Core Viewpoint - The report from Xingzheng International indicates that China Resources Beverage (02460) has declared a final dividend of CNY 0.307 per ordinary share and a special dividend of CNY 0.176 per ordinary share, with projected revenues and net profits for 2025-2027 showing steady growth, leading to an "Overweight" rating for the company [1] Group 1: Financial Performance - The company's revenue for 2024 is expected to increase by 0.05% year-on-year to CNY 135.21 billion, with gross profit rising by 6% to CNY 63.96 billion, resulting in a gross margin increase of 2.6 percentage points to 47.3% [2] - Projected revenues for 2025, 2026, and 2027 are CNY 146.72 billion, CNY 157.91 billion, and CNY 168.35 billion respectively, with net profits expected to be CNY 19.43 billion, CNY 21.84 billion, and CNY 24.55 billion [1] Group 2: Business Segments - The packaging drinking water business is steadily developing, accounting for 89.7% of total revenue in 2024, with a growth rate of over 8% for large-sized bottled water products [3] - The beverage business is experiencing rapid growth, with revenue increasing by 31% year-on-year to CNY 1.40 billion, representing 10.3% of total revenue [3] Group 3: Production Capacity and Cost Management - The company is expanding its self-built production capacity, adding 4 new factories and 22 production lines, resulting in a 21% increase in overall capacity [4] - The company has optimized its packaging material structure, significantly improving the self-sufficiency rate of bottle preforms and signing PET procurement framework agreements to reduce material costs [4] Group 4: Sales and Marketing Strategy - The company is enhancing its terminal channel advantages by increasing the number of retail outlets by 15% and achieving over 20% growth in commercial refrigeration display cabinets [5] - The company is focusing on product and brand expansion, successfully launching new products and achieving a 122% year-on-year increase in sales for the "Zhiben Qingrun" brand [5] Group 5: Brand Development and Collaboration - The company is establishing long-term collaborations with top domestic sports IPs to enhance brand influence, with the core brand "Yibao" achieving a first mention rate of 21% and a total recognition rate of 88% in the packaging water industry [6]

Market Position and Achievements - The Group has become the second largest company in China's packaged drinking water market and the largest in the purified drinking water market[17]. - In 2024, the Group received the "Top 10 Packaged Drinking Water Enterprises in China's Beverage Industry" award from the China Beverage Industry Association[19]. - The Group was awarded the "IPO with Outstanding Investment Value" in the 6th "Golden Grid Award" in 2024[22]. - The Group's commitment to social responsibility was recognized with the "Social Innovation and Contribution Award" in the 2024 CBN Corporate Social Responsibility List[26]. - The C'estbon brand achieved a first mention rate of 21% and a total recognition rate of 88% in 2024, ranking among the top three in the packaged water industry[80]. Financial Performance - In 2024, the Group's revenue reached RMB13,521.2 million, with profit attributable to owners increasing from RMB1,329.3 million in 2023 to RMB1,636.7 million in 2024, reflecting a growth of approximately 23%[30]. - The Group recorded total revenue of RMB13,521.2 million in 2024, a slight increase of 0.05% compared to 2023, with packaged drinking water products contributing 89.7% and beverage products 10.3% to total revenue[47]. - Revenue from packaged drinking water products amounted to RMB12,124.0 million in 2024, representing a decrease of 2.6% from 2023, while the retail sales of the Group's packaged drinking water products increased by 4.5% year-on-year[59]. - The beverage segment achieved revenue of RMB1,397.2 million in 2024, marking a significant increase of 30.8% compared to 2023, and accounted for 10.3% of total revenue[60]. - The Group's profit for the year increased by 24.7% from RMB1,331.4 million in 2023 to RMB1,660.8 million in 2024, with a net profit margin rising from 9.9% to 12.3%[130]. Operational Strategies and Product Development - The Group's strategic initiatives aim to embrace a new era and promote new development following its recent listing[18]. - The Group is focused on expanding its product specifications and diversifying water types to enhance its market presence[17]. - The Group's operational strategies include enhancing its product matrix to cover various consumer scenarios such as outdoor, indoor, business, catering, and sports[17]. - The Group launched a diversified operation of water types in 2024, aiming to become a top manufacturer of packaged drinking water[34]. - The Group's multi-brand strategy in the packaged drinking water segment aims to cater to diverse consumer preferences and enhance market competitiveness[53]. Production and Capacity - Several new factories were established in 2024, significantly increasing production capacity compared to the previous year[35]. - The Group's comprehensive production capacity increased by 21% in 2024 compared to 2023, with the addition of 22 new production lines[89]. - The proportion of self-owned production capacity for packaged drinking water is expected to exceed 60% by the end of the "14th Five-Year" Plan[89]. - The Group has successfully commissioned four new factories, including two self-owned factories in Guangdong and Fujian, to support business strategy[89]. Marketing and Brand Development - The Group's marketing efforts include utilizing brand ambassadors and various media placements to enhance brand recognition and awareness[62]. - The introduction of fencing world champions as brand ambassadors significantly increased brand recognition and consumer trust[87]. - The Group plans to continue leveraging its brand strength as the official drinking product supplier for TEAM CHINA in 2025[39]. Employee Management and Leadership - The Group has implemented fair recruitment policies and offers competitive salaries, comprehensive insurance, and performance-based incentive schemes[162]. - New hire training is provided to improve understanding of corporate culture and job responsibilities, along with tailored in-house training sessions[163]. - The company continues to expand its leadership team with experienced professionals to enhance governance and strategic direction[190][196]. - The appointments reflect the company's commitment to strengthening its management capabilities and driving future growth[188][193]. Sustainability and Social Responsibility - The Group achieved a five-star plus rating on its Sustainable Development Report from the Chinese Expert Committee on CSR Report Rating in 2024[19]. - The Group is committed to enhancing brand responsibility through initiatives focused on sustainable packaging and environmental protection[38]. Financial Management and Cost Control - The Group's cost of sales decreased by 4.8% to RMB7,124.0 million in 2024 from RMB7,479.5 million in 2023, primarily due to increased production in self-owned factories and lower raw material prices[102]. - Distribution and selling expenses amounted to RMB4,058.4 million in 2024, a decrease of 0.7% compared to RMB4,086.5 million in 2023, indicating stability in costs[120]. - Administrative expenses were RMB295.7 million in 2024, down 1.6% from RMB300.6 million in 2023, maintaining relative stability[121].

