Group 1: Company Performance - China Resources Beverage reported a revenue decline of 18.52% year-on-year to 6.206 billion yuan in the first half of 2025, with a net profit drop of 28.63% to 805 million yuan [2] - The revenue from packaged drinking water and beverages was 5.251 billion yuan and 955 million yuan respectively, with a decline of 23.11% in water revenue and a growth of 21.28% in beverage revenue [2] - The company's gross margin decreased by 2.6 percentage points to 46.67%, impacted by a significant revenue drop and an increased proportion of lower-margin beverages [2] Group 2: Industry Trends - The overall beverage market in China is still in a growth cycle, with a 4.7% increase in the domestic beverage market across all channels as of June this year [3] - Nongfu Spring reported a revenue increase of 15.6% year-on-year to 25.622 billion yuan in the first half of 2025, with its packaged water sales growing by 10.7% to 9.44 billion yuan [3] - The performance disparity between Nongfu Spring and China Resources Beverage indicates an intensifying competition in the beverage market [4]

Summary of China Resources Beverage Conference Call Company Overview - **Company**: China Resources Beverage - **Period**: First half of 2025 Key Financial Performance - **Net Revenue**: Increased by 21.3% year-on-year to CNY 6.206 billion [2][3] - **Net Profit**: Decreased by 28.7% year-on-year to CNY 0.823 billion, with a net profit margin of 13.3% [2][3] - **Gross Margin**: Decreased by 2.6 percentage points to 46.7% [2][3] - **Sales Cost**: Decreased by 14.3% year-on-year to CNY 3.309 billion [3] Industry and Market Dynamics - **Packaging Water Revenue**: Decreased by 23.1% due to industry consumption slowdown, changes in terminal formats, and intensified market competition [3][8] - **Beverage Revenue**: Increased by 21.3%, attributed to brand building, channel distribution, and new product launches [3][8] Strategic Initiatives Product Development - **New Products**: Launched 14 new SKUs across four categories, including large packaging water and pocket-sized drinks [2][5] - **Sustainability**: Developing de-plasticized packaging products to reduce carbon footprint [5] Marketing and Branding - **Sports Marketing**: Collaborated with the Chinese national team and major sports events to enhance brand visibility [7][15] - **Promotional Activities**: Engaged in various marketing campaigns, including partnerships with sports champions and themed events [7][15] Channel Optimization - **Sales Strategy**: Combined online sales, community services, and direct visits to increase consumer purchase rates [10] - **Distributor Model**: Shifted to a specialized distributor model, increasing the number of exclusive distributors by over 50% [10][21] Operational Efficiencies Cost Reduction - **Production and Logistics**: Implemented measures to enhance self-sourcing rates and optimize supply chain management, leading to significant cost savings [12] - **Capacity Expansion**: Planned to increase self-built capacity to over 60% by the end of 2025, with new factories in operation [11][17] Future Outlook - **Packaging Water**: Expected gradual recovery in sales growth in the second half of 2025, with increased channel investments [8][16] - **Beverage Business**: Plans to add three new beverage production lines by 2026 to further enhance operational efficiency and market responsiveness [9][19] Challenges and Responses - **Market Competition**: Addressed challenges from intensified competition and profit pressure through promotional adjustments and resource allocation [12][20] - **Inventory Management**: Increased channel inventory to prepare for peak demand seasons, with expectations of normalization as demand stabilizes [18] Conclusion - **Long-term Strategy**: Focused on sustainable growth through product innovation, enhanced marketing efforts, and optimized distribution channels to navigate a competitive landscape [20][22]

Core Insights - The beverage market is experiencing intensified competition, as evidenced by the performance of major players like China Resources Beverage and Nongfu Spring [1][4]. Company Performance - China Resources Beverage reported a revenue decline of 18.52% year-on-year to 6.206 billion yuan in the first half of 2025, with a net profit drop of 28.63% to 805 million yuan [1]. - The revenue from packaged drinking water and beverages for China Resources Beverage was 5.251 billion yuan and 955 million yuan, showing a decline of 23.11% and an increase of 21.28% respectively [1]. - In contrast, Nongfu Spring achieved a revenue growth of 15.6% year-on-year to 25.622 billion yuan in the same period, with its packaged water sales increasing by 10.7% to 9.44 billion yuan [2]. Market Trends - The overall beverage market in China is still in a growth cycle, with a channel growth rate of 4.7% reported by Nielsen IQ in June [2]. - Despite the growth in the market, competition remains fierce, as indicated by the performance disparities among companies [4]. Comparative Analysis - In comparison, Master Kong's beverage revenue declined by 2.6% year-on-year to 26.359 billion yuan in the first half of 2025, with specific declines in tea and water sales [3]. - The performance of different beverage segments varies, with carbonated and other beverages showing a growth of 6.3% for Master Kong [3].

