CITIC Securities: The adjustment of popular brands is coming to an end, with industry leaders showing resilience, and the window for allocation is opening.

The report from CITIC Securities stated that during the period of declining performance in the past three years, mass market enterprises have reduced capital expenditures, decreased capacity expansion, made provisions for impairment to improve the quality of the balance sheet, increased dividend payouts and share buybacks to enhance shareholder returns. Short-term financial reports show that the demand for mass market products is stabilizing, competition is easing, and the fundamental adjustment is nearing completion. During the industry downturn, leading companies still have strong competitiveness, maintaining or increasing market share. For specific sub-sectors such as seasonings, frozen foods, and meat products, the CR2 has increased in the past few years, while the CR2 for dairy products and snacks has remained stable. We are optimistic about the moderate improvement in the fundamentals of mass market products by 2026 and the valuable opportunities for bottom-up portfolio allocation in the sector. We recommend focusing on the cyclically strong sectors of catering supplies and dairy products; recommending leading companies in independent growth in bulk snacks, health products, and beverages; and recommending undervalued or recently declined beverage and snack companies.