農夫山泉股份有限公司 （於 中 華 人 民 共 和 國 註 冊 成 立 的 股 份 有 限 公 司） （股 份 代 號：9633） 截 至2024年12月31日止年度之 全年業績公告 2024年全年業績摘要 農夫山泉股份有限公司（「本公司」或「農夫山泉」）董事會（「董事會」）欣然公佈本 公司及其附屬公司（「本集團」）截 至2024年12月31日止年度（「報告期」）之按國際 財 務 報 告 會 計 準 則 編 製 的 綜 合 業 績，連 同2023年 同 期 的 比 較 數 字。 – 1 – 香港交易及結算所有限公司及香港聯合交易所有限公司對本公告的內容概不 負 責，對 其 準 確 性 或 完 整 性 亦 不 發 表 任 何 聲 明，並 明 確 表 示，概 不 對 因 本 公 告 全部或任何部分內容而產生或因倚賴該等內容而引致的任何損失承擔任何責 任。 NONGFU SPRING CO., LTD. • 總收益為人民幣42,896百 萬 元，同 比 增 加0.5%； • 母公司擁有人應佔溢利為人民幣12,123百 萬 元，同 比 增 加0.4%； • 每股基本盈利為人民幣1.078元，同 比 增 加0.4%； ...

Core Viewpoint - The chairman of Nongfu Spring, Zhong Shanshan, stated that the production of the green bottle water was a hasty decision and expressed concerns about the long-term consumption of pure water by families [1][2]. Group 1: Company Statements - Zhong Shanshan indicated that the green bottle pure water is not suitable for long-term consumption, raising questions about its safety and quality control [2]. - The company has not issued any health warnings on the packaging of the green bottle water, despite the chairman's admission regarding its unsuitability for prolonged use [2]. Group 2: Public Response and Actions - A science popularization blogger, Xiang Dongliang, reported Nongfu Spring to the Hangzhou West Lake District Market Supervision Bureau, citing potential public health risks associated with the green bottle water [1][2]. - The blogger emphasized that the essential minerals and trace elements for the human body are primarily obtained from food, and that the cleanliness of drinking water is paramount, suggesting that the brand's admission of safety issues warrants scrutiny [2].

Group 1 - The Securities Times is a key information disclosure platform for the Chinese capital market, providing comprehensive financial and securities news 24/7 [1] - It offers a wide range of content including market news, financial information, fund net values, bonds, futures, and announcements from listed companies [1] - The platform is managed by the People's Daily, ensuring authoritative and reliable information dissemination [1] Group 2 - The "Xinpi 168" comprehensive service area has been established to enhance information disclosure in the capital market [2] - The "Spark Plan" for investor education aims to provide authoritative and comprehensive services in the capital market [2]

Investment Rating - Buy (First-time rating) with a target price of HKD 40.53 [2][4] Core Investment Thesis - The company is a leader in the packaged water and sugar-free tea industries, benefiting from rising health consciousness among consumers. Its flagship products, natural water and Oriental Leaf, have driven strong financial performance, with revenue and profit CAGR of 23% and 32% respectively from 2020 to 2023 [3] - The launch of "Green Water" has mitigated the impact of negative publicity on the company's core water business, with short-term pressure on gross margins expected to ease over the medium to long term [3] - The sugar-free tea market, led by Oriental Leaf, has significant growth potential, with penetration rates expected to rise to 50%-60% in the future [3] - The company is well-positioned to capture opportunities in emerging categories such as sports drinks and ready-to-drink coffee, leveraging its platform advantages [3] Financial Projections - Revenue is expected to grow from CNY 44.98 billion in 2024 to CNY 60.53 billion in 2026, with a CAGR of 14.9% [6] - Net profit attributable to shareholders is projected to increase from CNY 11.88 billion in 2024 to CNY 16.54 billion in 2026, with a CAGR of 18% [6] - The company's PE ratio is forecasted to decline from 27x in 2024 to 20x in 2026, reflecting strong earnings growth [4] Packaged Water Business - The packaged water industry is driven by health-conscious trends and expanding consumption scenarios, with long-term growth potential [12] - The company holds a leading market share in packaged water, with a 17.4% volume share and 23.6% value share in 2023 [21] - The launch of "Green Water" has impacted gross margins, but the company's strong brand and channel advantages are expected to stabilize