Financial Performance - Total revenue for the year ended December 31, 2024, was RMB 13,521,246 thousand, a slight increase from RMB 13,514,728 thousand in 2023, representing a growth of 0.05%[3] - Profit attributable to owners of the company for 2024 was RMB 1,636,694 thousand, up 23.1% from RMB 1,329,341 thousand in 2023[3] - Basic earnings per share increased to RMB 0.79 in 2024 from RMB 0.66 in 2023, reflecting a growth of 19.7%[3] - Gross profit for the year was RMB 6,397,264 thousand, an increase from RMB 6,035,214 thousand in 2023, indicating a growth of 6.0%[5] - The company reported a total comprehensive income of RMB 1,707,931 thousand for 2024, compared to RMB 1,331,322 thousand in 2023, marking a significant increase of 28.4%[8] - The company reported a net profit of RMB 1,636,694,000 for the year 2024, compared to RMB 1,329,341,000 in 2023, reflecting an increase of 23%[29] - The company's net profit increased by 24.7% to RMB 1,660.8 million in 2024, with a net profit margin rising from 9.9% in 2023 to 12.3%[70] Dividends - The company proposed a final dividend of RMB 0.307 per share and a special dividend of RMB 0.176 per share for 2024, compared to no dividends in 2023[3] - The company declared a dividend of RMB 2.5 billion based on retained earnings as of December 31, 2023, with an additional proposed final dividend of RMB 0.307 per share and a special dividend of RMB 0.176 per share for the year ending December 31, 2024[28] - The board proposed a final dividend of RMB 0.307 per share and a special dividend of RMB 0.176 per share for the year ending December 31, 2024, subject to shareholder approval[92] Assets and Liabilities - Non-current assets increased to RMB 6,733,665 thousand in 2024 from RMB 7,443,777 thousand in 2023, a decrease of 9.5%[10] - Current assets rose to RMB 11,960,629 thousand in 2024, up from RMB 5,557,977 thousand in 2023, representing a growth of 115.0%[10] - The company’s total equity increased to RMB 11,861,274 thousand in 2024 from RMB 7,372,773 thousand in 2023, reflecting a growth of 60.5%[11] - The company’s cash and cash equivalents reached RMB 5,700,765 thousand in 2024, significantly up from RMB 2,074,698 thousand in 2023, indicating a growth of 174.5%[10] - Trade payables decreased from RMB 816,914 thousand in 2023 to RMB 625,295 thousand in 2024, indicating improved cash flow management[33] - The company's bank borrowings decreased significantly from RMB 42.5 million in 2023 to RMB 2.4 million in 2024[68] Revenue Breakdown - Sales of packaged drinking water amounted to RMB 12,124,048,000, while beverage sales reached RMB 1,397,198,000 for the year 2024[19] - Revenue from packaged drinking water products accounted for 89.7% of total revenue, amounting to RMB 12,124.0 million, which represents a decline of 2.6% year-on-year[38] - Beverage products generated revenue of RMB 1,397.2 million, reflecting a significant growth of 30.8% compared to the previous year, and accounted for 10.3% of total revenue[39] - Over 99% of the company's revenue and operating income is derived from customers located in mainland China[20] Cost Management - The cost of goods sold for the year was RMB 7,027,630,000, compared to RMB 7,394,539,000 in 2023, showing a reduction of 4.97%[27] - Sales costs decreased by 4.8% to RMB 7,124.0 million in 2024, primarily due to an increase in products produced in-house and a decline in raw material prices[59] - Interest income from bank deposits was RMB 167,520,000 in 2024, down from RMB 178,740,000 in 2023, indicating a decrease of 6.8%[23] - The company's financial costs decreased significantly from RMB 42,516,000 in 2023 to RMB 2,441,000 in 2024, a reduction of approximately 94.25%[24] Production and Capacity - In 2024, the company increased its overall production capacity by 21% compared to 2023, adding 22 new production lines and enhancing production autonomy and stability[51] - The company launched several new products in 2024, including "Zhi Ben Qing Run" sour plum soup and "Guihua Oolong Milk Tea," enriching its product matrix[53] - The company has implemented a unified bottle preform allocation operation plan, significantly increasing the self-sufficiency rate of bottle preforms by the end of 2024[51] Market Strategy - The company is actively investing in channel and market resources to strengthen its market position amid increasing competition and changing consumer habits[37] - The company aims to strengthen its market position along the Yangtze River and achieve rapid growth in the northwest market, focusing on enhancing channel distribution levels and modern channel business[45] - The