Summary of Conference Call Notes Company and Industry Overview - The company is positioned in the packaging water industry, specifically focusing on purified water, where it holds a 33% market share, making it the leader in this segment [1] - The company is currently facing challenges from competitors, particularly from Longhu Shanquan's green bottle purified water, which has initiated a price war in the market [3][4] Core Points and Arguments 1. **Market Position and Growth Potential** - The company is the second-largest player in the packaging water sector and is expanding its presence in northern regions, where growth opportunities are significant compared to competitors [2] - There is considerable room for consolidation among smaller players in the purified water market, which could benefit the company [2] 2. **Impact of Competition** - Longhu Shanquan's introduction of green bottle purified water has led to a decline in market share for some competitors, but the company has managed to maintain stable growth [4] - The price competition initiated by Longhu has affected the industry dynamics, but the company has shown resilience and is expected to see a slowdown in competitive pressures in 2025 [6] 3. **Financial Performance and Projections** - The company's beverage segment has surpassed 10% of total revenue, with sales expected to reach approximately 1.3 to 1.4 billion RMB in 2024, indicating a significant growth trajectory [6][7] - The company has a projected gross margin improvement due to increased self-manufacturing capacity, which is expected to rise from 70% to potentially 80% in the next three years [8][9] 4. **Cost Management and Profitability** - The company is implementing cost-saving measures, including reducing packaging costs and improving production efficiency, which are expected to enhance gross margins by approximately 10 percentage points in the long term [9] - The anticipated increase in net profit margins is projected to be between 10 to 15 percentage points, driven by improved operational efficiencies and scale [9] 5. **Valuation and Market Sentiment** - The current price-to-earnings (PE) ratio of the company is significantly lower than its peers, reflecting market skepticism regarding its core business and growth potential [10] - A target PE of 20 times is suggested for 2026, indicating a potential upside of approximately 35% from the current stock price [10] Other Important Insights - The company has successfully launched new beverage products, including chrysanthemum tea, which have gained significant market share, indicating a positive shift in its beverage strategy [7] - Despite the competitive landscape, the company is expected to maintain a stable market share and potentially benefit from a more favorable pricing environment in the coming years [6][10]