market share and margins over time [36][37] Tea Beverage Business - The sugar-free tea market is poised for significant growth, with Oriental Leaf expected to double in size due to rising health awareness and favorable industry trends [3] - The company's tea beverage business has a strong competitive edge, with a leading gross margin and a well-established brand and supply chain [49][50] - Oriental Leaf's market share is expected to remain stable, supported by product innovation and competitive pricing [55] Other Beverage Categories - The company is focusing on high-growth segments such as sports drinks and ready-to-drink coffee, leveraging its platform advantages to capture market share [3] - The functional beverage and juice categories have shown steady growth, with the company outperforming industry averages [56] - The company is streamlining its product portfolio to improve efficiency and profitability, with a focus on zero-sugar and natural products [57][58] Industry Trends - The packaged water industry is expected to continue growing, driven by increasing per capita consumption and health-conscious trends [12][13] - The sugar-free tea market is projected to expand significantly, with penetration rates expected to rise to 50%-60% in the coming years [3][46] - Emerging categories such as ready-to-drink coffee and functional beverages present new growth opportunities for the company [57][58]

Investment Rating - The report initiates coverage with a "Buy" rating for the company [3] Core Views - The company is a leading player in the soft drink industry, driven by its dual business segments of packaged water and beverages [1] - The company's revenue in 2023 reached 42.667 billion yuan, a year-on-year increase of 28.36%, with net profit attributable to shareholders reaching 12.079 billion yuan, up 42.19% year-on-year [1] - The beverage segment surpassed packaged water in revenue for the first time in 2023, contributing 49% of total revenue, with a growth rate of 55% [1] - The company's strong brand positioning and nationwide water source strategy have built a significant moat, supporting its premium brand image [1] Industry Overview Packaged Water Market - The Chinese packaged water market reached 215 billion yuan in 2023, with a CAGR of 7.1% from 2018 to 2023 [1] - The top five players in the market account for 58.6% of the market share, with the company holding a leading 23.6% share [1] - The market is expected to grow to 314.3 billion yuan by 2028, with a CAGR of 7.9% [32] Beverage Market - The Chinese beverage market reached 694.2 billion yuan in 2023, with a CAGR of 4.0% from 2018 to 2023 [47] - Tea beverages, functional beverages, and juice beverages are the key growth drivers, with tea beverages contributing 21% of the market share [47] - The market is expected to grow to 888.8 billion yuan by 2028, with a CAGR of 5.1% [47] Company Performance Revenue and Profit - In 2023, the company's revenue was 42.667 billion yuan, up 28.36% year-on-year, with net profit attributable to shareholders reaching 12.079 billion yuan, up 42.19% year-on-year [1] - The company's revenue is expected to grow to 49.254 billion yuan in 2024, 58.756 billion yuan in 2025, and 66.854 billion yuan in 2026 [5] - Net profit attributable to shareholders is expected to reach 12.754 billion yuan in 2024, 15.655 billion yuan in 2025, and 18.113 billion yuan in 2026 [5] Product Segments - Packaged water contributed 47% of revenue in 2023, with a growth rate of 11% [1] - Tea beverages contributed 30% of revenue, with a growth rate of 83%, driven by the success of the "Oriental Leaf" brand [2] - Functional beverages contributed 11% of revenue, with a growth rate of 28%, led by the "Scream" brand [2] - Juice beverages contributed 8% of revenue, with a growth rate of 23%, driven by products like "Farmer's Orchard" [2] Brand and Marketing - The company has built a strong brand image around "natural and healthy" through long-term multi-dimensional marketing campaigns [1] - The company's advertising campaigns, such as "A Little Sweet" and "We Don't Produce Water, We Just Deliver