Investment Rating - The report initiates coverage with an OUTPERFORM rating, targeting a price of HK$18.10, representing a potential upside of 38% from the current price of HK$13.10 [2]. Core Insights - China Resources Beverage is a leading player in the packaged drinking water industry, holding the position of the second-largest packaged drinking water company and the largest in pure drinking water in China. The core brand "Yibao" has maintained a leading market share, contributing approximately 90% to the company's revenue [3][8]. - The company is transitioning from a single product focus to a multi-product platform, with significant growth expected in the beverage segment, which currently accounts for about 10% of total revenue but shows promising growth potential [3][30]. - The company has been expanding its production capacity and optimizing its supply chain, which is expected to improve gross margins. The gross profit margin is projected to increase to 47.3% in 2024, up from 44.7% in 2023 [4][36]. Revenue and Profit Forecast - Revenue is expected to grow from RMB 14.54 billion in 2025 to RMB 16.54 billion in 2027, with year-on-year growth rates of 7.5%, 6.7%, and 6.6% respectively. Net profit is projected to increase from RMB 1.99 billion in 2025 to RMB 2.52 billion in 2027, with corresponding EPS of RMB 0.83, RMB 0.95, and RMB 1.05 [2][5]. Market Position and Growth Drivers - The company has a strong channel network, covering over 2 million retail outlets across China, with a significant increase in retail coverage from 50.6% in 2021 to 77.2% in 2024. The company is also focusing on expanding its presence in lower-tier cities and e-commerce platforms [5][44]. - The growth of large-sized bottled water products has outpaced the industry, with a CAGR of 9.9% from 2021 to 2024, making it a key growth driver for the company [3][31]. Cost Management and Margin Improvement - The company has been optimizing its cost structure, with a focus on increasing self-built production capacity to reduce reliance on outsourcing. This strategy is expected to enhance cost control and product quality consistency [4][48]. - The gross margin has improved due to a decrease in raw material costs, particularly PET, which is projected to stabilize in the future [36][37]. Strategic Expansion - The company is actively expanding its production facilities in key regions, including Guangdong and Fujian, to enhance its national coverage and eliminate supply bottlenecks [4][48]. - The strategic focus on sports marketing and partnerships with major events is expected to enhance brand visibility and consumer engagement, further driving growth [46][47].

Core Viewpoint - Goldman Sachs remains optimistic about the beverage sector, viewing it as a preferred sub-sector within essential consumer goods, with long-term sales growth expected to support profit growth prospects for 2025 [1] Group 1: Profit Forecasts and Target Price Adjustments - The firm has raised net profit forecasts for food and beverage companies by up to 9% and adjusted target prices by 7% to +25%, reflecting cost efficiencies, product cycles, and an extension of valuations to mid-2026 [1] - Year-to-date, the stock prices of covered Chinese beverage companies have increased by 19%, outperforming the MSCI China Consumer Staples Index's 8% gain [1] Group 2: Competition and Market Dynamics - Increased competition from takeout subsidies has led to greater pricing discounts for ready-to-drink beverages, potentially impacting market share in the short term [2] - The firm notes that while ready-to-drink beverage outlets number over 600,000, the impact of ready-to-drink beverages on the overall beverage industry remains limited [2] Group 3: Sales Impact Analysis - Scenario analysis indicates that ready-to-drink and freshly made beverage consumption may have a mutual cannibalization effect of about 50%, with seasonal subsidies boosting sales by 25% to 45% during peak periods [3] - The overall impact on ready-to-drink beverage sales is projected to be in the low to mid-single-digit percentage range [3] Group 4: Product Cycle and Consumer Trends - The product cycle remains a key driver, with no-sugar beverages, new flavors, and sports/energy drinks experiencing growth, contributing over 20% to beverage sales by 2025 [4] - Notable products include Dongpeng Beverage's "Brewed Water" and "Fruit Tea," as well as Nongfu Spring's "Oriental Tree Leaf," which are expected to see significant sales growth [4] Group 5: Profit Margin Resilience - Despite concerns over promotional risks affecting product prices, the firm believes that cost efficiencies will keep reinvestment levels manageable [5] - The forecast for unit cost reductions has been revised to 2.3% to 6.3%, with expectations that this will offset a decline in product prices of 1.0% to 3.2% [5] - The analysis suggests that overall costs could decrease by 1.2% to 5.3% if spot prices are utilized, theoretically countering the impact of price declines [5]

