Broker: UOB Kay Hian
Date of Report: Wednesday, 10 September 2025

Greater China Consumer Sector: Key Winners, Evolving Trends, and Top Stock Picks for 2025

Executive Summary: China Consumer Sector Delivers Mixed 2Q25/1H25 Results

The Greater China consumer sector produced a varied set of results for 2Q25/1H25, with nine out of twenty-two covered companies beating expectations, seven reporting in line or mixed results, and six missing targets. The sector continues to navigate deflationary pressures, especially in dairy, while companies with diversified portfolios and innovative channel strategies are outperforming. Favorable government policies, new consumption trends, and a focus on shareholder returns are shaping the competitive landscape. UOB Kay Hian maintains OVERWEIGHT ratings on key subsectors and highlights Anta, Galaxy, Haier, Midea, and Miniso as preferred picks.

Sector Trends and Key Observations

• Deflation Pressure: Deflation remains a challenge, particularly in the dairy segment, where average selling prices (ASP) for liquid milk declined in 2Q25/1H25.
• Portfolio Diversification: Companies like Anta (apparel & textiles) and Yili (dairy) with diversified product portfolios and offerings aligned with emerging consumption trends—such as outdoor sports, IP-related products, and leisure—maintain a constructive business outlook.
• Channel Expansion and Innovation: Consumer staples companies (notably in beer and dairy) are actively expanding into new channels and exploring customized and contract manufacturing models to capture evolving consumer behaviors.
• Policy Support: Sectors with direct policy stimulus, such as household durables, report robust domestic sales in 3Q25, despite some regions suspending trade-in subsidies.
• Shareholder Focus: Even companies facing near-term pressure are committed to stable dividends. Notably, household durables firms declared interim dividends for the first time.

Sector Ratings and Top Picks

Company Analysis and Sector Deep Dive

Apparel & Textiles: Sportswear Names Outperform, Sector Upgraded to OVERWEIGHT

• Sportswear momentum: Brands like Anta and Xtep posted stronger-than-expected 1H25 results. However, most companies saw retail sales momentum weaken in 2Q25 versus 1Q25, with increased discounting. Anta and Xtep reported early improvement signs in 3Q25, while Li Ning remained cautious, anticipating ongoing operational challenges.
• Product highlights: Professional products (e.g., Saucony under Xtep) and outdoor sports (e.g., Descente and KOLON under Anta) continued to deliver robust growth.
• Margins: Despite mounting pressure from online competition, operational efficiency improvements are expected to help protect margins.
• Manufacturers: Shenzhou reported mixed results with revenue beating expectations but margins missing. US tariff increases had limited impact on orders, and pricing remains stable.

Broadline Retail: Miniso Leads with SSS Growth, Sector Maintained at OVERWEIGHT

• Miniso reported better-than-expected 2Q25 results, with domestic same-store sales (SSS) turning to low-single-digit growth (vs. prior quarter’s decline), and overseas SSS declines narrowing.
• The company is focusing on SSS growth over aggressive store expansion, expecting positive SSS in both domestic and overseas markets for 2025.
• Operating margin contraction is expected to narrow in 2H25 due to more prudent spending and slower direct store expansion abroad.

Household Durables: Surprising Strength and First-time Interim Dividends

• Companies in this segment exceeded 2Q25 expectations, driven by strong top-line growth and improved operational efficiency, aided by digitalization and retail transformation.
• Despite partial realization of pent-up demand and the suspension of trade-in subsidies in some regions, 3Q25 sales remained robust, surpassing market expectations.
• Overseas markets are expected to accelerate in 2H25. Both covered companies declared interim dividends for the first time, signaling a commitment to shareholder returns.

Macau Gaming: Recovery Picks Up Pace, Remains OVERWEIGHT

• Macau GGR for the first eight months of 2025 reached MOP\$163.1b (up 7% YoY), recovering to 82% of 2019’s level.
• Operators are investing in enhanced offerings for premium customers, such as upgraded hotels (Sands China’s The Londoner, Galaxy’s Capella) and expanded entertainment events.
• 2025 GGR is estimated to reach MOP\$242b, representing 7% YoY growth and 83% recovery to pre-pandemic levels.

Restaurants: Challenging Environment with Self-help Initiatives

• Restaurant companies posted weak 1H25 results due to sluggish consumer demand and a shift to delivery (supported by platform subsidies), resulting in lower table turnover rates.
• Initiatives such as fresh-cut offerings and store format upgrades aim to boost customer traffic and ASP, but margin pressures persist from rising raw material costs and higher expenses.
• The sector remains in a store adjustment cycle, closing underperforming locations and being selective about new openings.

Specialty Retail: CTGDF Sees Narrowing Revenue Decline, Margin Pressure

• China Tourism Group Duty Free (CTGDF) reported a narrowed revenue decline in 2Q25 (-8% YoY vs. -11% YoY in 1Q25), echoing the trend in Hainan duty-free sales.
• Gross margin contraction worsened (-1.4ppt YoY), likely due to heightened online competition, but inventory remained healthy.
• CTGDF plans to expand into IP products and consumer electronics to align with new consumption trends.

Consumer Staples: Mixed Results in Baijiu, Beer, and Dairy

Baijiu: Divergent Performance, Sector Remains UNDERWEIGHT

• Moutai achieved in-line results and remains on track for its full-year target, driven by premium liquors. Wuliangye and Fen Wine missed expectations, with Fen Wine depending more on mid-to-low end products and facing significant margin contraction.
• Increased selling expenses, likely from higher channel subsidies, were reported but remain manageable.
• The industry is expected to stay in an adjustment phase with ongoing shipment controls to support wholesale prices.

Beer: Channel Shifts and Margin Expansion, OVERWEIGHT Maintained

• CR Beer exceeded expectations, Budweiser APAC and Tsingtao Brewery performed in line, while Chongqing Brewery missed.
• Most companies saw flat or modest volume growth, with Budweiser APAC’s China sales declining due to destocking. ASP growth was muted, except for Chongqing Brewery.
• Gross margin improvement was driven by easing raw material costs, with CR Beer’s refinement strategy driving strong bottom-line growth.
• With the anti-extravagance policy dampening on-trade channels, off-trade channels and instant retail are becoming key volume and premiumization drivers.

Dairy: Tepid Demand and Channel Expansion, MARKET WEIGHT Maintained

• Yili exceeded expectations, Mengniu was mixed, and Feihe missed. Both Yili and Mengniu saw a narrowing YoY decline in liquid milk in 2Q25, but the segment remains under pressure due to weak demand and competition from freshly made drinks.
• Yili launched value and innovative products to drive sales, while Mengniu cut prices. Both are expanding into new consumption channels.
• Raw milk supply-demand is expected to remain imbalanced into next year.

Top Stock Picks: Price Targets, Valuations, and Upside Potential

Peer Comparison Table

Conclusion: Cautious Optimism with Selective Sector and Stock Opportunities

While underlying demand has yet to show significant improvement, leading players with diversified portfolios, channel innovation, and cost discipline are outperforming in a challenging macro environment. Policy support, new consumption trends, and shareholder-friendly strategies are further supporting the sector. Investors are advised to focus on the highlighted OVERWEIGHT subsectors, with Anta, Galaxy, Haier, Midea, and Miniso standing out as top picks for the remainder of 2025.