Nature," have deeply resonated with consumers [16][41] - The company has also leveraged sports marketing, sponsoring events like the Olympics and partnering with international sports organizations [43] Supply Chain and Production - The company has established 12 major water sources across China, ensuring high-quality supply and supporting its premium brand image [45] - The company's production facilities are highly automated, with 144 production lines for packaged water and beverages, capable of producing 81,000 bottles per hour [45] - The company uses a combination of road, rail, and water transport to ensure efficient distribution across the country [45] Future Outlook - The company is expected to maintain strong growth in both packaged water and beverage segments, driven by its strong brand and product innovation [2] - The company's net profit is expected to grow at a CAGR of 16% from 2024 to 2026, reaching 18.113 billion yuan by 2026 [5] - The company's focus on health-conscious products, such as sugar-free tea and functional beverages, positions it well to capitalize on the growing health trend in China [47]

Economic Performance and Market Trends - China's GDP for the first half of 2024 reached RMB 61.7 trillion, a year-on-year increase of 5.0%[15] - Total retail sales of consumer goods in China for the first half of 2024 reached RMB 23.6 trillion, a year-on-year increase of 3.7%[15] - The soft beverage market in China is shifting towards healthier and more natural products, with sugar-free tea experiencing rapid growth[17] Revenue and Product Performance - Revenue for the first half of 2024 was RMB 22,173 million, an increase of 8.4% compared to the same period last year[20] - Revenue from packaged drinking water products decreased by 18.3% to RMB 8,531 million, accounting for 38.5% of total revenue[20][23] - Revenue from beverage products increased by 36.7% to RMB 13,542 million, accounting for 61.1% of total revenue[20] - Tea beverage products revenue grew by 59.5% to RMB 8,430 million, representing 38.0% of total revenue[21][34] - Functional beverage products revenue increased by 3.8% to RMB 2,550 million, accounting for 11.5% of total revenue[21] - Juice beverage products revenue rose by 25.4% to RMB 2,114 million, representing 9.5% of total revenue[21] - The company's tea beverage products recorded a revenue of RMB8,430 million, representing a 59.5% increase compared to the same period last year, accounting for 38.0% of total revenue[37] - Functional beverage products generated a revenue of RMB2,550 million, a 3.8% increase year-over-year, contributing 11.5% to total revenue[42][45] - Juice beverage products achieved a revenue of RMB2,114 million, a 25.4% increase compared to the previous year, making up 9.5% of total revenue[43][48] - Other products, including soda water and coffee beverages, recorded a revenue of RMB548 million, a 7.3% decrease year-over-year, accounting for 2.5% of total revenue[54][55] New Product Launches and Marketing - The company launched a new 19-liter PET barreled natural drinking water product in January 2024, derived from high-quality natural water sources[27][31] - In April 2024, the company introduced a purified drinking water product, marking its return to the purified water market after 24 years[26][29] - From April to May 2024, over 200 video clips were posted by top vloggers about the company's water sources, with nearly 500 million exposures and more than 10 million interactions[30] - The company launched a new product, "Nongfu Spring" edible ice, which has been introduced in multiple convenience store chains across 14 cities[33] - The "Oriental Leaf" product sold out 50,000 cases in 17 hours for its first batch and the second batch sold out in just 1 hour[38] - The "Tea π" new flavor launch and themed exhibition reached over 5 million people across nine cities[41][44] - The "Scream" brand launched two new flavors and conducted campus activities to enhance its sports image[46] - The "Victory" Vitamin Water collaborated with Color Run 2024 and organized the "V-Break Dance Battle" for the third year[47] - The "Farmer's Orchard" upgraded its classic products to meet cleaner and healthier trends, gaining consumer attention[50][51] - The "TANBING" coffee launched a 900ml sugar-free black coffee at RMB9.9, expanding its product matrix and reinforcing its brand image[54][56] - The company launched a new blood orange flavor of "Water Soluble C100" after a decade, with each 445ml bottle containing ≥100mg of vitamin C[152][154] - The company introduced a 900ml large-sized sugar-free classic black coffee under the "TANBING" brand, made from dark roasted Arabica coffee beans[152][154] - The company upgraded its 100% tomato and carrot mixed fruit and vegetable juices, ensuring no added sugar or food additives while preserving freshness[152][154] Financial Performance and Expenses - Revenue increased by 8.4% to RMB22,173 million compared to RMB20,462 million in the first half of last year[60][62] - Gross profit grew by 5.9% to RMB13,032 million, with gross profit margin decreasing by 1.4 percentage points to 58.8%[60][62] - Profit for the period rose by 8.0% to RMB6,240 million from RMB5,775 million in the first half of last year[69][73] - Selling and distribution expenses increased by 5.9% to RMB4,971 million, accounting for 22.4% of total revenue[64][65] - Administrative expenses decreased by 4.8% to RMB913 million, representing 4.1% of total revenue[66][70] - Other income and gains increased by 15.4% to RMB1,040 million, mainly due to higher interest income from term deposits[67][71] - Inventory increased to RMB3,337 million, with inventory turnover days rising from 55.0 to 64.2 days[78] - Trade receivables and bills increased to RMB703 million, with turnover days rising from 4.4 to 5.1 days[79] - Long-term bank deposits, pledged deposits, cash, and bank balances totaled RMB27,136 million, up 5.8% from the end of 2023[77] - The company did not declare an interim dividend for the six months ended June 30, 2024[76][80] - The Group's long-term bank deposits, pledged deposits, cash, and bank balances increased by 5.8% to RMB27,136 million as of June 30, 2024, compared to RMB25,639 million as of December 31, 2023[81] - Interest-bearing borrowings increased by 23.6% to RMB3,857 million as of June 30, 2024, compared to RMB3,121 million as of December 31, 2023[81] - Inventories increased to RMB3,337 million as of June 30, 2024, up from RMB3,092 million as of December 31, 2023, with inventory turnover days rising from 55.0 days to 64.2 days[82] - Trade and bills receivables increased to RMB703 million as of June 30, 2024, up from RMB547 million as of December 31, 2023, with turnover days increasing from 4.4 days to 5.1 days[83] - Trade and bills payables increased to RMB1,859 million as of June 30, 2024, up from RMB1,770 million as of December 31, 2023, with turnover days increasing from 33.8 days to 36.2 days[85][88] - The Group's gearing ratio increased to 14.9% as of June 30, 2024, compared to 11.2% as of December 31, 2023, mainly due to increased use of bills receivable financing[86][89] - The Group recorded net current liabilities of RMB4,950 million as of June 30, 2024, primarily due to an increase in long-term time deposit arrangements[86][90] - The Group held HK$1,553 million, US$475 million, and a small amount of other foreign currencies as of June 30, 2024, with exchange rates for USD and HKD against RMB increasing[95][100] - Capital commitments amounted to approximately RMB5,708 million as of June 30, 2024, mainly for the construction of production plants and purchase of production equipment[97][102] - The Company plans to invest RMB5 billion in the "Nongfu Spring Jiande Drinking Water and Beverage Comprehensive Industrial Base Project," with a wholly-owned subsidiary established during the reporting period[105][107] Employee and Shareholder Information - Total number of employees exceeded 20,000 as of June 30, 2024, with total employee benefit expenses amounting to RMB1,983 million[112][114] - Employee share incentive scheme granted 6,636,400 H shares in March 2022, accounting for 0.059% of total issued shares and 0.1318% of issued H shares[117][119] - Grant