Nongfu Spring (9633.HK) research report: bullish on beverage business with good growth and increased revenue contribution, and continues to maintain strong profit capabilities.
Event: According to data from the National Bureau of Statistics, the cumulative production of beverages in China from January to June 2024 was 98.1 million tons, a year-on-year increase of 7.90%. In addition, except for March 2024, when the production of beverages increased by only 3.3% year-on-year.
Nongfu Spring urgently needs to move away from the center of public opinion storm.
From the "public opinion storm" to the "restart of pure water", to the "price war" and "bromate", nongfu spring has fallen into a difficult period. Despite the fact that bottled water enters the peak sales season, the industry leader nongfu spring (09633.HK) has been embroiled in negative public opinion recently, with a notice of convenience store stopping selling nongfu spring being circulated on the internet. "Investor Web" found that most convenience stores sell nongfu spring products normally in their offline visits in Guangzhou. In the past six months, nongfu spring has been attacked by various network rumors, such as foreign capital control, pollution of water source areas, and public welfare donations, and has gone through several months of negative publicity.
Jefferies Expects 6.8% Rise in Nongfu Spring's H1 Net Profit
Hang Seng Index falls to three-month low. Beverage stocks are under pressure. Netease rebounds against market trend.
The rise of the yen against the US dollar by 0.6% has attracted market attention to an increase in global arbitrage trade closures. The Hang Seng Index continued to decline today to a three-month low.
Research reports from Zhongjin: Downgraded Nongfu Spring's target price to HKD 45. Short-term pressure on bottled water sales.
On July 24th, Geelong released a report which predicted that Nongfu Spring's revenue in the first half of the year will see a high-digit annual growth, mainly driven by the good performance of tea and juice. The net income will also see a high-digit annual growth due to the improvement of product structure offsetting the negative impact of packaged water, ensuring a stable net profit margin. The revenue performance meets expectations, and the profit performance may slightly exceed market expectations, mainly due to the better-than-expected profit margin improvement brought by the improvement of product structure. Geelong believes that the sales of packaged water are expected to recover in the long term despite short-term pressure, and the competitiveness of the beverage industry is constantly strengthening. Therefore, the profit forecast for this and next year is downgraded by 7% and 10% respectively, taking into account
Daiwa lowered its target price for Nongfu Spring to HKD 36 and downgraded the rating to "hold".
On July 24th, Global Wealth released a research report, forecasting that Nongfu Spring's packaged drinking water revenue would decline by 10% year-on-year in the first half of the year, while the growth trend of the flavored beverage business remains unchanged. The management acknowledges that the impact of the Wahaha incident was greater than expected, but the impact has begun to fade in the past two months. The company plans to strengthen channel investment and marketing in the second half of the year in order to regain market share. The bank said that considering operational deleveraging and marketing investment, it is expected that the company's profits will decline by 13% year-on-year in the second half of the year, and investors are advised to wait until the packaged drinking water business stabilizes before investing. The bank has downgraded the company's rating from "