Orient Securities has released a research report stating that the food and beverage sector currently offers solid relative return allocation value. On fundamentals, risks were concentrated and released during the third-quarter report season, and the sector's earnings bottom has basically been established. As the low-base effect gradually emerges from 2026Q4 onward, subsequent earnings are expected to improve quarter by quarter. On trading structure, the sector's overweight ratio is at its second-lowest level since 2003, better than other dividend assets, leaving substantial room for increased allocation. As policies to expand domestic demand and boost consumption continue to gain traction, the report recommends increasing the allocation weight of consumer and domestic-demand sectors, prioritizing high-dividend leaders, followed by stocks with expectation gaps and small and medium-sized enterprises with reform logic, specifically focusing on three main lines: dividends, expectation gaps, and industrial trends.
Earnings Adjustment Largely Complete, Fundamental Turning Point Approaching
In 2026Q3, the food and beverage sector generated revenue of 233.1 billion yuan and net profit attributable to parent companies of 38.2 billion yuan. For the first three quarters, revenue and net profit attributable to parent companies fell 1.2% and 8.1% year on year, respectively, with the adjustment widening in the third quarter alone, indicating that industry risks have been concentrated and released. Baijiu was the first to show signs of improvement, with Q3 revenue and net profit attributable to parent companies narrowing their year-on-year declines by 7.1 percentage points and 8.5 percentage points, respectively, compared with Q2. Kweichow Moutai returned to positive growth in Q3 revenue and net profit attributable to parent companies. Small and medium-sized enterprises adjusted earlier and stabilized first, with companies generating revenue below 3 billion yuan in 2025 seeing Q3 revenue rise 2.8% year on year, while leading enterprises are in the relay phase of clearing out. The report judges that the period of the steepest downward revision in sector earnings has passed, the earnings bottom has basically been established, and subsequent quarterly recovery is expected.
Structural Highlights Emerging, New Channels, New Categories, and New Cycles Opening Growth Space
On new channels, the rapid expansion of snack mass merchandisers continues to release incremental growth through channel reform. On new categories, health-oriented and functional products are accelerating their iteration, with electrolyte drinks, tea beverages, cheese, and oatmeal maintaining relatively fast growth. Anjoy Foods and Zhongju High-Tech achieved high earnings growth through product innovation and category expansion. On the cyclical side, the average price of raw milk turned positive year on year, the raw milk cycle has reached a turning point, earnings recovery for upstream pastures is highly certain, and demand for dairy products remains resilient.
Institutional Allocation Bottoming Out and Rebounding, Capital Flowing Back to Core Assets
In 2026Q3, the food and beverage sector's overweight ratio was -1.02%, up 0.17 percentage points from Q2. The actual allocation ratio for baijiu rose from 1.06% to 1.55%, with Kweichow Moutai receiving 0.25 percentage points of increased holdings, ranking fifth among consumer sector additions. The actual allocation ratio for Hong Kong-listed food and beverage stocks recovered to 1.56%. Excluding Moutai, the sector's actual allocation ratio was only 1.37%, indicating the industry remains in a significantly underweight range with broad room for further allocation.
Investment Recommendations and Targets
Investment recommendation: increase the allocation weight of consumer sectors, prioritizing domestic demand. 1) Dividend main line: recommend Kweichow Moutai (600519.SH, Buy), Shanxi Fenjiu (600809.SH, Buy), Yili Industrial Group (600887.SH, Buy), and Nongfu Spring (09633, Buy). 2) Expectation gap main line: recommend Eastroc Beverage (605499.SH, Buy), Yanjing Brewery (000729.SZ, Buy), and New Hope Dairy (002946.SZ, Buy), with related targets Wanchen Group (300972.SZ, Not Rated), Mingming Busy (01768, Not Rated), and Zhongju High-Tech (600872.SH, Not Rated). 3) Industrial trend main line: recommend Youran Dairy (09858, Buy) and Guyuelongshan (600059.SH, Buy), with related targets Anjoy Foods (603345.SH, Not Rated), Quanyangquan (600189.SH, Not Rated), Huifa Food (603536.SH, Not Rated), Ximai Food (002956.SZ, Not Rated), H&H International Holdings (01112, Not Rated), and Kingdomway (002626.SZ, Not Rated).
Risk warnings include food safety issues, management changes, industrial policy adjustments, accelerated increases in raw material prices, and consumer demand recovery falling short of expectations.