Core Viewpoint - The company, China Resources Beverage, is a leading player in the packaged water market with its core brand "Yibao" and aims to explore a second growth curve in the beverage sector through product diversification and improved operational efficiency [1][2]. Packaged Water Business - The packaged water market in China grew from 152.6 billion yuan in 2018 to 215 billion yuan in 2023, with a CAGR of 7.1%, indicating steady industry growth [2]. - The company holds an 18.4% market share in the packaged water sector, ranking second in the industry [1]. - The company’s self-production rate is expected to exceed 60% by the end of the 14th Five-Year Plan, improving profitability as the reliance on contract manufacturing decreases [2]. Beverage Business - The company began exploring the beverage sector in 2011 and launched its own brand "Zhiben Qingrun" in 2021, which has gained significant market share, particularly in chrysanthemum tea, reaching 38.5% in 2023 [3]. - The company has faced challenges with high sales expense ratios, approximately 30% in 2023, but ongoing product launches and improved distribution efficiency are expected to enhance profitability [3]. Profit Forecast and Investment Recommendations - The company is projected to achieve revenues of 14.07 billion yuan, 15.06 billion yuan, and 16.14 billion yuan in 2025, 2026, and 2027, respectively, with corresponding net profits of 1.92 billion yuan, 2.24 billion yuan, and 2.61 billion yuan [3]. - The company’s net profit margin is currently below the industry average, indicating significant room for improvement [3]. - The initial coverage rating for the company is "Buy," reflecting optimism about its growth potential in both the packaged water and beverage sectors [3].

Investment Rating - The report initiates coverage with a "Buy" rating for China Resources Beverage [3][8][10]. Core Views - China Resources Beverage, as a leading bottled water company, benefits from both revenue and profit growth. The company is expected to enjoy the industry's penetration rate increase and has made initial progress in its beverage business with the "Zhiben Qingrun" chrysanthemum tea series. The company is projected to improve its profitability through various cost-reduction strategies [3][8][29]. Summary by Sections Company Overview - China Resources Beverage is a subsidiary of China Resources Group, focusing on bottled water and beverage businesses. Its core brand "Yibao" is a leading bottled water brand in China, with a market share of 18.4% in 2023 [5][15]. Bottled Water Business - The bottled water market in China has grown from 152.6 billion yuan in 2018 to 215 billion yuan in 2023, with a CAGR of 7.1%. The company aims to increase its self-production rate from 32% in 2023 to over 60% by the end of the 14th Five-Year Plan, which is expected to significantly enhance profitability [6][8][29]. Beverage Business - The company has been exploring the beverage sector since 2011, launching various products. The "Zhiben Qingrun" series has gained a market share of 38.5% in 2023. The company aims to improve channel efficiency and reduce sales expenses through continuous product launches and increased distribution [7][8][29]. Financial Forecast and Investment Advice - The company is expected to achieve revenues of 140.7 billion yuan, 150.6 billion yuan, and 161.4 billion yuan in 2025, 2026, and 2027, respectively. Corresponding net profits are projected to be 19.2 billion yuan, 22.4 billion yuan, and 26.1 billion yuan, with EPS of 0.8, 0.93, and 1.09 yuan, respectively [8][29].

