July Consumption Growth Missed Expectations; Portfolio Focus Shifts to Earnings Improvement and High-Dividend Names

Overview

The report believes that China's consumption recovery momentum remains weak. Retail-sales growth decelerated further in July 2026, pressured by factors such as extreme weather and higher fuel costs weighing on summer travel. The investment strategy is not broadly bullish on consumption, but seeks alpha opportunities from companies with earnings improvement in 2H, relatively high dividend returns, or benefits from new-business expansion.

Core views

Against a backdrop of weakening macro consumption data, snack retail may still sustain relatively fast growth; the home-appliance sector faces a low year-on-year base in 2H 2026, and operating pressure may ease at the margin. At the company level, Weilong Delicious benefits from easing impacts of channel adjustments, accelerated new-product launches and a high dividend yield; Ninebot benefits from a low base, peak season and margin recovery; YUTO benefits from liquid-cooling and AI-glasses component orders, customer expansion, and the consolidated contribution from Huayang.

Analysis framework

The report assesses business conditions across consumer subsectors using high-frequency and sector indicators including monthly macro consumption, foot traffic, tourism, property, online retail, imports and exports, and raw-material prices. The stock-selection section considers earnings trends, valuation, dividends, catalysts and risks.

Methodology notes

• Valuation methodsDiscounted cash flow model

  DCF valuation

  Weilong Delicious and Ninebot Ltd are valued using discounted cash flow models, with weighted average costs of capital of 8.5% and 9.5%, respectively, and perpetual growth rates of 2.0% for both.

• Valuation methodsP/E relative valuation

  Target P/E

  YUTO Packaging Technology is valued using a P/E multiple approach, assigned a 2027E P/E of 25x based on a premium to its historical average valuation relative to its growth outlook.

• Investment screeningEarnings improvement and dividend screening

  Alpha opportunities

  Priority is given to companies with sequential earnings improvement in 2H 2026, dividend support, low-base recovery, or new-growth-business catalysts.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Weilong Delicious (9985.HK)

  A key monthly recommendation in the report; Buy rating maintained.

  Strengths

  Dividend guidance for the next three years, 2026E dividend yield of 7.8%, expected easing of the negative impact from channel adjustments, potentially accelerated new-product launches in 2H, and expected improvement in earnings growth.

  Weaknesses

  Channel adjustments previously disrupted new-product launches, and short-term execution still requires validation.

  Comparison

  2026E P/E of 12x; current price HKD8.56, target price HKD10.70, potential upside 25.0%.

  Risks

  Food safety, intensifying competition, rising raw-material prices, weaker-than-expected category and channel expansion, high governance concentration, and potential index exclusion.

• Ninebot Ltd (689009.SS)

  A key monthly recommendation in the report; Buy rating maintained.

  Strengths

  2Q26 results beat expectations; a low base, the arrival of the peak season, and continued margin recovery are expected to drive earnings improvement in 2H.

  Weaknesses

  Earnings improvement depends on delivery of peak-season demand and cost trends.

  Comparison

  2026E P/E of 17.5x; current price RMB44.00, target price RMB61.00, potential upside 38.6%.

  Risks

  Uncertainty over revisions to China's electric two-wheeler standards, weaker-than-expected overseas demand, higher-than-expected costs, intensifying competition, and deterioration in the trade environment.

• YUTO Packaging Technology (002831.SZ)

  A key monthly recommendation in the report; Buy rating maintained.

  Strengths

  Liquid-cooling and AI-glasses component orders and customer expansion provide growth opportunities, while post-acquisition consolidation of Huayang may contribute to earnings.

  Weaknesses

  The share price has corrected since 2Q26 amid volatility in the AI hardware sector, and uncertainty remains over execution of new-business orders.

  Comparison

  2026E P/E of 19x; current price RMB28.18, target price RMB43.70, potential upside 55.1%.

  Risks

  Raw-material cost volatility, weaker-than-expected Apple sales, and weaker-than-expected business development.

Key data

• July 2026 growth in total retail sales of consumer goodsYoY +0.6%Below June's YoY +1.0% and Bloomberg consensus expectations of YoY +1.5%.
• Goods retail sales and catering revenueYoY +0.5%; YoY +1.4%Corresponding to July 2026 growth in goods retail sales and catering revenue.
• Communications equipment retail salesYoY +20.4%The fastest-growing major product category; the report believes this was partly driven by price increases for consumer electronics such as smartphones.
• Weilong Delicious 2026E dividend yield7.8%The report considers this yield attractive; 2026E P/E is 12x.
• Weilong Delicious earnings forecast1H26 net profit YoY +4.6%; 2H26E net profit YoY +14.4%The impact of channel adjustments is expected to diminish in 2H.
• Ninebot Ltd valuation2026E P/E of 17.5xExpected to be driven by a low base, the arrival of the peak season, and continued margin recovery.
• YUTO Packaging Technology valuation2026E P/E of 19xFocus is on execution of liquid-cooling and AI-glasses component orders, customer expansion, and the consolidated contribution from Huayang.

Impact & implications

The consumer sector's beta recovery remains fragile, and portfolio positioning should avoid broad bets based solely on expectations of macro recovery. Relatively more attractive areas include high-dividend food and beverage, travel and durable-consumption-related names with improving earnings trends, home appliances supported by low bases, and packaging companies with incremental businesses such as AI hardware or liquid cooling. Investors need to continue verifying whether micro indicators such as sales, margins, new products and orders can deliver.

Risks

• Extreme weather, higher fuel costs, or weakening employment and confidence may continue to weigh on discretionary consumption and summer travel.
• Persistent weakness in autos, the property chain and home-improvement-related consumption may drag on overall retail sales and earnings in related subsectors.
• Raw-material price volatility and intensifying industry competition may erode margins for food and beverage, light-industry and home-appliance companies.
• Company-level channel expansion, new-product launches, overseas demand, order execution and M&A integration may all fall short of expectations.

What to watch

• Whether growth in monthly total retail sales of consumer goods, catering revenue and communications equipment sales improves.
• Whether drags from autos, building materials and decoration, sports and entertainment goods, and gold and jewelry narrow.
• Recovery in summer and holiday tourism consumption, metro foot traffic, air travel and high-speed rail passenger traffic.
• Weilong Delicious's new-product launches, effectiveness of channel adjustments and dividend execution.
• Ninebot's peak-season sales, margins and overseas demand performance.
• YUTO's liquid-cooling and AI-glasses orders, customer expansion, Huayang consolidation contribution and consumer-electronics demand.