price for employee share incentive scheme was HK$13.22 per share, 30% of the average closing price of H shares in the 120 trading days before the grant date[117][119] - 108 scheme participants were granted shares, including 4 directors and 1 employee from Yangshengtang Group[117][119] - 1,837,234 shares met the third vesting condition in April 2024, while 19,692 shares were forfeited due to unmet conditions and 29,282 shares were forfeited due to employee exits[122] - Employee share incentive scheme has a validity period of 10 years, with approximately 7 years remaining as of the report date[117][119] - Maximum number of H shares that can be acquired under the employee share incentive scheme is 5% of total issued share capital, with no single participant exceeding 1%[116][118] - 2,610,000 shares met the first vesting condition in April 2022, while 44,184 shares were forfeited[122] - 1,708,200 shares met the second vesting condition in April 2023, while 285,048 shares were forfeited due to unmet conditions and 102,760 shares were forfeited due to employee exits[122] - 6,636,400 shares were granted under the 2022 employee share incentive scheme, with 6,155,434 shares vested and 480,966 shares forfeited[123][127] - In April 2022, 2,610,000 awards met the first tranche vesting conditions, while 44,184 awards were forfeited[124] - In April 2023, 1,708,200 awards met the second tranche vesting conditions, while 285,048 awards were forfeited due to unmet conditions and 102,760 awards were forfeited due to employee resignations and demotions[125] - In April 2024, 1,837,234 awards met the third tranche vesting conditions, while 19,692 awards were forfeited due to unmet conditions and 29,282 awards were forfeited due to employee resignations and demotions[126] - The weighted average closing price prior to vesting date during the reporting period was HKD 45.080[130][133] - As of January 1, 2024, 1,886,208 awards were unvested, and by June 30, 2024, all unvested awards had been vested or forfeited[133] - The total number of awards granted to other employee participants was 6,067,400, with 1,666,424 vested and 48,974 forfeited during the reporting period[133] - Total number of awards unvested as at January 1, 2023 was 3,982,216 shares, with 1,708,200 shares vested during 2023 at a weighted average closing price of HKD45.080[135] - The company did not grant any awards during the reporting period[135] Sustainability and Corporate Responsibility - The company aims to reduce carbon emission intensity and comprehensive energy consumption intensity by 20% by 2030 against the 2019 baseline[139] - The company targets to make plastic packaging for water and beverage 100% recyclable/reusable/compostable by 2025[139] - The company released the 2023 Sustainability Report (ESG Report) in April 2024, showcasing its commitments and achievements in sustainable development[138] - The company focuses on sustainable water use, paying attention to water resource risks in operation locations[141] - The company is dedicated to reducing food waste and promoting the reuse of food residues as part of its circular economy initiatives[141] - The company has conducted biodiversity risk assessments and protection efforts, promoting sustainable agriculture[141] - The company is committed to energy conservation and emission reduction, promoting the use of clean energy[141] - The company has intensified monitoring emission efforts and solidified environmental audit processes to minimize negative environmental impacts[141] - The company continued its classic public welfare project, providing free water to outdoor workers during high temperatures for the ninth consecutive year[143][145] - The company visited multiple tea-producing regions to conduct on-site audits of tea leaf harvesting and processing, ensuring tea leaves meet raw material standards[144][146] - The company established a closed-loop quality assurance system covering raw materials, research and development, manufacturing, and sales channels[152][154] - The company implemented a three-tier sustainable development governance