Core Viewpoint - China Resources Beverage reported stable revenue growth for 2024, with revenue reaching 13.521 billion yuan and net profit increasing by 24.7% to 1.661 billion yuan, driven by a significant improvement in gross margin from 44.7% in 2023 to 47.3% in 2024, leading to a net profit margin increase from 9.9% to 12.3% [1][3][4] Financial Performance - The company plans to distribute a total dividend of 1.158 billion yuan for 2024, with a payout ratio of 70.8%, reflecting a strong commitment to shareholder returns [1][16] - The gross margin has increased significantly over the past years, with a compound annual growth rate of 24.6% in net profit, outperforming the industry average [3][4] Cost Control and Efficiency - The improvement in gross margin is attributed to three main factors: an increase in self-owned production capacity from 36% in 2023 to over 50% in 2024, cost reductions through value chain optimization, and a decrease in raw material costs [5][6][7] - The company achieved a 4.8% reduction in sales costs, amounting to 3.55 billion yuan, which is comparable to the net profit increase of 3.3 billion yuan for the year [7] Product and Market Strategy - In 2024, the packaging drinking water segment generated 12.124 billion yuan in revenue, accounting for 89.7% of total revenue, while the beverage segment, identified as a second growth curve, achieved 1.397 billion yuan, growing by 30.8% [9][12] - The company has successfully launched new beverage products, such as "Zhiben Qingrun" chrysanthemum tea, which captured a 38.5% market share and saw a 122% increase in sales [10][12] Future Outlook - The company aims to enhance its internal production, operations, and marketing capabilities by 2025, focusing on supply chain efficiency and cost reduction [1][15] - The strategic focus includes expanding into the northern market and enhancing product diversification, with expectations of continued growth in the beverage segment [15][17]

Investment Rating - The report maintains a "Buy" rating for China Resources Beverage (02460) [3][5][17] Core Views - The company's performance for 2024 met expectations, with revenue of RMB 13.52 billion, flat year-on-year, and a net profit of RMB 1.64 billion, up 23% year-on-year [6][7] - The bottled water business is under short-term pressure, but profitability is expected to improve steadily due to capacity expansion and reduced reliance on outsourcing [6][8] - The beverage business is experiencing rapid growth, with a 30.8% increase in revenue to RMB 1.4 billion in 2024, supported by the existing distribution network [6][8] Financial Data and Profit Forecast - Revenue projections for the company are as follows: - 2023: RMB 13.515 billion - 2024: RMB 13.521 billion - 2025E: RMB 14.602 billion - 2026E: RMB 15.618 billion - 2027E: RMB 16.648 billion - Year-on-year growth rates for revenue are projected at 7.1% for 2023, 0.0% for 2024, and 8.0% for 2025 [4][8] - Net profit forecasts are: - 2023: RMB 1.329 billion - 2024: RMB 1.637 billion - 2025E: RMB 1.981 billion - 2026E: RMB 2.262 billion - 2027E: RMB 2.484 billion - Year-on-year growth rates for net profit are projected at 34.3% for 2023, 23.1% for 2024, and 21.1% for 2025 [4][8] Market Performance - The closing price on March 27, 2025, was HKD 14.54, with a market capitalization of HKD 34.87 billion [5][6] - The stock has shown a comparative performance of -38% against the Hang Seng China Enterprises Index over the past year [6][8]

Investment Rating - The report maintains a "Buy" rating for China Resources Beverage [6] Core Views - The company reported a stable sales performance with a slight increase in revenue and a significant rise in net profit, indicating effective operational strategies and cost management [1][3] - The beverage segment is experiencing rapid growth, particularly in tea and energy drinks, which are expected to drive future revenue increases [2][3] - The company is committed to high dividend payouts, reflecting its strong cash flow and profitability [3] Summary by Sections Financial Performance - In 2024, the company achieved revenue of 13.521 billion, a year-on-year increase of 0.05%, and a net profit of 1.637 billion, up 23.12% [1] - The gross margin improved to 47.3%, an increase of 2.7 percentage points year-on-year, driven by enhanced production capacity and efficiency [3] - The company plans to distribute a total dividend of 1.158 billion, with a payout ratio of 70.8% [3] Packaging Water Business - The packaging water segment generated revenue of 12.124 billion, a decrease of 2.59% year-on-year, but the company outperformed the industry growth rate [1] - The retail sales of the company's packaging water products grew by 4.5%, compared to the industry average of 2.5% [1] Beverage Business - The beverage segment reported revenue of 1.397 billion, a year-on-year increase of 30.80%, contributing 10.3% to total revenue [2] - The tea beverage product line saw a remarkable sales increase of 122% year-on-year, with the chrysanthemum tea series leading in market share [2] Production and Cost Management - The company expanded its production capacity by 21% in 2024, adding 22 new production lines [3] - The sales, management, and R&D expense ratios decreased, contributing to the overall improvement in profitability [3] Future Projections - The company expects net profit to grow by 20.7%, 20.4%, and 21.9% in 2025, 2026, and 2027, respectively, reaching 1.98 billion, 2.38 billion, and 2.90 billion [3]

