Summary of Eastroc Beverage Conference Call Company Overview - **Company**: Eastroc Beverage (605499.SS) - **Market Cap**: Rmb154bn as of February 3 close - **Recent Listing**: HK listing with gross proceeds of HK$10.14bn Key Industry Insights - **Energy Drinks Market**: - Per-capita intake in China (~8L) is significantly lower than Thailand (~11L), indicating growth potential [2][13] - Sales growth in regions outside Guangdong shows nearly 50% in Southwest and over 70% in North China [2] - The sports drink market in Mainland China is projected to reach Rmb43.5bn by 2025, growing at mid-teens% annually [6] Financial Performance and Projections - **Earnings Growth**: - Projected earnings CAGR of 26% from 2025 to 2027, with specific growth rates of 34% in 2025, 27% in 2026, and 24% in 2027 [1][24] - 2026/27E P/E ratios are 27x and 22x, respectively, which is a significant discount compared to peers like Monster and Celsius [1][27] Product and Market Strategy - **New Product Launches**: - Strong execution in new product roll-outs, particularly with the sports drink "Bushuila," which is expected to continue doubling sales [2][8] - The company is investing in lower-sugar versions to drive further penetration in the market [2] - **International Expansion**: - Strategic partnership with Salim Group for entry into the Indonesian market, involving a total investment of US$300mn [8] - The Indonesian energy drink market is estimated at US$240mn in 2025, with low per capita consumption (0.9L) compared to Thailand and Vietnam [8] Margin and Cost Structure - **Gross Profit Margin (GPM)**: - Expected overall GPM margin expansion of approximately 1 percentage point year-over-year in 2026E [7] - Cost benefits from key inputs like sugar and PET are anticipated to contribute to margin improvements [7][20] Risks and Challenges - **Market Risks**: - Potential for lower industry growth in energy drinks and a worsening competitive landscape [28] - Risks associated with the ramp-up of new product launches and geographical expansion [29] Valuation and Investment Recommendation - **Price Target**: - 12-month target price set at Rmb323, based on a 32x 2026E P/E [27] - Current share price at Rmb274.51, indicating an upside potential of 17.7% [30] Conclusion - Eastroc Beverage is positioned for strong growth driven by product innovation, market expansion, and favorable cost dynamics, despite facing certain market risks. The investment recommendation remains a "Buy" based on attractive valuation metrics and growth potential.

Summary of the Beverage Industry Expert Call Industry Overview - The call focused on the beverage industry in China, particularly discussing contract growth and competition dynamics among major brands such as Eastroc, Nongfu, Wahaha, Tingyi, and UPC [1][2]. Key Companies and Their Performance Eastroc - Achieved 35% sales growth in 2025, reaching Rmb1.2 billion [2]. - Set a 2026 baseline growth target of 38%, with energy drinks expected to grow by over 25% and Bushuila by over 40% [2]. - Plans to increase refrigerator coverage by 15% and achieve 100% Point of Sale (PoS) coverage in schools and hospitals [2]. - New products like Daka (RTD coffee) and Guozhicha are expected to grow by over 60% in 2026 [2]. Nongfu - Projected 18% overall sales growth in 2025, driven by 15% growth in packaged water and 21% in tea beverages [3]. - Aims for a 15% overall contract growth target in 2026, with specific targets of 12% for water and 20% for other beverages [3]. - Focus on large-package drinking water (12.9L) for family use and new product launches [3][7]. Wahaha - Experienced a decline in market share from 17.6% in 2025 to 15% [8]. - The expert expressed caution regarding operational uncertainties and noted a lack of new product launches or channel investment [8]. - Achieved Rmb296 million in contract sales in 2025, which was below the contracted growth target of 50% [8]. Tingyi - Recorded a 4% sales decline in 2025 but targets a 5% growth in 2026 [9]. - The company faces competitive pressure from Eastroc and Nongfu, particularly regarding pricing and new product launches [9]. Competitive Landscape - The beverage market in China is bifurcating, with strong brands like Eastroc and Nongfu gaining momentum while others like Wahaha face operational challenges [1]. - The expert highlighted the importance of channel management and investment in refrigerators for brand exposure and consumer engagement [2][7]. Additional Insights - The expert noted that the Rmb1-bonus policy (20% winning rate) will continue until the 2026 Chinese New Year, with a 5-8% rebate for retailers expanding new products [2]. - There is a significant focus on expanding refrigerator coverage to enhance brand visibility, with a target of over 50% coverage in 2026 [7]. - The expert observed a divergence in distributor confidence across regions, indicating varying levels of market stability [8]. Conclusion - The beverage industry in China is characterized by strong growth potential for leading brands, particularly Eastroc and Nongfu, while facing challenges from operational uncertainties and competitive pressures for others like Wahaha and Tingyi. The focus on new product development and channel expansion will be critical for maintaining growth momentum in the coming years [1][2][3][8][9].