China Securities believes that there are three investment themes worth noting in the food and beverage sector in the second half of the year: high-growth leaders, high-dividend and potential dividend-yielding stocks with abundant cash reserves, and undervalued symbols with potential for marginal improvements.
In the first half of the year, the food and beverage industry was weakly covered by the reopening, and the recovery of the dining chain was slower than expected. Beers, frozen foods, and B-end condiments showed weaker recoveries, while the baijiu sector slightly exceeded expectations during the Spring Festival due to more returning visitors and the festive effect, and consumption was relatively flat after entering the off-season in the second quarter. Currently, the market has low expectations for the sector. China Securities believes that the valuations of the leading companies have fallen, and the sector has long-term allocation value.
Looking forward to the second half of the year, China Securities believes that the food and beverage industry is expected to achieve a moderate recovery against the backdrop of continuous macro policies and consumer stimulus policies, which are closely related to residents' income expectations and the trend of CPI. Against the background of accelerating concentration differentiation in the baijiu sector, leading liquor companies will accelerate the harvest of industry shares. The probability of achieving the annual performance target of leading companies is higher; benefiting from cost reductions and efficiency improvements, the profit margin of popular product sectors is expected to stabilize and increase.
China Securities maintains its profit forecast and valuation of food and beverage stocks with a preference for H shares, such as Uni-President Enterprises Corp. (00220.HK), Tingyi (Cayman Islands) Holding Corp. (00322.HK), Want Want China Holdings Limited (00288.HK), Vintage Wines Estate Ltd. (06979.HK), Tsingtao Brewery Co., Ltd. (00291.HK), China Mengniu Dairy Co Ltd (02319.HK), and Yihai International Holding Ltd. (01579.HK).