[Soochow Food & Beverage Su Cheng Team]

English summary

Continuing to report our latest views: 'Double bottom' is not pessimistic. The so-called 'double bottom' refers to: 1) a basic judgment that the 'earnings bottom' has been reached (among other factors such as low valuations and low positioning), and 2) the 'base position thinking' in the response strategy. Base position thinking includes conventional responses to bottom-of-cycle targets and some judgments about the market. Views: Objectively, consumption remains under pressure overall, and low positions are significantly affected by market style. On one hand, the shift of technology into consolidation is slightly favorable to consumer allocation sentiment; on the other hand, interim reports are diverging, and targets with confirming/beating earnings deserve attention. We analyze from two perspectives: whether the earnings bottom and inflection point are foreseeable. Mass consumer goods are generally at low levels. In terms of industry logic, retail transformation and discount models show prominent growth, with room for format evolution and same-store improvement. We continue to favor leading food-service suppliers and quality chains such as discount snack chains for earnings delivery. We pay attention to Modern Dairy's turnaround to profitability. Key recommendations: H&H International Holdings, with all three main businesses improving, debt declining, and an uptrend in earnings established; Milkground, which is in a profit release channel; and Yanjing Beer, the most successful SOE reform target. For base positions, retain liquor stocks with flexibility: Luzhou Laojiao and Gujing.