The food and beverage sector halted its decline and moved higher today (March 5). The Huabao Food and Beverage ETF (515710), which reflects the overall performance of the sector, traded in positive territory after opening and was up 0.54% at the time of writing.
Among the constituent stocks, consumer staple stocks led the gains, with some baijiu stocks also performing strongly. At the time of writing, Haitian Flavouring & Food was up over 2%, while Lianhua Holdings, Dongpeng Beverages, Yingjia Liquor, and several others rose more than 1%.
Aijian Securities noted that as policy pressures gradually ease, baijiu demand is expected to recover gradually, catalyzed by policies aimed at boosting consumption. The industry is currently at a low valuation level with pessimistic expectations fully reflected. It is anticipated that the path for industry consolidation will become clearer, making the bottom more evident. Efforts to control volume and stabilize prices are pushing up wholesale prices, with the recovery in Pu Fei wholesale prices showing a positive signal first. Leading baijiu companies are increasing dividend payout ratios, enhancing dividend yields and creating some allocation appeal.
From a valuation perspective, the food and beverage sector remains at a low level. Data shows that as of yesterday's close (March 4), the PE ratio of the Segmented Food Index, which the Food ETF (515710) tracks, was 19.19 times, sitting at the 1.57th percentile over the past 10 years, highlighting the cost-effectiveness of medium to long-term allocation.
Looking ahead, Oriental Securities stated that overall, downstream consumer-facing companies might sequentially hit their earnings trough by Q1 2026. It recommends focusing on catering and baijiu. (1) Baijiu: An inflection point for channel inventory appears to have been reached, with an earnings trough likely approaching. The Q1 report could be a watershed for baijiu investment, potentially opening a golden window for annual allocation. (2) Catering supply chain and beer: Expectations are leading; after valuation increases, focus will shift to earnings realization. (3) Beverages, snacks, and food retail: These segments offer potential for absolute returns. From an earnings certainty perspective, focus on companies with channel or category growth potential, and those benefiting from cost-side improvements leading to earnings recovery.
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A golden cross signal has formed in the MACD indicator, and these stocks are performing well.
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