Guotai Haitong: Consumption is in a rebound phase driven by valuation and trading structure, with structural opportunities outweighing aggregate ones.

Guotai Haitong released a research report stating that consumption is currently in a rebound phase driven by valuation and trading structure. If the macro environment remains unchanged, the consumption investment logic will mainly be: 1) share gains and profit distribution along the industry chain, supporting stable cash flow and high shareholder returns; 2) penetration rate opportunities are scarce but show significant excess returns, mainly in small- and mid-cap stocks. If the macro environment improves, optional and service consumption leaders will have higher elasticity and significant excess returns. Guotai Haitong's main views are as follows: Valuation and trading structure support a rebound; a reversal requires macro prosperity to meet thresholds This article constructs a consumption analysis framework with macro health H and profitability E as thresholds, valuation V and trading structure P as catalysts, and correction factor S. Macro determines 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 is often accompanied by high valuations and crowded trading, reducing excess returns; 2) Valuation only has a high win rate when macro prosperity is strong. 3) Trading structure provides additional elasticity under high macro prosperity conditions. Under the above evaluation system, the current consumption sector's valuation and trading structure support a rebound. Historical review: A-share consumption excess returns are concentrated in two periods; leaders do not always outperform Excess returns came from two periods: cumulative excess returns from 2000 to 2026 were about 110pct, averaging only 1.0pct per year; November 2008 to July 2012 contributed +67.4pct, and February 2016 to February 2021 contributed +63.3pct; 2006-2007 and 2021-2026 saw drawdowns of 65.6pct and 39.5pct. A-share consumption rallies fall into three categories: 1) earnings-driven, with the strongest sustainability; 2) valuation-driven, dependent on liquidity; 3) defensive, which only provides relative resilience, with absolute returns not necessarily positive. Declines come from valuation contraction and earnings deterioration. From 2021 to 2024, PE fell from 43.0x to 20.8x, digesting valuation; after December 2024, relative EPS turned negative, and excess returns since 2021 were -39.5pct. The market-cap-weighted index's long-term excess return versus the equal-weighted seven industries is not high; leaders do not always outperform the benchmark, with excess returns concentrated in 2007-2012 and 2015-2021. Valuation divergence rather than broad undervaluation; structural opportunities outweigh aggregate ones Macro prosperity is weak, with all four itemscredit/confidence/inflation/housing pricesfailing to meet thresholds. Valuation is cheap but divergent: consumption PE 22.5x, 27.4% percentile; relative to CSI 300, PE 1.63x, 9.5% percentile; PB 2.77x, 2.5% percentile; food and beverage and beauty care are at relatively low percentiles, while social services and light industry are not cheap. Trading structure is not crowded; active equity funds' consumption heavy positions are near a ten-year low; consumption trading volume is at the historical 5th percentile. Low turnover limits downside space, but without catalysts, prices can also drift lower. The inflection point depends on earnings: in 2026, consumption's relative EPS growth versus CSI 300 is 28.2%, at the 4th percentile since 2010. US and Japan experience: US staples' excess returns are concentrated in recession and inflation shock periods, and they underperform during expansions; Japanese staples only serve a safe-haven role and did not bring excess returns during reflation, with excess returns mainly coming from overseas expansion and services. A-shares' long-term excess return center may shift lower, with opportunities coming more 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 deviations in valuation and trading structure signals and an incomplete and non-comprehensive evaluation system.