company has adopted a regional development strategy to consolidate its market leadership and break the north-south disparity, particularly enhancing its presence in the Yangtze River region[45] - The company has established long-term partnerships with top sports IPs, enhancing brand influence through sports marketing initiatives[48] - The company has focused on targeted marketing strategies on mainstream internet platforms, effectively increasing conversion rates among high-attention demographics[47] Research and Development - Research and development costs decreased from RMB 61.5 million in 2023 to RMB 53.4 million in 2024[67] - The company plans to enhance its product R&D capabilities, allocating 3% of the net proceeds, which amounts to RMB 156.4 million, with RMB 8.5 million already utilized[90] Corporate Governance - The company has adhered to all applicable corporate governance code provisions since its listing date until December 31, 2024[97] - The company has established an audit committee consisting of two non-executive directors and four independent non-executive directors to oversee financial reporting and risk management[100] - The audit committee has reviewed the consolidated financial statements for the year ending December 31, 2024, ensuring compliance with applicable accounting standards[100] - The group's auditor, Deloitte, confirmed that the financial data disclosed in the preliminary announcement aligns with the audited financial statements for the year ending December 31, 2024[101] Future Plans - The company plans to launch new sports and coffee beverage products in 2025, enhancing its product portfolio[42] - The company has no current plans for potential investments and acquisitions, with RMB 417.1 million allocated for this purpose remaining unutilized[90] - The company has no plans for significant investments or acquisitions beyond those disclosed in the prospectus[79]

Investment Rating - The report assigns a "Buy" rating for the company [2][8]. Core Insights - The company has a solid foundation in the bottled water industry, having been established in 1984 and becoming a market leader in Guangdong by 2006. It has expanded nationally and has a strong market presence with a significant share in the bottled water segment [3][15]. - The bottled water market in China is expected to grow, with a market size of 215 billion yuan in 2023, reflecting a 4% year-on-year increase. The company holds a 32.7% market share in the purified water segment, indicating its leading position [4][22]. - The company is focusing on increasing its self-production capacity, which is expected to enhance profitability. It has 13 owned factories and plans to expand production capacity significantly [5][22]. - The company is also investing in marketing and brand building, with a high sales expense ratio compared to industry peers, indicating a commitment to enhancing brand visibility [6][7]. Summary by Sections 1. Long-term Commitment to Bottled Water - The company has been deeply involved in the bottled water sector for 40 years, achieving significant market share and expanding its product offerings [3][15]. - In 2023, the company reported revenues of 13.564 billion yuan and a profit of 1.331 billion yuan, with year-on-year growth rates of 7.16% and 34.66%, respectively [3][15]. 2. Broad Market Demand and Competitive Advantage - The bottled water market is projected to grow, with a compound annual growth rate (CAGR) of 7% from 2018 to 2023, outpacing other segments in the soft drink market [4][22]. - The company benefits from economies of scale and a strong distribution network, which positions it favorably against competitors [4][5]. 3. Profitability and Growth Potential - The company has a gross margin of 44.66% and a net margin of 9.82% in 2023, indicating room for improvement in profitability compared to peers [25][26]. - The report forecasts revenue growth rates of 6.8%, 7.7%, and 8.2% for 2024 to 2026, with profit growth rates of 20.8%, 18.3%, and 16.3% for the same period [8][10]. 4. National Expansion and Channel Development - The company is actively expanding its distribution network, with a significant increase in the number of sales points and a focus on national coverage [6][22]. - The sales revenue from distributors and direct sales reached 119.23 billion yuan and 15.91 billion yuan, respectively, in 2023, showing a robust growth trajectory [6][22]. 5. Financial Projections and Valuation - The report projects earnings per share (EPS) of 0.67, 0.79, and 0.92 yuan for 2024 to 2026, with corresponding price-to-earnings (PE) ratios of 21, 18, and 15 [8][10].

