China Consumer Earnings Season Enters a Profit Reset Phase, with Defense and Turnarounds Taking the Lead

Overview

This report reviews the FY25 earnings season for the China consumer sector. Its conclusion is that results were mixed and disappointing, demand has improved only modestly year to date, and the market is repricing for a new normal of low or no growth in 2026. As conflict in Iran and cost-inflation uncertainty have intensified, many consumer companies have not provided clear margin guidance, leading investors to shift away from prior high-growth consumer themes toward defensive names, dividend payers, supply-driven opportunities, and turnarounds.

Core views

The key views are: first, the FY25 earnings season confirms that profit expectations need to be reset, with the number of companies missing both revenue and earnings estimates clearly exceeding those beating both. Second, cost inflation in 2026 may become especially visible in 2H26, with food and beverage the most sensitive sector and RTD beverages facing greater risk because of their high PET cost exposure. Third, retail and franchise formats are diverging materially, as restaurants and FMD still plan rapid store expansion while sportswear is slowing expansion and shifting toward store upgrades. Fourth, the investment theme has shifted from high growth to defense, dividends, strong pricing power, and turnarounds.

Analysis framework

The report evaluates earnings risk and stock-picking opportunities in China consumer through beat/miss statistics, company guidance for 2026, raw-material cost tracking, EPS sensitivity to PET price increases, store expansion cadence by subsector, consensus EPS revisions, and valuation comparisons.

Methodology notes

• Earnings reviewFY25 revenue and earnings beat/miss analysis

  Use whether revenue and earnings beat expectations to measure earnings-season quality

  The report counts the 45 stocks that have reported 4Q/FY25 results and compares the number of double beats versus double misses to judge the overall strength of the earnings season.

• Cost sensitivityRaw-material cost tracking and PET sensitivity ranking

  Use raw-material price changes and PET as a share of COGS to measure margin pressure

  The report tracks costs such as PET, PE, polyester, copper, glass, pork, whole milk powder, coffee beans, and sugar, and ranks beverage companies by EPS sensitivity to PET price increases.

• Industry comparisonFast-vs-slow and small-vs-large divergence framework

  Compare store expansion and upgrade cadence across restaurants, FMD, QSR, and sportswear subsectors

  The report argues that penetration, chain-ization, and CR5 continue to rise rapidly in restaurants and FMD, while store expansion is slowing for sportswear and apparel brands, with more emphasis in 2026 on store upgrades.

• Stock-picking frameworkThree overweight buckets: low cost risk, strong pricing power, and turnaround names

  Screen for relatively resilient or improving names in a low-growth and cost-uncertain environment

  The report recommends overweighting companies with lower cost-inflation risk, stronger pricing and cost pass-through ability, and operations in a turnaround or improvement phase.

Asset mapping & comparison

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

• Mixue, Eastroc, Pop Mart

  Previously seen as representatives of new consumption or high-growth names, but they were clearly de-rated after earnings

  Strengths

  Strong past growth and significant outperformance versus the sector in 2025

  Weaknesses

  Slower growth in 2026 and weaker-than-expected guidance drove valuation re-rating

  Comparison

  Versus defensive and dividend names, they have higher volatility and are more sensitive to risk appetite

  Risks

  Further earnings cuts, valuation compression, and lower market risk appetite

• Haitian, WH Group, Nongfu, Tingyi

  Beneficiaries of the defensive and dividend rotation

  Strengths

  Leading market share, stronger moats, better pricing power, or standout dividend characteristics

  Weaknesses

  Still exposed to raw-material cost pressure and low-demand growth conditions

  Comparison

  Compared with high-growth consumer stocks, they are better suited as a hedge in a low-risk-appetite environment

  Risks

  Higher-than-expected cost inflation, insufficient pass-through, or weak demand

• Mengniu

  A supply-driven name that has attracted attention year to date

  Strengths

  Supply-side factors may improve earnings or share-price performance

  Weaknesses

  Demand is still not exciting, and dairy price and cost volatility remain to be watched

  Comparison

  Unlike pure defensive names, its investment case depends more on supply-side improvement

  Risks

  Slower-than-expected industry demand recovery, raw-material price changes, and competitive pressure

