China Galaxy Securities: Overall atmosphere at the autumn sugar fair is subdued; focus on structural highlights in product categories.

China Galaxy Securities released a research report stating that, looking ahead to 26Q4, it maintains its previous view and is optimistic about the following sectors: 1) dairy products, where stabilizing and rebounding raw milk prices are driving downstream competition to ease and profitability to improve, while demand-side upgrades in deep processing and low-temperature categories open up growth space; 2) restaurant supply chain, where sector share prices have already adjusted significantly, and 26Q4 policy expansion may bring macro demand improvement; 3) baijiu sector, where share price adjustments have been relatively sufficient, wholesale prices of leading brands are bottoming out and rebounding, with focus on sell-through and destocking; 4) beverages, where cost pressure has been reflected in share prices, with focus on the pace of demand recovery; 5) individual stocks driven by new channels and new categories, which still have long-term growth space. The main views of China Galaxy Securities are as follows: Baijiu: The industry as a whole is still in the destocking stage; focus on structural growth investment opportunities The baijiu industry is still in a stage of scale contraction. Against the backdrop of sell-through pressure, liquor companies are proactively destocking, and the adjustment trend is expected to continue in Q4. Under a weak beta backdrop, continue to identify alpha opportunities, with attention to three directions: 1) the ultra-high-end price band, where Moutai still has relatively good sell-through performance due to its strong brand power; 2) the price band below RMB 300 and light-bottle baijiu, centered on banquet, light business, and self-consumption scenarios, which are less affected by macroeconomic cycles and still have good growth potential; 3) companies still in the stage of broad regional brand expansion, which can partially hedge against the impact of the industry downturn cycle, such as Anhui Yingjiagongjiu, etc. Beer: There is still room in the RMB 8-12 price band; optimistic about craft beer growth driven by quality upgrades The bank believes that the beer industry's overall scale is under pressure due to weak restaurant demand, but it still has structural growth dividends, and it is optimistic about two major directions going forward: 1) the RMB 8-12 price band still has considerable growth space, because this price band can support strong product power and channel profits, and competition is not yet intense; attention to Beijing Yanjing Brewery and FuJian YanJing HuiQuan Brewery, which are actively positioning in this price band; 2) craft beer is one of the few beer categories that has achieved rapid growth in recent years, and its penetration rate is still low compared with mature overseas markets, leaving significant room for improvement in the future. Beverages: Structural factors plus short-term shocks; focus on leading companies during the industry adjustment stage Demand growth in the beverage industry is slowing in 2026. The bank judges that the core reasons are structural factors of weakening channel dividends combined with the short-term shock of slower travel growth. In addition, the cost side is also under pressure from rising crude oil prices. Looking at 26Q3, the bank believes this trend may continue until the end of the year before further observation. However, a positive signal is that the bank has found signs of supply clearing in some categories. For example, at this year's autumn sugar fair, the number of exhibiting brands in formerly popular categories such as functional beverages, coconut water, and sugar-free tea decreased. In addition, fruit juice, ready-to-drink milk tea, oat milk, and low-alcohol beverages currently have relatively good momentum, with more exhibiting brands and new products at this year's autumn sugar fair. Snacks: Konjac category supply may improve marginally; fresh snacks become an industry hotspot Demand growth for the konjac category slowed this year, but there are also improvement signals on the supply side. The number of related new products and brands exhibiting at the autumn sugar fair decreased significantly, and the bank expects the supply-demand relationship to improve in 2027. Fresh snacks have become a current industry hotspot. On the one hand, fresh snack store brands are independently exhibiting to attract franchisees; on the other hand, some manufacturers are upgrading products under the concept of freshness. In addition, OEMs for fresh snack stores are launching NB brands to attract franchisees. Risk warnings: risk of demand recovery falling short of expectations, risk of intensifying industry competition, risk of downstream channel reform effects falling short of expectations, and food safety risk.