China Galaxy Securities released a research report stating that during the National Day and Mid-Autumn Festival holidays, overall white liquor sales declined by 20%-30%, showing differentiation across scenarios, regions, and brands. By scenario, business banquet demand remained sluggish, while mass consumption and social gatherings were relatively resilient. In the restaurant sector, National Day travel showed steady growth. According to preliminary statistics from the Ministry of Transport, cross-regional personnel flow from October 1-8 reached approximately 2.432 billion person-trips, averaging 304 million person-trips daily, up 6.2% year-over-year and hitting a historical high for the same period, driving marginal weak recovery. Looking ahead to October, the market will focus primarily on Q3 earnings performance, with relevant high-performing individual stocks and sectors worthy of attention.

China Galaxy Securities' main viewpoints are as follows:

**September Shows Marginal Improvement, National Day and Mid-Autumn Festival Weak Recovery**

**White Liquor Industry:** During the National Day and Mid-Autumn Festival holidays, overall white liquor sales declined by 20%-30%, showing differentiation across scenarios, regions, and brands. By scenario, business banquet demand remained sluggish, while mass consumption and social gatherings were relatively resilient. By region, traditional white liquor consumption provinces like Henan, Shandong, and Jiangsu remained relatively stable. By brand, leading premium liquor brands saw demand recovery, with inventory levels decreasing after destocking in the first half. Taking Kweichow Moutai as an example, the company's autumn market research across sixteen provinces and cities showed that since September, terminal sales of Kweichow Moutai increased approximately 100% month-over-month and over 20% year-over-year, further improving from August.

**Restaurant Supply Chain Industry:** Nine departments including the Ministry of Commerce issued "Several Policy Measures on Expanding Service Consumption," expected to boost consumer confidence. In September, Amap released the "Amap Street Survey Rankings" and simultaneously launched the "Local Business Support Plan," targeting daily average addition of 10 million customer traffic for offline dining and other service industries. National Day travel showed steady growth. According to preliminary statistics from the Ministry of Transport, cross-regional personnel flow from October 1-8 reached approximately 2.432 billion person-trips, averaging 304 million person-trips daily, up 6.2% year-over-year and hitting a historical high for the same period, driving marginal weak recovery.

**Data Tracking: White Liquor Wholesale Prices Under Pressure, Raw Material Costs Differentiated**

White liquor wholesale prices: In September, Feitian case/bottle wholesale prices were 1,790/1,765 yuan, down 40/40 yuan from the previous month and down 600/530 yuan year-over-year. Eighth-generation Wuliangye wholesale price was 840 yuan, down 20 yuan from the previous month and down 120 yuan year-over-year. Jiannanchun 1573 wholesale price was 840 yuan, up 10 yuan from the previous month and down 20 yuan year-over-year. Qinghua 20 wholesale price was 360 yuan, unchanged from the previous month and down 15 yuan year-over-year. Mengzhilan M6+ wholesale price was 540 yuan, unchanged from the previous month and down 10 yuan year-over-year.

Packaging materials: As of September 24, 2024, PET/film prices were down 7.1%/4.8% year-over-year, while aluminum/glass/cardboard prices were up 3.2%/2.6%/8.0% year-over-year respectively.

Raw material costs: Sugar/flour/quail egg/pork prices were down 8.8%/2.7%/2.1%/26.5% year-over-year respectively; soybean/palm oil/sunflower seed prices were up 0.3%/7.0%/9.4% year-over-year respectively. August 2024 barley import prices were up 4.2% year-over-year.

Dairy products: On September 18, domestic fresh milk price was 3.03 yuan/kg, down 3.5% year-over-year; GDT auction whole milk powder winning bid price was $3,790/ton, up 9.9% year-over-year.

**Investment Recommendations**

In September, the food and beverage index underperformed the broader market, with all internal sub-sectors in adjustment phases. Looking ahead to October, the market will focus primarily on Q3 earnings performance, with relevant high-performing individual stocks and sectors worthy of attention. Looking toward Q4 2024, under expectations of PPI improvement gradually transmitting to CPI improvement, priority focus should be given to pro-cyclical directions with supply clearing and valuation bottoms.

Medium to long-term, we continue to recommend focusing on three main themes: 1) Growth stocks in new categories and new channels, such as Guoquan, Wanchen Group, Eastroc Beverage, Weilong, Yanjin Shop Food, Jingzai Food, Youyou Food, and Ligao Food. 2) Sectors with relatively stable demand and improving competitive landscape, including Nongfu Spring, Uni-President China, China Resources Beverage, and Tingyi Holding. 3) Pro-cyclical recovery direction: for white liquor sector, focus on Kweichow Moutai, Shanxi Xinghuacun, Wuliangye, and Jiannanchun; for mass consumer goods sector, focus on Tsingtao Brewery, Yanjing Beer, Chongqing Beer, China Resources Beer, Qianwei Central Kitchen, and Baoli Food.

**Risk Warnings**

Risk of demand recovery falling short of expectations, risk of intensified industry competition, risk of downstream channel transformation effects falling short of expectations, food safety risks.