structure led by the Board, ensuring compliance with laws and regulations[153][155] - The company conducted a series of special audits to control risks comprehensively and safeguard the interests of shareholders and stakeholders[153][155] - The company continued to invest in rich learning resources and customized high-quality training programs for employees[149][150] - The company enforced policies related to employee occupational health and safety, conducting regular safety emergency drills and strengthening safety culture[149][150] Shareholder and Ownership Structure - Mr. Zhong Shanshan holds 6,211,800,000 domestic shares, representing 100% of the relevant class and 55.2333% of the total issued share capital[167] - Mr. Zhong Shanshan holds 1,303,252,410 H shares through controlled corporations, representing 25.8856% of the relevant class and 11.5881% of the total issued share capital[167] - Mr. Zhong Shanshan is the beneficial owner of 1,929,249,240 H shares, representing 38.3193% of the relevant class and 17.1543% of the total issued share capital[167] - Mr. Xiang Xiansong holds 32,400 H shares as a beneficial owner, representing 0.0006% of the relevant class and 0.0003% of the total issued share capital[167] - Mr. Rao Minghong holds 59,400 H shares as a beneficial owner, representing 0.0012% of the relevant class and 0.0005% of the total issued share capital[167] - Mr. Jiang Xiaodong holds 471,250 H shares as a beneficial owner, representing 0.0094% of the relevant class and 0.0042% of the total issued share capital[167] - The total issued share capital of the company as of June 30, 2024, is 11,246,466,400 shares[170] - Mr. Zhong Shanshan directly holds 98.38% equity interest in Yangshengtang and indirectly holds 1.62% through Hangzhou Youfu, wholly owned by him[171] - Yangshengtang, wholly-owned by Mr. Zhong Shanshan, purchased 7,000,000 H Shares of the Company from July 9 to July 26, 2024, increasing his indirect holdings to 1,310,252,410 H Shares, representing 26.02% of H Shares and 11.65% of total share capital[171] - Mr. Xiang Xiansong owns a beneficial interest in 32,400 H Shares of the Company, corresponding to vested incentive shares under the Employee Share Incentive Scheme[171] - Mr. Rao Minghong owns a beneficial interest in 59,400 H Shares of the Company, corresponding to vested incentive shares under the Employee Share Incentive Scheme[171] - Mr. Zhong Shanshan holds a 17.66% beneficial interest in Beijing Wantai Biological Pharmaceutical Enterprise Co., Ltd., with controlled corporations holding an additional 55.65%[172] - Mr. Zhong Shanshan holds a 63.50% interest in Xiamen Youmaike Medical Instruments Co., Ltd. through controlled corporations[172] - Mr. Zhong Shanshan holds a 60.00% interest in Beijing Tairun Innovation Technology Incubator Co., Ltd. through controlled corporations[172] - Mr. Zhong Shanshan holds a 94.93% interest in JWT (Beijing) Biotechnology Company Limited through controlled corporations[174] - Mr. Zhong Shanshan holds a 90.00% beneficial interest in Guanzi Management Consulting (Lishui) Partnership, with controlled corporations holding an additional 10.00%[174] - Mr. Zhong Shanshan holds a 24.81% beneficial interest in Guanzi Equity Investment (Lishui) Partnership, with controlled corporations holding an additional 74.94%[174] - Mr. Zhong Shanshan directly holds 98.38% equity interest in Yangshengtang, the controlling shareholder of the company, and indirectly holds 1.62% through Hangzhou Youfu[177] - Yangshengtang Pharmaceutical Co., Ltd., a non-wholly owned subsidiary of Yangshengtang, is 97.53% indirectly owned by Mr. Zhong Shanshan through Yangshengtang[177] - Beijing Wantai Biological Pharmaceutical Enterprise Co., Ltd. has a total share capital of 1,268,206,999 shares, with Mr. Zhong Shanshan directly holding 17.66% and indirectly holding 55.65% through Yangshengtang[177] - Xiamen Youmaike Medical Instruments Co., Ltd. is 63.50% owned by Beijing Wantai Biological Pharmaceutical Enterprise Co., Ltd., with Mr. Zhong Shanshan indirectly holding interest through the latter[177] - Beijing Tairun Innovation