Haitong International said that Nongfu Spring (09633)'s good products, good marketing and good channels have brought about rapid sales, making the whole chain have high turnover and a large-scale effect on the business.
The Zhitong Finance App learned that CICC released a research report stating that it covered Nongfu Spring (09633) for the first time and gave it a “superior to the market” rating. The estimated revenue for 2023-2025 is 418.1/490.1/56.06 billion yuan, respectively, while net profit to mother is 109.8/129.3/14.85 billion yuan, with a target price of HK$50. The company is a scarce target with ultra-high ROE growth and enjoys a valuation premium. The company's historical ROE is around 35%. It is an absolute tier in the Hong Kong stock consumer market, mainly due to its high net sales interest rate and high asset turnover ratio. At the same time, the company's good growth, net profit from 2018 to 2022 was CAGR 23.9%, so historical valuations have enjoyed a certain premium.
The bank said that Nongfu Spring's good products, good marketing and good channels have brought rapid sales, making the whole chain have high turnover, and the business has a scale effect. (1) The scale effect of raw material procurement: The company has always enjoyed lower purchase prices than the industry due to large-scale procurement. The unit price of PET purchase is about 80-90% of the national average price, and the price locking operation is accurate. At the same time, the bank judged that the company's costs are also on a downward channel this year. (2) Scale effect of transportation costs: The increase in the scale of transportation has also increased the company's ability to bargain freight, and can even achieve special railway line transportation. At the same time, the company is also actively optimizing the regional layout. Soft drinks are large in size, heavy in weight, and low in value, and the economy weakens as transportation distance increases. In recent years, the company has continued to lay out new water sources such as Huangshan and Dujiangyan on a large scale to fill gaps in provinces. The production area is closer to the consumer market, shortening the transportation distance, which is conducive to the continuous reduction of the company's transportation cost rate.