Investment Rating - The report initiates coverage on China Resources Beverage with a "Buy" rating and sets a target price of HKD 15.97 based on a 25-year PE of 18x [3][10][137]. Core Views - China Resources Beverage is a leading player in the domestic bottled water industry, leveraging multi-category expansion, full-channel layout, and national expansion to build competitive advantages in packaged water business, remaining resilient against short-term industry competition fluctuations [3][4][26]. - The company is at a critical juncture, transitioning from OEM to self-production in bottled water and actively developing its non-water beverage segment, which is expected to contribute to revenue growth [3][5][21]. Summary by Sections Industry Overview - The bottled water industry in China is projected to reach a market size of RMB 226.6 billion in 2023, with a CAGR of 3.6% from 2019 to 2023. The demand for bottled water is relatively inelastic, indicating a stable long-term growth trajectory [4][24][30]. - The competitive landscape is evolving, with the top three players' market share increasing from 35% in 2005 to 68% in 2023, indicating a trend towards industry consolidation [6][57][72]. Company Analysis - China Resources Beverage's revenue from bottled water accounted for 92% in 2023, with significant growth potential in both bottled water and non-water beverage segments. The company aims to enhance its self-production ratio from 33% in 2023 to approximately 70% by 2027, which is expected to improve profit margins [5][21][98]. - The company has a robust product matrix, with a focus on large-sized bottled water products, which are expected to capture market growth in various consumption scenarios [27][81][86]. Financial Projections - The report forecasts the company's revenue to grow from RMB 135.2 billion in 2023 to RMB 163.2 billion by 2026, with a corresponding increase in net profit from RMB 1.33 billion to RMB 2.3 billion during the same period [7][163][184]. - The projected EPS for 2024-2026 is expected to be RMB 0.70, RMB 0.83, and RMB 0.96, respectively, with a target price based on a PE ratio of 18x for 2025 [7][137][184]. Competitive Positioning - China Resources Beverage has established a strong distribution network with over 200,000 terminal points, enhancing its market penetration and brand visibility [90][112][115]. - The company is strategically positioned to leverage its parent company, China Resources Group, for additional support in channel development and resource allocation [77][110][112]. Growth Catalysts - The company is focusing on expanding its non-water beverage segment, which has shown significant growth potential, with a revenue CAGR of over 40% from 2021 to 2023 [81][97][103]. - The ongoing national expansion strategy, particularly in high-potential markets like Jiangsu and Sichuan, is expected to drive future revenue growth [99][115][116].
华润饮料：提效并多元，启航新征程