Investment Rating - The report assigns a "Buy" rating for the company [2][8]. Core Views - The company has a solid foundation in the bottled water industry, with significant growth potential despite being established for over 40 years [3][15]. - The demand for packaged drinking water is broad, with leading companies maintaining stable advantages in the market [4][29]. - The company shows strong profitability elasticity and potential for platform growth in its beverage business [5][22]. - There is ample room for channel expansion and national coverage, with a focus on increasing the number of distribution points [6][7]. - The investment logic is based on short-term revenue growth driven by national expansion and long-term benefits from industry consolidation and increased product specifications [8][10]. Summary by Sections 1. Long-term Commitment to Bottled Water - Established in 1984, the company became the leading bottled water brand in Guangdong by 2006 and has since expanded regionally and nationally [3][13]. - In 2023, the company achieved revenues of 13.564 billion yuan and a profit of 1.331 billion yuan, reflecting year-on-year growth of 7.16% and 34.66% respectively [3][15]. 2. Broad Market Demand and Leading Position - The packaged drinking water market reached 215 billion yuan in 2023, growing by 4% year-on-year, with a CAGR of 7% from 2018 to 2023 [4][29]. - The company holds a 32.7% market share in the purified water segment, establishing itself as a market leader [4][5]. 3. Profitability and Growth Potential - The company’s revenue from packaged drinking water and beverages in 2023 was 12.447 billion yuan and 1.068 billion yuan, respectively, with a gross margin of 46% for water products [5][22]. - The self-production ratio is increasing, which is expected to enhance profitability [5][22]. 4. Channel Expansion and Marketing - The company has a significant sales force and a growing number of distribution points, with 8,700 sales personnel and 3,938 secondary distributors covering 2 million terminal points [6][7]. - Marketing efforts are focused on brand image and sports partnerships, with a high sales expense ratio maintained at 30%-33% [7][22]. 5. Profit Forecast and Valuation - Revenue growth is projected at 6.8%, 7.7%, and 8.2% for 2024-2026, with profit growth at 20.8%, 18.3%, and 16.3% respectively [8][10]. - The expected EPS for 2024-2026 is 0.67, 0.79, and 0.92 yuan, with corresponding PE ratios of 21, 18, and 15 times [8][10].

Investment Rating - The report assigns an "Outperform" rating to CR Beverage, with a target price of HKD 17.50, indicating an expected return above 10% over the next 12 months [5][10]. Core Insights - CR Beverage is expected to benefit from a dual-driven revenue growth strategy focusing on national expansion and market penetration, with a projected compound annual growth rate (CAGR) of 3.5% for its packaged water segment from FY24 to FY26 [1][9]. - The company plans to enhance its gross margin from 44.7% in FY23 to 49.0% in FY26 by increasing its self-production ratio from approximately 50% in 1H24 to 70% in FY26, supported by a planned investment of 4.3 billion RMB in capacity construction [2][9]. - Adjusted net profit is forecasted to grow at a CAGR of 16.8% from FY24 to FY26, driven by the expansion of self-production facilities and a strong brand presence [2][9]. Summary by Sections Revenue and Profit Forecast - Revenue (in million RMB) is projected to grow from 12,623 in 2022 to 16,443 in 2026, with year-on-year growth rates of 11.3%, 7.1%, 5.3%, 7.0%, and 8.1% respectively [3]. - Net profit (in million RMB) is expected to increase from 990 in 2022 to 2,067 in 2026, with growth rates of 15.3%, 34.3%, 22.3%, 16.3%, and 9.3% [3]. - Diluted earnings per share (in RMB) are forecasted to rise from 0.49 in 2022 to 0.86 in 2026, reflecting similar growth trends [3]. Valuation Metrics - The price-to-earnings (P/E) ratio is projected to decrease from 23.3 in 2022 to 14.4 in 2026, indicating a more attractive valuation over time [3]. - The expected dividend per share (in HKD) is set to increase from 0 in 2023 to 0.28 in 2026, with corresponding yields rising from 1.6% to 2.1% [3]. Market Position and Strategy - CR Beverage holds an 18.4% market share in China's packaged water market, ranking second, with significant growth potential in northern and central-western regions [1]. - The company aims to deepen its market penetration in lower-tier cities and enhance retail network coverage, which is expected to drive market share growth [1].

