Is the consumer sector about to hit bottom?

Market reaction and Haitan's rebound

It has been reported that a clutch of consumer stocks — Ketuo Biotech (科拓生物), Yuehai Feed (粤海饲料), Shitou Co. (狮头股份), Junyao Health (均瑶健康) and Huafu Fashion (华孚时尚) — hit daily trading limits on the latest session, with other names such as Xin Xunda (新迅达), Haitian (海天味业) and Ruoyuchen (若羽臣) following suit. The market cheer was led by Haitian (海天味业), which reported 2025 revenue of RMB 28.873 billion and net profit attributable to shareholders of RMB 7.038 billion — both record highs — alongside a restored gross margin of 41.78% and an unprecedented RMB 79.5 billion in cash dividends (a 112.95% payout ratio). The company has pledged a three‑year minimum dividend rate of 80% of annual net profit, a signal that management expects more predictable cash returns to shareholders.

Macro backdrop and policy support

Why now? Recent macro data offer a plausible explanation. China’s National Bureau of Statistics showed retail sales of consumer goods reached RMB 8.61 trillion in Jan–Feb 2026, up 2.8% year‑on‑year, and 2025 saw total retail sales exceed RMB 50 trillion with consumption contributing 52% to growth — evidence that China’s economy is leaning more on domestic demand. Policymakers have doubled down: the 2026 government work report put “building a strong domestic market” top of the agenda and subsequent Commerce Ministry guidance promises targeted support for services such as tourism, sports, health and eldercare. Improved social financing and a modest rebound in household and corporate lending have also eased liquidity concerns that weighed on valuations.

Risks and sector divergence

But is this a broad bottom or a sector rotation? Not yet clear. Geopolitical tensions have pushed global energy prices higher, reportedly lifting transport and input costs for food, packaging and PET, and many consumer companies still face uneven demand recovery. Leading brands with strong pricing power can pass costs to consumers — Haitian’s roughly 12% rise in soy‑sauce price per ton over three years without losing share is a case in point — yet other segments remain bifurcated. Eastroc Beverage (东鹏饮料) posted strong profit growth for 2025, while Master Kong (康师傅) saw stagnant beverage revenue and thin margins; Nongfu Spring (农夫山泉) has overtaken some peers, and Haidilao (海底捞) is still feeling the drag of a heavy直营 (direct‑operation) model. The Baijiu sector, long a pillar of consumption, has been through a multi‑year correction and still trades at subdued earnings multiples. Investment into consumer projects also fell about 25% in 2025, underscoring lingering capital caution. So: recovery signs are real, but sustainable upside will hinge on income and confidence returning more firmly, and on whether policymakers can keep consumption momentum alive.