Technology Incubator Co., Ltd. is 60.00% owned by Beijing Wantai Biological Pharmaceutical Enterprise Co., Ltd., with Mr. Zhong Shanshan indirectly holding interest through the latter[177] - JWT (Beijing) Biotechnology Company Limited is 94.93% owned by Beijing Wantai Biological Pharmaceutical Enterprise Co., Ltd., with Mr. Zhong Shanshan indirectly holding interest through the latter[177] - Xiamen Innobiomax Biotechnology Co., Ltd. is 60.00% owned by Xiamen Innodx Biotechnology Co., Ltd., a wholly owned subsidiary of Beijing Wantai Biological Pharmaceutical Enterprise Co., Ltd., with Mr. Zhong Shanshan indirectly holding interest through the latter[181] - Guanzi Management Consulting (Lishui) Partnership (Limited Partnership) is 90.00% directly and 10.00% indirectly owned by Mr. Zhong Shanshan through Guanzi Private Equity Fund Management (Hangzhou) Co., Ltd.[181] - Guanzi Equity Investment (Lishui) Partnership (Limited Partnership) is 24.81% directly and 74.44% indirectly owned by Mr. Zhong Shanshan through Yangshen

Investment Rating - The report maintains an "Overweight" rating for Nongfu Spring (09633) [3] Core Views - Nongfu Spring's 2024 interim results showed revenue of RMB 22.173 billion, up 8.36% YoY, and net profit attributable to shareholders of RMB 6.24 billion, up 8.04% YoY, meeting expectations [3] - The company's tea beverage segment continues to grow rapidly, while the packaged water segment faces short-term pressure [3] - Profitability remains stable despite increased promotional expenses for the new green bottled water product [4] Financial Performance Revenue Breakdown - Packaged water: RMB 8.53 billion, down 18.3% YoY [3] - Tea beverages: RMB 8.43 billion, up 59.5% YoY [3] - Functional beverages: RMB 2.55 billion, up 3.8% YoY [3] - Juice beverages: RMB 2.11 billion, up 25.4% YoY [3] - Other products: RMB 550 million, down 7.3% YoY [3] Profitability Metrics - Gross margin: 58.8%, down 1.4 percentage points YoY [4] - Sales expense ratio: 22.4%, down 0.5 percentage points YoY [4] - Administrative expense ratio: 4.1%, down 0.6 percentage points YoY [4] - Net profit margin: 28.1%, down 0.1 percentage point YoY [4] Future Projections - Revenue forecast for 2024-2026: RMB 46.708 billion, RMB 54.133 billion, RMB 61.508 billion [5] - Net profit forecast for 2024-2026: RMB 13.058 billion, RMB 15.303 billion, RMB 17.866 billion [5] - EPS forecast for 2024-2026: RMB 1.16, RMB 1.36, RMB 1.59 [5] - ROE forecast for 2024-2026: 39.34%, 31.55%, 26.92% [5] Strategic Positioning - The company's "red bottle + green bottle" strategy caters to diversified consumer needs [3] - Nongfu Spring is well-positioned in the RMB 2 price segment for packaged water [3] - The company is capitalizing on the trends of sugar-free and premium beverages [3]

Investment Rating - The investment rating for the company is "Buy" [1] Core Views - The report highlights that the company achieved a revenue of 22.173 billion yuan in the first half of 2024, representing a year-on-year increase of 8.4%, and a net profit attributable to shareholders of 6.24 billion yuan, also up by 8.0% [1][3] - The report emphasizes the company's strong growth potential and profitability in the beverage industry, driven by its dual-engine development strategy of water and beverages, and its commitment to innovation and health [3][4] Financial Performance Summary - The company's packaging water revenue faced a significant decline of 18.3% year-on-year in H1 2024, totaling 8.531 billion yuan, primarily due to negative impacts from online public opinion [2] - Tea beverage revenue surged by 59.5% year-on-year to 8.430 billion yuan in H1 2024, attributed to the health-conscious and low-sugar consumption trends [2] - Juice beverage revenue increased by 25.4% year-on-year to 2.114 billion yuan, benefiting from product upgrades and new flavor launches [2] - The overall gross margin for H1 2024 was 58.8%, a decrease of 1.4 percentage points year-on-year, influenced by promotional activities for new products [3] Earnings Forecast - The report projects the company's EPS for 2024, 2025, and 2026 to be 1.10 yuan, 1.24 yuan, and 1.38 yuan respectively, with corresponding P/E ratios of 24, 21, and 19 times based on the closing price of 28.4 HKD per share on August 30, 2024 [4]