Investment Rating - The report initiates coverage with an "Outperform" rating, expecting a return above 10% over the next 12 months [5][10]. Core Insights - CR Beverage is positioned to benefit from national expansion and market penetration strategies, which are expected to drive revenue growth [9]. - The company plans to improve its gross margin by increasing its self-production ratio from approximately 50% in 1H24 to 70% by FY26F, which will enhance cost control and product quality [2]. - The target price for CR Beverage is set at HKD 17.50, based on a 20x FY25F price-to-earnings ratio, reflecting the average valuation of the Chinese beverage sector [2]. Revenue and Profit Forecast - Revenue projections for CR Beverage are as follows: - FY23: RMB 13,515 million - FY24: RMB 14,224 million - FY25: RMB 15,217 million - FY26: RMB 16,443 million - The compound annual growth rate (CAGR) for revenue from FY24 to FY26 is estimated at 3.5% [3]. - Net profit forecasts are: - FY23: RMB 1,329 million - FY24: RMB 1,626 million - FY25: RMB 1,891 million - FY26: RMB 2,067 million - The CAGR for adjusted net profit from FY24 to FY26 is projected at 16.8% [3]. Market Position and Strategy - CR Beverage holds an 18.4% market share, ranking second in China's packaged water market, with significant growth potential in northern and central-western regions [1]. - The company aims to enhance its market presence by deepening penetration in lower-tier cities and expanding retail network coverage [1][2].

Investment Rating - The investment rating for the company is "Buy" [1] Core Views - The report highlights that the company is currently undervalued due to market pessimism, with growth potential driven by national expansion, platform development, and self-production [9][10] - The company has a strong market position in the bottled water sector, with its main brand "Yibao" showing resilience during price wars and gaining market share [10][39] - The beverage segment is at a turning point, with significant growth in revenue and market share, indicating potential for further expansion [49][50] Financial Summary - Revenue projections for the company are as follows: - 2023A: 13,515 million RMB - 2024E: 14,526 million RMB (YoY +7.5%) - 2025E: 15,747 million RMB (YoY +8.4%) - 2026E: 17,103 million RMB (YoY +8.6%) [6] - Net profit forecasts are: - 2023A: 1,329 million RMB - 2024E: 1,625 million RMB (YoY +22.3%) - 2025E: 1,965 million RMB (YoY +20.9%) - 2026E: 2,275 million RMB (YoY +15.8%) [6] - The company’s return on equity (ROE) is projected to be 19.3% in 2023, decreasing to 12.4% in 2024, and stabilizing at 13.1% from 2025 onwards [6] Growth Logic - The company’s growth logic is based on three main pillars: 1. **National Expansion**: The company has successfully increased its market share in the bottled water segment despite industry price wars, with a focus on expanding into northern regions [10][23] 2. **Platform Development**: The beverage business is experiencing rapid growth, with a significant increase in revenue and market share, indicating a successful transition to a multi-product platform [49][50] 3. **Self-Production**: The company aims to enhance profitability through increased self-production rates, which are expected to improve gross and net profit margins significantly [10][39] Market Position - The company holds a strong competitive position in the bottled water market, ranking second after Nongfu Spring, with a market share of 18.4% in the bottled water segment and 32.7% in the pure drinking water segment [11][20] - The bottled water market in China is projected to grow at a CAGR of 7.9% over the next five years, driven by increasing consumer awareness of drinking safety and the expansion of home consumption scenarios [16][20] Beverage Segment Performance - The beverage segment has shown impressive growth, with revenue increasing by 37% in 2022, 49% in the first half of 2023, and projected to maintain a strong growth trajectory [49][50] - The introduction of new products, such as herbal teas and flavored drinks, has contributed to the rapid expansion of the beverage segment, which now accounts for over 10% of total revenue [49][50]