Investment Rating - The report maintains a "Buy" rating for China Resources Beverage [6] Core Views - The company reported a stable revenue of 13.521 billion, with a slight year-on-year increase of 0.05%, and a net profit of 1.637 billion, reflecting a year-on-year growth of 23.12% [1] - The beverage segment is actively being developed as a second growth curve, achieving a revenue of 1.397 billion, which is a significant year-on-year increase of 30.80% [2] - The company is focusing on enhancing production capacity and efficiency, with a gross margin of 47.3%, up by 2.7 percentage points year-on-year [3] - The company plans to distribute a total dividend of 1.158 billion, with a payout ratio of 70.8%, indicating a strong commitment to shareholder returns [3] Summary by Sections Sales Performance - The packaging water business generated revenue of 12.124 billion, a decrease of 2.59% year-on-year, accounting for 89.7% of total revenue. The retail sales of the company's packaging water products grew by 4.5%, outperforming the industry growth rate of 2.5% [1] - The beverage business has shown robust growth, with a three-year compound annual growth rate of 40%, driven by new product launches and market expansion [2] Production and Profitability - The company has increased its production capacity by 21% year-on-year, adding 22 new production lines, which is expected to enhance the self-sufficiency rate of packaging water to over 60% by the end of the 14th Five-Year Plan [3] - The net profit margin improved to 12.1%, an increase of 2.27 percentage points year-on-year, supported by reduced sales and management expenses [3] Financial Projections - The company forecasts net profits for 2025, 2026, and 2027 to be 1.975 billion, 2.377 billion, and 2.897 billion respectively, with year-on-year growth rates of 20.7%, 20.4%, and 21.9% [3] - The report provides a detailed financial outlook, projecting steady revenue growth and improving profitability metrics over the next few years [5][12]

Core Viewpoint - The beverage industry is experiencing intense competition, particularly due to a price war initiated by Nongfu Spring, which has prompted China Resources Beverage to adopt strategies for resilience and growth amidst these challenges [2][3]. Group 1: Company Performance - China Resources Beverage reported a slight revenue increase of 0.05% to 13.521 billion yuan, while net profit rose by 23.1% to 1.637 billion yuan, indicating effective cost optimization and business diversification strategies [2]. - The gross profit margin improved to 47.3%, reflecting the company's ability to maintain profitability despite competitive pressures [2]. Group 2: Market Dynamics - The bottled water market in 2024 is characterized as a "year of chaos," with Nongfu Spring aggressively pricing its products, such as the "Green Bottle Pure Water" at 9.9 yuan for 12 bottles, significantly impacting market dynamics [2]. - Nongfu Spring's market share for its green bottle water surged from zero to 9%, directly affecting China Resources Beverage's small-sized bottled water segment [2]. Group 3: Strategic Responses - In response to the price war, China Resources Beverage is focusing on "upward breakout" strategies by launching premium products like "Yibao Lu" and mid-range offerings like "Ben You," with the latter seeing over 100% year-on-year sales growth [2]. - The company aims to increase its self-manufactured product ratio to 70% by 2025, which is expected to enhance cost advantages and improve profit margins [3]. Group 4: Industry Outlook - The beverage sector is witnessing a shift, with non-water beverage categories such as tea and juice growing by 30.8%, now accounting for over 10% of total revenue, which helps mitigate risks associated with reliance on a single product category [3]. - Despite maintaining an 18.4% market share, China Resources Beverage faces challenges from Nongfu Spring's 23.6% share and must focus on brand differentiation and channel optimization to remain competitive [3].