Investment Rating - Buy/Initiate coverage with a target price of HKD 34.7 [1] Core Views - H1 2024 performance met expectations, with revenue reaching RMB 22.17 billion, up 8.4% YoY, and net profit attributable to shareholders of RMB 6.24 billion, up 8.1% YoY [2] - Green bottle purified water performed well, compensating for the decline in packaged water market share, while sugar-free tea continued to grow rapidly [2] - The company's gross margin decreased by 1.38 percentage points to 58.78% due to increased promotional efforts and lower capacity utilization in the packaged water segment [2] - The company is expected to recover its packaged water market share gradually, with a stable overall operation aiming for high-quality development [2] Product Performance - Packaged water revenue decreased by 18.3% YoY to RMB 8.53 billion, while tea beverage revenue increased by 59.5% YoY to RMB 8.43 billion [2] - Functional beverage revenue grew by 3.8% YoY to RMB 2.55 billion, and juice revenue increased by 25.4% YoY to RMB 2.11 billion [2] - The operating profit margin for packaged water decreased by 4.2 percentage points, while tea beverages saw an increase of 1.0 percentage point [2] Future Outlook - The company expects revenue to grow by 8%, 12%, and 13% in 2024, 2025, and 2026, respectively, reaching RMB 46.21 billion, RMB 51.85 billion, and RMB 58.33 billion [2] - Net profit is projected to grow by 6%, 12%, and 13% over the same period, reaching RMB 12.83 billion, RMB 14.32 billion, and RMB 16.23 billion, respectively [2] - The company's PE ratio is expected to be 19X, 15X, and 13X for 2024, 2025, and 2026, respectively [2] Financial Metrics - The company's net profit margin remained stable at 28.14% in H1 2024, down only 0.08 percentage points YoY [2] - Sales expenses decreased by 0.53 percentage points to 22.42%, while management expenses decreased by 0.56 percentage points to 4.12% [2] - The company's ROE is expected to be 42.28%, 38.93%, 30.28%, and 25.55% for 2023A, 2024E, 2025E, and 2026E, respectively [6]

Investment Rating - The report maintains an "Accumulate" rating for the company [1] Core Views - The company reported a revenue of 22.173 billion yuan for H1 2024, representing a year-on-year increase of 8.4%, with a net profit of 6.240 billion yuan, up 8.0% year-on-year [3][4] - The revenue from packaged drinking water declined by 18.3% year-on-year due to negative public sentiment, while ready-to-drink tea revenue surged by 59.5% year-on-year, driven by strong market positioning and product innovation [4][5] - The company is expected to face challenges in restoring its packaged water business due to ongoing negative impacts from public sentiment and increased competition in the market [4][5] Summary by Sections Market Data - Total shares outstanding: 11.246 billion [2] - Total market capitalization: 319.4 billion HKD [2] - 1-year price range: 26.05 to 47.92 HKD [2] - 3-month turnover rate: 10.48% [2] Revenue Performance - H1 2024 revenue breakdown: - Packaged drinking water: 8.531 billion yuan, down 18.3% year-on-year - Ready-to-drink tea: 8.431 billion yuan, up 59.5% year-on-year - Functional beverages: 2.550 billion yuan, up 3.8% year-on-year - Juice beverages: 2.114 billion yuan, up 25.4% year-on-year - Other products: 548 million yuan, down 7.3% year-on-year [3][4] Profitability Metrics - H1 2024 gross margin: 58.8%, down 1.4 percentage points year-on-year [4] - H1 2024 net profit margin: 28.1%, down 0.1 percentage points year-on-year [4] - Operating profit margins by segment: - Packaged drinking water: 32.2% - Ready-to-drink tea: 44.1% - Functional beverages: 41.2% - Juice: 23.6% [4] Financial Forecasts - Revised net profit forecasts for 2024-2026: - 2024: 12.373 billion yuan (down 4.3%) - 2025: 14.420 billion yuan (down 0.8%) - 2026: 16.063 billion yuan (down 1.0%) [5][6] - Current stock price corresponds to a PE ratio of 24x for 2024, 20x for 2025, and 18x for 2026 [5]