February 23, 2026 01:41 PM GMT China/Hong Kong Consumer | Asia Pacific Post-CNY F&B and Gold & Jewelry Channel Check Takeaways The call with a multi-categories distributor reflects improvement in demand in this CNY holiday season, which is in line with market expectation and our previous pre-CNY channel checks. Key Takeaways Liquor - Moutai and WLY saw growth YTD in the distributor's regions as lower pricing drove good volume. They have completed their Feitian Moutai orders for 1Q (40% of annual budget). La ...

Summary of the Conference Call Industry Overview - **Sector**: China Consumer Sector - **Key Themes for 2026**: 1. **Lukewarm Demand**: Overall retail sales growth slowed to 1.3% YoY in November 2025, down from 2.9% in October 2025, with forecasts of 2.6% growth in 2026 and 2.5% in 2027, reflecting a deceleration in GDP growth to 4.5% in 2026 and 4.1% in 2027 [10][10] 2. **Price Deflation**: Persistent price deflation in consumer products, with significant price drops in categories like apparel and catering, impacting overall industry profitability [10][10] 3. **Consumer Preferences**: Young adults are prioritizing differentiated design, experience, and social value in their purchases [2][2] 4. **Overseas Expansion**: Companies are expected to expand internationally to counteract slow domestic growth, facing operational risks such as tariffs and supply chain management [10][10] 5. **Aging Demographics**: Challenges and opportunities arise from an aging population, with a decline in birth rates and a growing proportion of individuals over 65 years old [10][10] Financial Projections - **Earnings Growth**: Sector sales and earnings are projected to grow by 7.1% and 12.2% YoY in 2026, respectively, with a projected earnings CAGR of 10.3% from 2025 to 2027 [6][6] - **Valuation**: China consumer stocks are trading at 17x 2026E P/E, compared to ASEAN's 19x, Japan's 28x, and India's 54x, with a dividend yield of 4.2% [6][6] Investment Recommendations - **Top Picks**: - **Laopu**: Expected to benefit from experience-led growth with a disciplined store count and strong earnings growth of 40% in 2026 [20][20] - **Luckin**: Forecasted to achieve a 28% increase in net profit, driven by a consumer-centered vision and strong digitalization [20][20] - **Guming**: Anticipated to net add 3.3k stores in 2026, with a 20% YoY increase in core net profit [20][20] - **Mao Ge Ping (MGP)**: Positioned to benefit from experience-driven consumption trends, expecting 30% earnings growth in 2026 [20][20] - **YUMC**: Strong growth expected from KFC and a turnaround for Pizza Hut, with a target of 30K stores by 2030 [20][20] - **Pop Mart**: Despite recent stock price declines, expected to maintain strong earnings with a focus on new product launches [20][20] - **Top Avoids**: - **Bud APAC**: Concerns over weak consumption sentiment and high-end market exposure, with forecasts of declining sales and EBITDA [27][27] - **Yanghe**: Risks associated with channel inventory build-up and rising competition [27][27] Additional Insights - **Consumer Behavior**: Consumers are expected to continue spending on affordable treats and differentiated products, with a focus on experiences rather than price [10][10] - **Market Dynamics**: Increased competition is leading to accelerated consolidation within the industry, with leaders expected to gain market share through cost-saving initiatives and digital technologies [10][10] - **Demographic Trends**: Marriage registrations dropped significantly, indicating a shrinking young population and potential further declines in birth rates [12][12] This summary encapsulates the key points from the conference call, highlighting the current state and future outlook of the China consumer sector, along with specific investment recommendations and potential risks.

Investment Rating - The report maintains an "Overweight" rating for several companies in the China consumer space, including Laopu, Pop Mart, Luckin, Guming, Mixue, MGP, YUMC, Nongfu, Anta, Yili, CR Beer, BSD, WHG, Hengan, Tingyi, and UPC [2][28]. Core Insights - Companies are "cautiously optimistic" about the 2026 outlook, not assuming additional stimulus policies in their budgets, which could provide upside risk if implemented [2][6]. - Major drivers for sales growth in 2026 include more value product launches, efficiency improvements, and overseas expansion [2][6]. - Leading companies are committed to increasing shareholder returns through dividends and buybacks to compensate for low visibility in business growth [2][6]. Summary by Relevant Sections Consumer Sector - Overall consumption stabilized in Q3 2025, with a significant recovery expected to be challenging without policy support [6]. - Companies are maintaining light channel inventory and rational promotional levels in Q4 2025, anticipating that shipments for the 2026 Chinese New Year holiday sales will be booked in Q1 2026 [6]. - Sales and EPS growth rankings by sector indicate strong growth in IP and soft drinks, followed by sportswear and OEM, home appliances, and QSR restaurants [6]. Shareholder Returns - Companies are increasing their dividend payout ratios, with CR Beer targeting 60% in 2025 and 70-80% over the next 2-3 years [7]. - Yili plans to raise its dividend payout ratio from 70%+ to 75%+ from 2025 to 2027 [7]. - Midea and YUMC are also expected to implement significant buyback programs, with Midea planning over RMB 10 billion for 2025 [7]. Company-Specific Insights - CR Beer expects to drive revenue growth through premiumization and product differentiation, with a focus on maintaining earnings and margin guidance [11]. - WH Group anticipates a decline in hog prices in both China and the US for 2026, while targeting MSD volume growth in packaged meat [11]. - Nongfu Spring aims for double-digit revenue and earnings growth in 2026, with a focus on enhancing market share in bottled water [15]. - Tingyi maintains a DD earnings guidance for 2025, despite pressures in the non-carbonate beverages segment [15]. - Haier targets sales growth of MHSD and OP margin expansion, with plans for significant investment in the US market [20].