• Li Ning, Chagee

  Names tied to turnarounds or operational improvement

  Strengths

  Have operating inflection points and earnings-recovery optionality

  Weaknesses

  The improvement path still needs to be validated by results

  Comparison

  Compared with mature defensive names, they offer higher potential upside but lower certainty

  Risks

  Store strategy, brand momentum, or same-store sales improvement falling short of expectations

• Luckin Coffee, Mao Geping, Moutai

  Names the report suggests overweighting for lower cost-inflation risk

  Strengths

  Relatively less exposed to cost-inflation pressure

  Weaknesses

  Still face weak consumer demand and valuation volatility

  Comparison

  In an environment of high oil and raw-material prices, they are more resilient than higher-cost-exposure food and beverage companies

  Risks

  Slower demand, intensifying competition, or earnings cuts

• Laopu, Anta, Haitian, Nongfu

  Names the report suggests overweighting for strong pricing power and cost pass-through ability

  Strengths

  Brand strength, market share, or channel capabilities support cost pass-through

  Weaknesses

  If end-demand weakens, room for price increases or cost pass-through may be limited

  Comparison

  They are better able to withstand margin pressure than companies with higher cost sensitivity and weaker pricing power

  Risks

  Costs rising faster than pass-through and higher consumer price sensitivity

• Tingyi & UPC, CR Beverage, Eastroc, Nongfu

  RTD beverage names ranked by EPS sensitivity to PET price increases

  Strengths

  Eastroc and Nongfu are somewhat protected by longer-term PET lock-ins and healthier margins

  Weaknesses

  Tingyi & UPC and CR Beverage are more vulnerable to PET price increases

  Comparison

  The RTD beverage category is more exposed to PET costs than other consumer subsectors

  Risks

  Sustained PET price increases and margin pressure after lock-in periods expire

Key data

• Number of stocks with reported results45The rest of the companies are expected to report in the second half of April.
• Double beats12Both revenue and earnings beat expectations.
• Double misses21Both revenue and earnings missed expectations, indicating weak earnings-season quality.
• Packaged and industrial materials gain>20%PET, PE, polyester, and copper are up more than 20% versus 2025 average prices; glass remains in a downtrend.
• PET cost shareabout 20-30% of COGSRTD beverages are the most exposed to PET price increases.
• Net store opening plan+10-30% YoYLeading restaurants and FMD companies plan 10-30% year-on-year growth in net store openings in 2026.
• 2026 consensus earnings revisionconsumer staples -1%, consumer discretionary -4%After FY25 earnings season, 2026 consensus earnings for China consumer staples and discretionary were cut.
• Report publication time2026-04-14 20:10 HKTThe report was completed at 2026-04-14 20:08 HKT and published at 20:10 HKT.

Impact & implications

The investment implication is that the market may continue to cut 2H26/FY26 earnings expectations in the near term, especially for food and beverage companies; high-growth consumer stocks may remain volatile after weak guidance, while capital should favor defensive names with market share, moats, dividends, and cost pass-through ability, as well as clear turnaround opportunities.

Risks

• An extended Iran conflict keeps oil prices elevated and increases cost pressure.
• 2H26 raw-material inflation comes in above expectations, especially for PET, PE, polyester, and copper.
• Consumer demand improves only modestly, and low growth or no growth becomes the new market re-rating normal.
• Companies continue to lack clear margin guidance, reducing earnings visibility.
• High-growth consumer stocks remain under pressure as guidance disappoints.
• Food and beverage and RTD beverage companies fail to pass through costs sufficiently, driving margin erosion.

What to watch

• Whether 2H26/FY26 consensus earnings continue to be revised down, especially in food and beverage.
• Price trends in key raw materials such as PET, PE, polyester, copper, glass, pork, whole milk powder, coffee beans, and sugar.
• PET lock-in durations, gross margin buffers, and pricing power among RTD beverage companies.
• Whether high-growth names such as Mixue, Eastroc, and Pop Mart can re-stabilize growth expectations.
• Whether the relative performance of defensive and dividend names such as WH Group, Haitian, Nongfu, and Tingyi can continue.
• The extent to which operational improvement is delivered by turnaround names such as Li Ning and Chagee.
• 2026 store expansion, upgrades, and lower-tier-city strategies in restaurants/FMD, QSR, and sportswear.