Investment Rating - The report assigns a "Buy" rating for China Resources Beverage (02460.HK) [1] Core Views - China Resources Beverage has established itself as the second-largest packaged water company and the largest drinking purified water company in China, with market shares of 18.4% and 32.7% respectively in 2023 [4][16] - The company is expanding its beverage categories, achieving significant market shares in tea, juice, and coffee beverages, and is progressing towards a multi-category development strategy [4][16] - The report anticipates revenue growth driven by increased self-production rates and a reduction in service fees, alongside national expansion and the development of the beverage segment [4][22] Company Overview - China Resources Beverage has been deeply involved in the water beverage industry for decades, gradually expanding its beverage categories [4][13] - The company has a clear and stable shareholding structure, with its controlling shareholder, China Resources Group, being a state-owned diversified holding enterprise [4][17] - The management team has extensive industry experience, which aids in the execution of strategic initiatives [4][19] Packaging Water Market - The packaging water industry is experiencing stable growth, driven by increasing health awareness and demand for bottled water [4][30] - The market size for packaged water in China grew from 152.6 billion to 215 billion yuan from 2018 to 2023, with a compound annual growth rate (CAGR) of 7.1% [4][34] - The competitive landscape is characterized by a stable oligopoly, with China Resources Beverage holding a significant market share in the purified water segment [4][31] Financial Analysis - The company's revenue increased from 113.4 billion yuan in 2021 to 135.15 billion yuan in 2023, with a CAGR of 9.2% [4][22] - The beverage segment has shown remarkable growth, with revenues rising from 5.22 billion yuan in 2021 to 10.68 billion yuan in 2023, reflecting a CAGR of 43% [4][22] - The report projects revenues of 143.3 billion, 154.2 billion, and 167 billion yuan for 2024, 2025, and 2026 respectively, with corresponding net profits of 16.2 billion, 19.9 billion, and 23.2 billion yuan [4][22]

Investment Rating - The report initiates coverage with an "Outperform" rating for the company [4]. Core Viewpoints - The company is a leader in China's packaged drinking water market, with a strong brand presence and a multi-category strategy that enhances profitability [2][19]. - The company has shown robust revenue and profit growth, outperforming industry averages, with a focus on expanding its product matrix and sales network [2][29]. - The report highlights the company's strategic expansion into various beverage categories, leveraging its core brand "Yibao" to capture market share [19][58]. Summary by Sections 1. Company Overview - The company is recognized as the second-largest packaged drinking water enterprise in China and the largest in the pure drinking water segment, with "Yibao" being one of the most popular brands [2][13]. - The company has established a comprehensive sales and distribution network across China, maintaining around 1,000 distributors and over 8,700 sales personnel [2][25]. 2. Financial Performance - The company’s total revenue is projected to grow from 135.64 billion CNY in 2023 to 167.31 billion CNY by 2026, with a compound annual growth rate (CAGR) of 7.5% [2][4]. - Net profit is expected to increase from 1.33 billion CNY in 2023 to 2.31 billion CNY in 2026, reflecting a CAGR of 18.5% [2][4]. - The gross margin is anticipated to improve from 44.66% in 2023 to 50.84% by 2026, indicating enhanced operational efficiency [2][4]. 3. Market Dynamics - The packaged drinking water market in China is projected to reach 314.3 billion CNY by 2028, with a CAGR of 7.9% from 2023 to 2028 [48]. - The company holds a significant market share in the chrysanthemum tea beverage segment, ranking first with a market share of 38.5% in 2023 [2][54]. 4. Strategic Initiatives - The company employs a "1+N" model for national factory layout, with plans to increase self-built production capacity to enhance operational efficiency [3][26]. - The company is actively expanding its product offerings beyond packaged water, including herbal tea and juice products, which have shown substantial growth potential [20][58]. 5. Competitive Positioning - The company benefits from synergies with its parent group, enhancing its operational efficiency and market presence [15][19]. - The report notes that the concentration of the packaged drinking water market is increasing, with the top five companies holding a market share of 58.6% in 2023 [52].

