Guotai Haitong has released a research report stating that the consumer sector is currently in a rebound phase driven by valuation and trading structure.

If the macro environment remains unchanged, the consumer investment logic will mainly rest on two pillars: first, share gains and profit redistribution along the industrial chain, which support stable cash flow and high shareholder returns; second, penetration rate opportunities are scarce but offer clear excess returns, primarily among small and mid-cap stocks. If the macro environment improves, leaders in discretionary and service consumption will demonstrate greater elasticity and deliver notable excess returns.

The main views of Guotai Haitong (601211) are as follows:

Valuation and trading structure support a rebound, but a reversal requires macro conditions to meet thresholds

First, the report constructs a consumer analysis framework with macro health H and profitability E as thresholds, valuation V and trading structure P as catalysts, and correction factors S. Second, macro conditions determine direction, earnings determine sustainability, and valuation and trading structure determine stock price elasticity: 1) Macro prosperity and excess returns are not monotonically positive—high macro prosperity often comes with high valuations and crowded trading, reducing excess returns; 2) Valuation only has a high win rate when macro conditions are favorable; 3) Trading structure provides additional elasticity under high macro prosperity. Third, under this evaluation system, current consumer sector valuation and trading structure support a rebound.

Historical review: A-share consumer excess returns are concentrated in two periods, and leaders do not always outperform

First, excess returns come from two major phases: from 2000 to 2026, cumulative excess was approximately 110 percentage points, averaging only 1.0 percentage point per year; November 2008 to July 2012 contributed +67.4 percentage points, and February 2016 to February 2021 contributed +63.3 percentage points; 2006–2007 and 2021–2026 saw drawdowns of 65.6 percentage points and 39.5 percentage points respectively. Second, A-share consumer rallies fall into three categories: 1) Earnings-driven rallies have the strongest sustainability; 2) Valuation-driven rallies depend on liquidity; 3) Defensive rallies only offer relative resistance, and absolute returns may not be positive. Third, declines stem from valuation contraction and earnings deterioration. From 2021 to 2024, PE fell from 43.0x to 20.8x, representing valuation digestion; after December 2024, relative EPS turned negative, and excess returns since 2021 have been -39.5 percentage points. Fourth, the market-cap-weighted index has not delivered high long-term excess returns compared to equal-weighted seven major sectors; leaders do not always beat the benchmark, with excess returns concentrated in 2007–2012 and 2015–2021.

Valuation divergence rather than broad undervaluation means structural opportunities outweigh broad market opportunities

First, macro prosperity is weak, with none of the four criteria—credit, confidence, inflation, and housing prices—meeting the threshold. Second, valuations are cheap but divergent: consumer PE is 22.5x at the 27.4th percentile, relative to CSI 300 PE of 1.63x at the 9.5th percentile and PB of 2.77x at the 2.5th percentile; food and beverage and beauty care are at low percentiles, while social services and light industry are not cheap. Third, trading structure is not crowded, with active equity fund consumer holdings near a ten-year low; consumer trading volume is at the 5th historical percentile. Low volume limits downside but also makes for slow declines when catalysts are absent. Third, the turning point depends on earnings: in 2026, consumer EPS growth relative to CSI 300 is 28.2%, at the 4th percentile since 2010. Fourth, US and Japan experience: US staples excess returns are concentrated in recession and inflation shock periods, underperforming during expansions; Japan staples only serve as a safe haven and did not generate excess returns during reflation, with excess returns mainly coming from overseas expansion and services. The long-term excess return center for A-shares may shift downward, with opportunities increasingly coming from share gains, service penetration, and overseas revenue. Risk warnings: income recovery falling short of expectations, reversal of channel dividends and profit redistribution, and data caliber errors leading to valuation and trading structure signal deviations, as well as an incomplete and non-comprehensive evaluation system.