Group 1: Company Performance - China Resources Beverage reported a revenue decline of 18.52% year-on-year to 6.206 billion yuan in the first half of 2025, with a net profit drop of 28.63% to 805 million yuan [1] - The revenue from packaged drinking water decreased by 23.11% to 5.251 billion yuan, while beverage revenue increased by 21.28% to 955 million yuan [1] - The gross margin for China Resources Beverage was 46.67%, down 2.6 percentage points year-on-year, primarily due to a significant revenue drop and increased channel investments [1] Group 2: Market Trends - The overall beverage market in China is still in a growth cycle, with a 4.7% increase in the domestic beverage market across all channels as of June 2025 [2] - Nongfu Spring reported a revenue increase of 15.6% year-on-year to 25.622 billion yuan in the first half of 2025, with its packaged water business growing by 10.7% [2] - The performance disparity between companies like Nongfu Spring and China Resources Beverage indicates intensifying competition in the beverage market [4] Group 3: Competitor Analysis - Master Kong's beverage revenue declined by 2.6% year-on-year to 26.359 billion yuan in the first half of 2025, with tea beverage sales down 6.3% [3] - The beverage market is experiencing a split in performance, highlighting the competitive landscape where some companies are thriving while others are struggling [4]

Investment Rating - The report maintains a "Recommended" rating for China Resources Beverage (02460.HK) with a target price of 15 HKD [1][8]. Core Views - The company reported a revenue of 6.206 billion HKD for H1 2025, a decrease of 18.52% year-on-year, and a net profit of 805 million HKD, down 28.63% year-on-year. The report highlights that the company is facing temporary operational pressure but emphasizes the importance of operational adjustments and beverage product development for long-term growth [1][8]. Financial Summary - **Revenue and Profit Forecasts**: - Total revenue for 2024 is projected at 13.521 billion HKD, with a decline to 11.872 billion HKD in 2025E, followed by a recovery to 13.069 billion HKD in 2026E and 14.052 billion HKD in 2027E [3][14]. - Net profit is expected to decrease from 1.637 billion HKD in 2024 to 1.286 billion HKD in 2025E, before rising to 1.620 billion HKD in 2026E and 1.907 billion HKD in 2027E [3][14]. - **Key Financial Ratios**: - The projected earnings per share (EPS) for 2025 is 0.54 HKD, with a price-to-earnings (P/E) ratio of 19.7 [3][14]. - The company’s asset-liability ratio is 44.65%, indicating a moderate level of debt [4]. - **H1 2025 Performance**: - The gross profit margin for H1 2025 was 46.67%, down 2.6 percentage points year-on-year. The net profit margin was 13.26%, a decrease of 1.9 percentage points year-on-year [8][9]. Business Segment Performance - **Beverage and Packaging Water**: - The packaging water segment saw a revenue decline of 23.11% to 5.251 billion HKD, while the beverage segment grew by 21.28% to 955 million HKD in H1 2025. The report notes that the company is focusing on product series such as "Benqingrun" and "Moli Water" to drive growth [8][9]. - **Cost Management**: - The report indicates that while raw material prices have decreased, the overall revenue decline has weakened scale effects, leading to increased costs in sales and marketing efforts [8][9]. Strategic Outlook - The report suggests that despite the current operational challenges, the long-term growth logic remains intact. The company is focusing on inventory optimization, channel adjustments, and the introduction of new beverage products to enhance its market position [8][9]. - The report emphasizes the importance of production efficiency improvements and the development of new beverage lines as key factors for future profitability [8][9].

饮料业务：持续推新，积极打造第二曲线。25H1 公司饮料业务实现收入9.55 亿元，同比+21.29%，占 营收比重+5.1pct 至15.4%。25H1 公司推出14 款新品SKU，致力于第二曲线打造：1）茶饮料方面，重 点培育至本清润、佐味茶事、愿事之茗、午后红茶；2）果汁方面，重点发力蜜水和假日系列；3）其他 饮料方面，主要包括运动饮料魔力和咖啡饮料焰焙。 收入承压叠加产品结构变化，利润率下行。25H1 公司实现毛利率46.67%，同比-2.60pct，主要系收入下 降和产品结构变化的影响所致。 25H1 公司销售/ 管理/ 研发费用率同比+2.92/+0.43/+0.00pct 至30.36%/2.33%/0.24% 。25H1 实现归母净 利率12.97% ， 同比-1.84pct。 机构：国盛证券 研究员：李梓语/黄越 事件：公司发布2025 年中报，2025H1 公司实现营业收入62.06 亿元，同比-18.52%；实现归母净利润 8.05 亿元，同比-28.63%。 包装水业务：经营短期承压，多品牌多水种发展。25H1 公司包装水业务实现收入52.51 亿元，同 比-23.11%，占营收比重- ...