Company and Industry Summary Company Overview - The company has a strong cost advantage and has been continuously improving its asset ratio since its inception, leading to significant earnings elasticity. It is positioned as a key recommended stock for 2025 [1] - The company operates primarily in two core segments: bottled water and beverages, with detailed strategies for each segment [1] Industry Background - The company has a historical background in the bottled water industry, being a key player in establishing national standards for bottled drinking water in China [2] - The development of the company can be divided into four stages, with significant milestones in branding and market expansion from 2001 to the present [2][4] Market Position - The company has achieved a leading market share in the bottled water segment, surpassing competitors like Nongfu Spring, with a market share of approximately 18.4% as of 2023 [17][18] - The overall bottled water market is concentrated, with the top five players holding nearly 60% of the market share [17] Financial Performance - Revenue growth has been stable, with a compound annual growth rate (CAGR) of around 9% from 2021 to 2023. In 2023, revenue reached 13.5 billion, reflecting a year-on-year growth of about 7% [8] - The bottled water segment accounts for approximately 92% of total revenue, with sales reaching nearly 12.5 billion in 2023 [9] Product Development - The company has been expanding its product line, introducing new beverage products and enhancing its bottled water offerings. Recent innovations include the launch of flavored water and plant-based beverages [5][21] - The company is focusing on the growth of medium and large-sized packaging, which has shown higher growth rates compared to smaller sizes [13][19] Marketing and Distribution - The company has established deep marketing ties with major sporting events, enhancing brand visibility and consumer engagement [6] - Distribution channels are being expanded, with a significant increase in beverage sales through bottled water outlets, which accounted for about 67% of beverage sales in 2023 [22] Future Outlook - The company is expected to benefit from ongoing market expansion and product diversification, particularly in the beverage segment, which is projected to grow significantly [20][36] - Cost optimization through improved asset ratios and production efficiencies is anticipated to enhance profitability, with gross margins expected to stabilize around 48% to 49% [37][38] Key Risks and Considerations - The company faces competitive pressures in both the bottled water and beverage markets, necessitating continuous innovation and marketing efforts to maintain its market position [18] - Fluctuations in raw material prices and potential pricing wars in the bottled water segment could impact margins [37] This summary encapsulates the key points from the conference call, highlighting the company's strategic positioning, market dynamics, financial performance, and future growth prospects.

Investment Rating - The report assigns a "Buy" rating for the company, indicating a positive outlook for investment [5]. Core Insights - The company has established itself as the second-largest packaged drinking water enterprise in China and the largest in the bottled pure water segment, with a multi-category strategic development framework centered around its flagship brand "Yibao" [15]. - In 2023, the company achieved a revenue of 13.51 billion yuan, representing a year-on-year growth of 7.1%, and a net profit attributable to shareholders of 1.33 billion yuan, up 34.3% year-on-year [15]. - The report highlights the company's strong market position, with a retail sales figure of 39.5 billion yuan for "Yibao" pure water, leading the market, and significant contributions from its beverage brands [15]. Summary by Sections Company Overview - The company has undergone four development phases: industry pioneering (1984-2000), core business refinement (2001-2010), national expansion (2011-2017), and dual-driven growth (2018-present) [16]. - The management team is experienced, with a significant shareholding of 50.04% by China Resources Group, ensuring stability and strategic alignment [1]. Industry Analysis - The pure drinking water market is projected to grow, with a market size of 120.6 billion yuan in 2023 and a CAGR of 7.7% from 2018 to 2023, driven by increasing health awareness and the expansion of household and restaurant usage scenarios [2]. - The competitive landscape shows a trend towards oligopoly, with the top five companies' market share increasing from 56.2% in 2021 to 58.6% in 2023 [2]. Financial Performance - The company reported a compound annual growth rate (CAGR) of 9.2% in revenue and 24.5% in net profit from 2021 to 2023, indicating strong operational efficiency and cost management [1]. - The revenue from packaged water reached 12.45 billion yuan in 2023, with a growth rate of 4.5%, while beverage revenue surged by 49% to 1.07 billion yuan [1][3]. Product and Brand Strategy - The company has a comprehensive product matrix with over 13 brands and 59 SKUs, focusing on pure water, tea beverages, juices, and coffee [15]. - The beverage segment, particularly self-owned brands, has shown remarkable growth, with self-owned beverage revenue reaching 880 million yuan, up 65.3% year-on-year [3]. Competitive Advantages - The company leverages sports marketing to enhance brand recognition and has a robust distribution network covering over 2 million retail points [4]. - Plans for capacity expansion include the establishment of five new factories by 2024-2025, aiming for a total capacity of 6.61 million tons for packaged water and 350,000 tons for beverages [4][7].