Jinwu Finance | Zheshang International's Research Reports indicate that China Resources Beverage (02460) is one of the two leading enterprises in China's packaged water market, long dominating the purified water market. The report states that the company's beverage Business is in a rapid expansion phase, with the revenue/gross profit CAGR for 2021-2023 reaching 43%/55% (the contributions to total revenue/gross profit rising from 7.9%/6.0% to 10.3%/6.8% by 4M24), primarily benefiting from the company's focus on trending niche product lines like chrysanthemum tea. The report forecasts that the beverage Business revenue/gross profit CAGR from 2023-2026 will achieve 44%/43%.

Additionally, the company has established a solid market foundation in the southern (especially the CNI Zhujiang Index) and eastern regions (contributing approximately 59% of revenue), and plans to continue expanding into the northern market where penetration rates are lower. The report believes that, based on a low base, the northern expansion will support revenue growth and stabilize market share.

The report is Bullish on China Resources Beverage mainly based on: 1) the company's solid position in the purified water market; 2) the second growth curve propelled by Chinese herbal tea and functional beverages is gaining momentum; 3) expansion of its own production capacity and nationwide layout will significantly enhance Operation efficiency; 4) as the only state-owned enterprise in the sector, it has greater risk resistance capability during economic downturns.

The report initiates coverage with a 'Buy' rating and sets a Target Price of HKD 18.84. The Target Price corresponds to a 22 times 2025 P/E, based on: 1) the peers in the ready-to-drink beverage sector currently trading at 23 times 2025 P/E, granting a 15% discount since the company's beverage Business is still in its infancy; 2) as the only central enterprise in the sector, it has greater risk resistance, granting a 10% premium.