Group 1 - The company expects a net profit decline of 20% to 30% in the first half of 2025 compared to 2024 due to increased marketing investments and product adjustments [1] - The company is strategically increasing marketing resources and adjusting product mix to support long-term development, which is impacting short-term profitability [1] - The company is implementing cost control measures and optimizing operations to mitigate negative impacts on profitability [1] Group 2 - The company is a leader in the purified water industry, focusing on channel cultivation, network expansion, and targeting new channels such as dining and households [2] - The company is developing its second sub-brand, focusing on natural and mineral water, with an expected recovery in packaged water market share [2] - The company aims to enhance its net profit margin through increased self-production and reduced outsourcing costs, benefiting from cost reductions in PET and sugar [2] Group 3 - The board anticipates declaring a mid-term dividend by mid-2025, reflecting a commitment to shareholder returns and a sustainable financial position [2] - The company is expected to face short-term pressure due to intensified competition in the packaged water and beverage sectors, alongside channel reforms [3] - Long-term profit growth is anticipated as the company continues to focus on beverage business development and improves profit margins through increased self-production [3]

Investment Rating - The report downgrades the investment rating to "Accumulate" from "Buy" due to short-term performance pressure [3][6]. Core Views - The company is expected to see a net profit decline of 20% to 30% in the first half of 2025 compared to 2024, primarily due to increased marketing investments and product adjustments aimed at long-term growth [1]. - Despite short-term challenges, the company maintains a strong position in the pure water industry and is focusing on expanding its market presence in the restaurant and household segments [2]. - The company is actively working on enhancing its product portfolio, particularly in the beverage sector, with a focus on high-potential products [2]. - The net profit margin is expected to improve due to a higher proportion of self-produced products and reduced outsourcing costs, alongside cost benefits from raw materials [2]. Summary by Sections Financial Performance - For 2025, the company anticipates a revenue of 12,778 million RMB, a decrease of 5.5% year-on-year, with net profit expected to be 1,299 million RMB, reflecting a decline of 20.6% [5][10]. - The earnings per share (EPS) for 2025 is projected at 0.54 RMB, down from 0.68 RMB in 2024 [5][10]. Market Strategy - The company is focusing on channel refinement and market expansion, particularly in the food and beverage sectors, to drive growth [2][3]. - The introduction of new products under the "Ben You" series is aimed at capturing market share in the natural and mineral water segments [2]. Shareholder Returns - The board is committed to providing sustainable returns to shareholders, with plans to declare interim dividends based on a solid financial position and retained earnings [2].

Investment Rating - The report maintains an "Increase" rating for the beverage industry, indicating a positive outlook for leading companies in the sector [5]. Core Insights - The beverage industry is expected to continue experiencing intense competition, with leading companies like Nongfu Spring and China Resources Beverage likely to benefit from increased market share [3]. - Nongfu Spring is projected to see steady growth in its bottled water business and sustained high growth in its beverage products, supported by strong brand, channel, and product capabilities [1]. - China Resources Beverage, as a leader in the purified water sector, is focusing on channel expansion and product development, which is expected to enhance its market share and profitability [2]. Summary by Sections Nongfu Spring - The company is expected to recover its bottled water market share and potentially exceed previous highs due to its strong brand and product capabilities [1]. - The beverage segment is diversified with high-growth products like sugar-free tea "Oriental Leaf" and functional drinks "Scream" and "Power Emperor Vitamin Water," which align with health trends [1]. - As of July 21, 2025, the company's PE(TTM) is 38.01X, with a five-year average of 54.25X, indicating potential for valuation recovery [1]. China Resources Beverage - The company is solidifying its position in the purified water market while expanding into new channels such as dining and family segments [2]. - The introduction of sub-brands focusing on natural and mineral water is expected to drive market share recovery [2]. - The company's PE(TTM) is 17.97X, suggesting a significant valuation gap compared to Nongfu Spring, with potential for both performance and valuation improvement [2]. Investment Recommendations - The report recommends focusing on Nongfu Spring and China Resources Beverage due to their competitive advantages and growth potential [3]. - Additionally, it suggests monitoring Eastroc Beverage for its strong growth attributes and Uni-President China for its high dividend yield [3].