Summary of China Resources Beverage (2460.HK) Earnings Review Company Overview - **Company**: China Resources Beverage (2460.HK) - **Market Cap**: HK$34.4 billion / $4.4 billion - **Current Price**: HK$14.66 - **12-Month Price Target**: HK$19.00 - **Upside Potential**: 29.6% [1] Key Financial Highlights - **FY24 Results**: Net margin beat reported on March 21, 2024 - **Earnings Forecast**: Revised up by 6% for 2025 to Rmb2.06 billion, representing a 26% year-over-year increase - **P/E Ratio**: Trading at 16x 2025 P/E on updated estimates [1][17] Core Insights from Analyst Briefing 1. **2024 Performance**: - Resilient performance despite a slowing industry - Profitability exceeded expectations with stable topline growth - Packaged water retail sales gained 0.4 percentage points in market share - Growth driven by mid-to-large pack water and strong beverage sales [1][20] 2. **2025 Targets and Outlook**: - Plans to reignite growth in the water segment and enhance margins through cost efficiency - Focus on penetrating lower-tier cities and expanding consumption scenarios [1][18] - Beverage segment to emphasize tea, juice, and sports drinks, with new product launches [1][18] 3. **Margin Expansion**: - Expected margin expansion driven by increased in-house production ratio (aiming for 70% in 2025) - Cost benefits from renegotiated service fees and operating leverage [1][16][19] 4. **Shareholder Returns**: - Management aims to maintain or increase the common dividend payout ratio, currently at 45% for 2024 [1][16] Operational Highlights - **Market Share Growth**: Packaged water retail sales grew by 4.5% year-over-year in 2024, outpacing the industry [1][20] - **Capacity Expansion**: Added four new plants and retired nine legacy production lines, boosting total capacity by 21% [1][20] - **Channel Expansion**: Increased points of sale by 15% year-over-year to 2.5 million [1][21] Product Innovation - New product launches include family-sized water SKUs and various beverage lines, including herbal tea and sports drinks [1][21] Earnings Estimate Changes - **Revenue Forecasts**: Adjusted down by 4-5% for 2025-2027, reflecting enhanced margin expansion [1][22] - **EPS Growth**: Expected to grow from Rmb0.79 in 2025 to Rmb1.20 by 2027 [1][22] Risks and Considerations - **Competitive Landscape**: Potential for intensified competition in the bottled water market - **Raw Material Prices**: Fluctuations could impact margins - **Channel Management**: Uncertainty in distribution could affect sales [1][24] Conclusion - **Investment Rating**: Buy rating maintained with a target price of HK$19.00, based on a 19x 2026E P/E [1][23] - **Attractive Risk-Reward**: Stock offers high margin visibility and growth potential despite slight downward adjustments in sales forecasts [1][17]

Investment Rating - The report assigns a "Buy" rating for China Resources Beverage (02460) with a target price of 18.75 HKD, indicating an expected increase of over 15% relative to the market index in the next six months [1][6][12]. Core Insights - China Resources Beverage achieved a revenue of 13.521 billion CNY in 2024, a slight increase of 0.05% year-on-year, while the net profit attributable to shareholders rose by 23.12% to 1.637 billion CNY. The company declared a total cash dividend of 1.158 billion CNY, with a payout ratio of 70.77% [3][4][7]. - The company’s packaging water business recorded a revenue of 12.124 billion CNY, a decline of 2.6% year-on-year, while the second-line beverage business grew by 30.8% to 1.4 billion CNY, contributing 10.3% to total revenue [4][5]. - The gross margin improved by 2.6 percentage points to 47.3%, driven by increased self-owned production capacity and reduced outsourcing costs [5][6]. Summary by Sections Financial Performance - In 2024, the company reported total revenue of 13.521 billion CNY and a net profit of 1.637 billion CNY, with respective growth rates of 0.05% and 23.12% [3][7]. - The projected revenues for 2025, 2026, and 2027 are 14.453 billion CNY, 15.261 billion CNY, and 16.075 billion CNY, with expected growth rates of 7%, 6%, and 5% respectively [6][7]. Business Segments - The packaging water segment accounted for 89.7% of total revenue, with a notable decline in small-sized products due to competitive pricing pressures, while larger-sized products saw an increase in revenue by 8.6% [4][5]. - The second-line beverage segment is expected to continue its growth trajectory, with new product launches aimed at expanding consumer reach [4][6]. Operational Efficiency - The company has improved its operational efficiency, leading to a significant reduction in production costs and an increase in net profit margin to 12.1% [5][6]. - The self-owned production capacity is projected to increase to over 60%, further enhancing profitability [6].