Investment Rating - The report initiates coverage with a "Buy" rating for China Resources Beverage [4][10][12] Core Views - China Resources Beverage, as a leading packaged water company, benefits from both revenue and profit growth. The company is expected to enjoy the industry's penetration rate increase and has made initial progress in its beverage business with the "Zhiben Qingrun" chrysanthemum tea series. The company is projected to improve its profitability through various cost-reduction strategies and increased self-production rates [4][10][40]. Summary by Sections Company Overview - China Resources Beverage is a subsidiary of China Resources Group, focusing on packaged water and beverage businesses. Its core brand "Yibao" is a leading purified water brand in China, with a market share of 18.4% in 2023. The company has launched several beverage brands to diversify its product offerings, now totaling 13 brands and 56 SKUs [7][19]. Packaged Water Business - The packaged water market in China has grown from 152.6 billion yuan in 2018 to 215 billion yuan in 2023, with a CAGR of 7.1%. The company aims to increase its self-production rate from 32% in 2023 to over 60% by the end of the 14th Five-Year Plan, which is expected to significantly enhance its profitability [8][10][40]. Beverage Business - The beverage segment has shown rapid growth, with the "Zhiben Qingrun" series achieving a market share of 38.5% in 2023. The company aims to improve channel efficiency and reduce sales expenses through continuous product launches and increased distribution [9][10][31]. Financial Forecast and Investment Recommendations - The company is expected to generate revenues of 140.7 billion yuan, 150.6 billion yuan, and 161.4 billion yuan for the years 2025, 2026, and 2027, respectively. Corresponding net profits are projected to be 19.2 billion yuan, 22.4 billion yuan, and 26.1 billion yuan. The EPS is forecasted to be 0.8, 0.93, and 1.09 yuan, with PE ratios of 15X, 13X, and 11X for the same years [10][12][29].

Group 1 - The stock prices of Andeli Juice (02218.HK), Cha Baidao (02555.HK), and China Resources Beverage (02460.HK) have increased by 6.66%, 3.31%, and 2.60% respectively [1]

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 Overview - The Hang Seng Index showed stability, closing up 0.40%, supported by sectors like banking and electricity [1] - The US and UK reached a trade agreement, reducing tariffs on UK car imports from 25% to a maximum of 10%, with a cap of 100,000 cars per year [1] - The agreement requires the UK to purchase an additional $5 billion in US agricultural products and a $10 billion Boeing procurement deal [1] US-China Trade Negotiations - Substantial trade negotiations between the US and China are set to take place, with expectations of a significant reduction in tariffs from 145% to 50% [2] - The negotiations are seen as exploratory, aimed at understanding each side's demands and limits [2] Economic Data - China's April exports in USD rose by 8.1% year-on-year, while imports fell by 0.2%, resulting in a trade surplus of $96.18 billion [4] - The data indicates a strong performance in trade despite the ongoing tariff conflicts, with April's figures being the second highest for the month historically [4] Sector Focus - The Chinese government is intensifying efforts to combat the smuggling of strategic minerals, which is crucial for national security and economic stability [7] - The crackdown on smuggling is expected to tighten supply and support prices, potentially enhancing company performance in the sector [7] Company Highlights - China Resources Beverage reported a revenue of 13.521 billion yuan and a net profit of 1.661 billion yuan for 2024, marking a 24.7% increase [9] - The company plans to distribute a total dividend of 0.483 yuan per share, reflecting a payout ratio of 70.8% [9] - The beverage segment is experiencing significant growth, with a 30.8% increase in revenue, contributing to 10.3% of total revenue [10] - The company is increasing its self-production capacity, aiming for over 60% by 2025, which will reduce reliance on outsourcing and lower manufacturing costs [10]

Group 1 - Non-alcoholic beverage stocks in Hong Kong experienced a significant rally in the afternoon session [1] - Andeli Juice (02218.HK) surged over 75%, indicating strong market interest [1] - Cha Bai Dao (02555.HK) rose more than 20%, reflecting positive investor sentiment [1] Group 2 - Nongfu Spring (09633.HK) increased nearly 8%, contributing to the overall sector growth [1] - China Resources Beverage (02460.HK), Gu Ming (01364.HK), and Mixue Group (02097.HK) all saw gains exceeding 3.5% [1]

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].