Orient Securities released a research report stating that 2026 may serve as a turning point for the food and beverage (F&B) industry, where upward momentum is more likely than a downturn, with performance being the core concern. The firm believes that from 2021 to 2024, the F&B sector primarily focused on digesting valuation bubbles through earnings releases. By the end of 2025, sector valuations have returned to historical lows, but weak consumer spending power and other factors have led to downward revisions in earnings, shifting the core focus back to fundamentals—specifically, performance.
**Key Views from Orient Securities:**
**Fundamentals: Transition from Structural Dividends to Aggregate Recovery, Balancing "Old" and "New"** The report suggests that as economic restructuring progresses and household balance sheets recover, 2026 could mark an inflection point in demand. For some time, the "L-shaped demand curve" and "structural consumption trends" may coexist, with new consumption sectors maintaining strong performance while traditional sectors undergo earnings adjustments. Over time, consumption is expected to witness both aggregate recovery and structural prosperity, with both traditional and new consumption sectors likely to see upward earnings revisions. Traditional sectors, in particular, may demonstrate earnings elasticity.
**Embracing "Old" Consumption: Demand Bottoming Out, Operational Improvements** For traditional consumption, the report identifies liquor as the best indicator for 2026. It forecasts that liquor sector earnings may undergo significant downward revisions in the first half of 2026 before entering a phase of sequential improvement, signaling a bottoming-out for F&B performance. Additionally, segments like frozen food, condiments, dairy, and beverages within the foodservice supply chain show healthy inventory levels and low earnings bases, with some companies leveraging competitive advantages to achieve earnings rebounds or profit expansion. For liquor, once earnings hit an "L-shaped bottom," leading companies will strengthen their "bond-like asset" attributes, presenting attractive valuations and potential for stock price appreciation driven by valuation re-rating.
**Welcoming "New" Consumption: Continued Structural Dividends** As a mature industrial economy undergoing structural transformation, China's consumption landscape will retain its "large aggregate, strong structural" characteristics for an extended period, given demographic cycles and external conditions. The report highlights that innovation remains a key driver, with new product categories, channels, and markets continuing to fuel earnings growth in the consumer sector.
**Risk Factors:** 1) Food safety issues; 2) Adjustments in industrial policies; 3) Management team changes.
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