According to the Zhitong Finance and Economics APP, Soochow Securities released a research report stating that the investment strategy for food and beverage in 2024 is low-value quality certainty growth + high dividend yield, with an emphasis on operational improvement. Pay attention to the continuous accumulation of stable policies and changes in risk appetite. Under a neutral hypothesis, the volatility in 2024 is still similar to that of 2022, and low-level layout is more rational. For baijiu, the fundamentals are strong in the long term and the target is to increase market share. Also, optimistic about the dividend yield varieties supported by cash flow, the short-term layout expectations will not mask the long-term value recognition. Food and beverage/baijiu have an average dividend payout rate of 60% and have fallen back in valuation, entering the high dividend stock camp, and have a higher probability of increasing dividends further.

Soochow Securities believes:

Hold positions for csi sws food & beverage index actively managed equity funds in Q2 24 have dropped to a new low since 2018.

The active equity fund food and beverage heavy position ratio in 23Q2-24Q2 were 12.20%, 13.32%, 12.28%, 12.26%, and 8.64%, respectively, a 3.62pct decrease from 24Q2 (超配比例环比下降2.96pct). The major reasons for this are: 1) at the macro level, in the wave-like economic recovery process of 24Q2, there is cyclical expectation volatility. 2) At the industry level, 24Q2 sales are slow, and most brands are mainly digesting inventory. The strength of full-year revenue realization needs to be observed later. 3) At the fund level, along with concerns about domestic demand, market allocation is more inclined to focus on dividend and offshore-related targets, such as dividend targets such as hydropower, nuclear power, coal, midstream manufacturing with offshore logic related to the apple industry chain (TMT), etc.

All sub-sectors have reduced their positions to new lows since 2018.

24Q2 baijiu holding ratio decreased by 3.05pct to 7.53% compared to the previous quarter. The active equity fund baijiu holding ratio at the end of each quarter in 23Q2-24Q2 were 9.91%, 11.50%, 10.46%, 10.58%, and 7.53%, respectively. The holding ratios of beer, drinks and dairy products, food processing, snack food, seasoning and fermentation products, and pre-packaged liquor all decreased compared to the previous quarter, and the active fund holding ratios decreased by -0.24pct, -0.07pct, -0.09pct, -0.10pct, -0.05pct, and -0.02pct, respectively.

Major consumer fund liquor holdings have been significantly reduced, and the remaining active fund baijiu holdings have been reduced to a low allocation.

The bank distinguishes active equity funds as major consumer funds (active equity funds holding baijiu with a scale of more than 1 billion yuan) and other active funds, and separately calculates changes in positions: 1) The major consumer funds' 24Q2 food and beverage sector holdings decreased by 10.98pct compared to the previous quarter to 41.68%, with baijiu and beer holdings decreasing by 9.09pct and 1.69pct, respectively. 2) The other active funds' 24Q2 food and beverage sector holdings decreased by 2.35pct compared to the previous quarter to 4.63% and and are currently low allocated. Among them, baijiu holdings decreased by 1.97pct to 3.63%, and sub-sectors such as drinks and dairy products, food processing, snack food, seasoning and fermentation products have reached a low allocation level.

The major baijiu holdings have significantly reduced positions, and Gujing has dropped out of the top 20.

As of the end of Q2 24, among the top 20 active funds' heavy positions, 4 of them belong to the food and beverage sector, all of which are liquor symbols, respectively Kweichow Moutai, Wuliangye Yibin, Luzhou Laojiao, and Shanxi Xinghuacun Fen Wine Factory, a decrease of 1 from the end of Q1 (Anhui Gujing Distillery). Among them, Kweichow Moutai and Luzhou Laojiao's holdings ratio and quantity decreased the most. Kweichow Moutai's position ranking fell to second place compared to the end of Q1 24, and the proportion of active fund heavy positions at the end of Q2 24 was 2.63%, down 1.11% from the previous period, and the number of heavy positions held decreased by 21.6% compared to the previous period. Wuliangye Yibin's holdings ranking fell to 8th place, and the proportion of active fund positions at the end of Q2 was 1.35%, down 0.55% from the previous period, and the number of shares held decreased by 18%. Luzhou Laojiao's holdings ranking fell 8 places to 11th, and the proportion of active fund heavy positions at the end of Q2 was 1.23%, down 0.69% from the previous period, and the number of heavy positions held decreased by 20.5% compared to the previous period. Shanxi Xinghuacun Fen Wine Factory's holdings ranking fell to 13th, and the proportion of active fund heavy positions at the end of Q2 was 0.97%, down 0.29% from the previous period, and the number of heavy positions held decreased by 14.0% compared to the previous period. Anhui Gujing Distillery fell out of the top 20 holdings.

Individual stock holdings decreased across the board, with some outstanding stocks adding positions in the low range of the previous period.

The top 5 active fund heavy positions with the highest increase in holdings compared to the previous period in Q2 24 were: Mengniu Dairy, Chongqing Brewery, Hebei Hengshui Laobaigan Liquor, Beijing Yanjing Brewery, and Anjoy Foods Group. In the baijiu sector, Hebei Hengshui Laobaigan Liquor has performed positively in both middle-high-end shipments and active marketing actions so far this year, with relatively better business elasticity, increasing the proportion of heavy positions of active funds compared to the previous period. In the beer sector, Yanjing Brewery and Chongqing Brewery have increased their holdings compared to the previous period due to the implementation of reforms and accelerated realization of raw material declines, while China Res Beer has decreased compared to the previous period. In the food sector, the main added stocks are: Mengniu Dairy, which is at a low valuation, and Anjoy Foods Group.

Risk reminder: There is a lack of information disclosure and samples, and there may be lag in data statistics.