26 August 2025 | 9:00PM HKT Nongfu Spring (9633.HK): 1H25 First Take: OPM beat on strong product mix with tea up 20%, op efficiency and ad/promotion saving; Buy Leaf Liu +852-3966-4169 | leaf.liu@gs.com Goldman Sachs (Asia) L.L.C. Hongda Zhong +852-2978-2300 | hongda.zhong@gs.com Goldman Sachs (Asia) L.L.C. Christina Liu +852-2978-6983 | christina.liu@gs.com Goldman Sachs (Asia) L.L.C. Valerie Zhou +852-2978-0820 | valerie.zhou@gs.com Goldman Sachs (Asia) L.L.C. c45a43530f604d12bcb9a82b5aa6b9f6 n Revenue: N ...

Summary of Key Points from the Conference Call Industry Overview - The report focuses on the polarization between New and Old Consumption in China, highlighting three key trends: 1. A stagnant economy limits overall growth, creating selective opportunities [1] 2. Supply-demand mismatches and corporate competency gaps challenge companies amid commoditized supply and demanding consumers [1] 3. A new generation of consumers seeks instant, experiential, and affordable "dopamine" experiences, reflecting a global trend [1] Analytical Framework - The "365" framework is reiterated, consisting of: 1. **Three macro themes**: structural imbalance of supply, demand, and intermediary channels [2] 2. **Six behavior patterns**: emotional value quest, instant gratification, focus on IP/contents, she-economy, brand demystification, and upgrade vs. downgrade [2] 3. **Five baskets**: emotional value, health & wellness, addictiveness, value for money, and new channels [2] New vs. Old Consumption - Definitions of New and Old Consumption are often ambiguous; adaptation to trends is crucial [3] - Strategies for Old Consumption include product innovation, brand rejuvenation, and channel recalibration [3] - Risks for New Consumption include scalability, lifecycle sustainability, and regulatory challenges [3] Market Dynamics - New Consumption was a significant trade in 1H25 due to macro weakness and liquidity, but recent market rotations have negatively impacted it [4] - Earnings sustainability and visibility are emphasized as key factors for investment decisions [4] Stock Picks - Preferred companies based on fundamentals and valuation include: - **New Consumption**: Pop Mart and Laopu Gold - **Old Consumption incorporating New Consumption**: Mao Geping, Eastroc, and Nongfu Spring - Mixue is rated as Underperform due to unfavorable risk-reward dynamics [5] Performance Metrics - New Consumption stocks have shown a 70% increase in share price since March 2025, while Old Consumption remains largely flat [14] - New Consumption trades at a 71% premium to Old Consumption on average since 2024 [17] Consumer Behavior Insights - The report identifies a quest for emotional value driven by stress and a fragmented society, leading to a rise in "dopamine consumption" [45] - Instant gratification and granular "dopamine" are becoming prevalent due to shorter attention spans and digital media immersion [56] - The she-economy is reshaping consumption narratives, with female consumers becoming more vocal and influential [82] Brand Dynamics - Brand demystification is occurring as traditional branding foundations are challenged, leading to a new storytelling journey for brands [94] - The rise of emotional value and community sharing is significant in the she-economy, with consumers focusing on quality-for-money rather than brand prestige [93] Conclusion - The report emphasizes the importance of understanding the evolving landscape of consumer behavior in China, particularly the distinctions between New and Old Consumption, and the implications for investment strategies in the consumer sector [1][2][3][4][5]

25 July 2025 | 9:10AM HKT Nongfu Spring (9633.HK): 1H25 Preview: Expect DD% growth across categories with NPM expansion; Potentially brighter 2H25; Buy We look for Rmb25.4bn in sales and Rmb7.3n in reported net income in 1H25E, up 15%/17% yoy, with largely unchanged sales/c.4% higher NP vs. our prior forecasts, mainly driven by slightly better growth for Juice/Tea and mild NPM expansion to 28.7% (1H24: 28.1%). We expect 1H25E sales to mainly be driven by ongoing strong momentum in juice (up 18% yoy) and tea ...

Investment Rating - The report maintains a "Buy" rating on Eastroc, Tingyi, CR Beverage, and Nongfu, with a preference for the beverage sector within staples due to growth potential and earnings visibility [9]. Core Insights - The beverage sector in China has shown a year-to-date rally of 19%, outperforming the MSCI China staples index, which increased by 8% [1]. - Despite rising competition, the sector is expected to sustain long-term volume growth and profit visibility into 2025, driven by a solid product cycle and cost benefits [9]. - Key debates in the beverage space include the impact of freshly made drinks (FMD) due to intensified food delivery subsidies, the ongoing product cycle, and margin resilience amid competition [1][2][8]. Summary by Sections Impact of Freshly Made Drinks (FMD) - FMD has seen a volume boost from delivery subsidies, with a potential short-term impact on ready-to-drink (RTD) soft drinks due to cannibalization [2]. - The analysis suggests a limited overall impact on the beverage industry, primarily affecting nearby soft drink points of sale (POS) [2]. - A scenario analysis indicates a potential low single-digit to mid-single-digit percentage impact on daily volume sold by RTD soft drinks, assuming a 50% cannibalization rate [19]. Product Cycle Dynamics - The product cycle remains a critical driver, with sugar-free drinks, new flavors, and sports/energy drinks gaining traction [3][39]. - New product launches, such as Eastroc's Ice Tea and UPC's sugar-free tea, are expected to contribute significantly to sales in 2025 [7][41]. - The focus on health and functional benefits continues to shape consumer preferences, leading to a rise in innovative beverage offerings [39][40]. Margin Resilience and Cost Benefits - The report highlights manageable impacts from competition risks, with cost benefits expected to continue into the second half of 2025 [8]. - Unit cost deflation is revised to 2.3% to 6.3% for the beverage segments, which is anticipated to offset potential declines in average selling prices (ASP) [8][64]. - Companies are adjusting promotional strategies and scaling down promotions for classic SKUs while benefiting from ASP hikes on larger pack beverages [64].