer confidence has weakened, with inflation concerns rising. The short-term inflation expectation increased from 4.5% to 4.9% [7]. - Retail sales growth is dependent on policy incentives and promotional activities, while consumer concerns about prices and unemployment persist [7]. - The CPI is influenced by declining energy prices and initial tariff effects, with core CPI reaching 3.1%, the highest this year [9]. Essential Consumption Insights - Beverage sales show marginal weakness, while tobacco data has rebounded. Alcohol and dairy sectors continue to exhibit weakness [27]. - Alcohol retail sales in June were $5.95 billion, down 3.3% year-on-year, indicating limited resilience in sales [27]. - Dairy product shipments totaled $13.61 billion in June, with a year-on-year increase of 1.6%, reflecting a relatively flat performance [31]. - Tobacco shipments reached $6.05 billion in June, up 7.3% year-on-year, with a CPI increase of 6.5% [33]. Discretionary Consumption Insights - Restaurant and department store sales show marginal weakness, while clothing sales have improved [35]. - Restaurant retail sales in July were $98.3 billion, a year-on-year increase of 5.6%, but a month-on-month decline of 0.4% [35]. - Department store sales reached $77.39 billion in July, up 2.3% year-on-year, but still below overall retail sales growth [38]. - Clothing retail sales in July were $26.63 billion, up 5.0% year-on-year, with expectations of price increases due to tariffs [40]. Market Performance and Valuation - The discretionary consumption sector performed well, with an 8.2% increase, while the essential consumption sector declined by 1.7% [4]. - The essential consumption ETF saw a net inflow of $120 million, while the non-essential consumption ETF experienced a net outflow of $650 million [4]. - The median valuation for leading food and beverage companies in the U.S. stock market was 24x at the end of July, indicating a relatively high valuation level [4].