成长空间：自产率提高后期待盈利弹性，非水饮料业务积极蓄势展望公司未来成长空间：1）收入端，瓶装水主业（23 年收入占比92%）在渠道拓展及市场扩张上空间尚存，非水饮料业务（23 年收入占比8%）亦有爆品打造潜力。2）利润端，23 年公司净利率仅9.9%（vs 农夫山泉28.1%），未来提升路径主要依托毛利率提振及销售费用率优化：公司计划通过未来3-5 年的时间将23 年接近70%的代工比例下降至~30%，且伴随供应链优化及饮料业务规模效应发挥，公司毛利率提升路径清晰；此外，公司人效提升仍有空间，随上市后品牌红利持续发挥，费用率层面具备优化空间。It covered China Resources Beverages for the first time and gave it a purchase rating, with a target price of HK$15.97 (based on 25-year 18 x PE).
China Resources Drinks is a leading enterprise in the domestic bottled water industry. It has built a competitive advantage in the packaged water business in multiple dimensions such as multi-category development+omni-channel layout+nationwide expansion, and is not afraid of short-term industry competition fluctuations. Currently, the company is facing a critical moment when the bottled water business is shifting from OEM to self-production and the second curve layout for non-water beverages. We are optimistic that the company's nationalization process is progressing, the packaged water business is stable, and the non-water beverage business is expected to gain momentum and contribute to revenue growth. At the same time, profitability is also expected to be boosted, driven by increased self-production ratio/supply chain optimization/expansion of the non-water beverage scale/cost ratio reduction.
Demand in the bottled water industry is resilient. China Resources Drinks has a multi-dimensional competitive advantage. According to Euro Rui, the size of the bottled water industry was 226.6 billion yuan in '23. Pure water accounted for half of the country, and the company has a stable leading position in the pure water circuit. 1) On the product side, the company's forward-looking layout has been leading the competition in terms of the number of SKUs, and is expected to seize the development dividends of home/office segments with a rich product matrix; 2) On the channel side, the company proposed “intensive cultivation and decisive terminals” in '21, taking into account the number of outlets developed and the quality of terminal services, to tilt more channel profits towards terminals; 3) On the market side, based on the southern base market, adopt a national strategy of “expanding from west to east and north” to expand the sales area.
Growth space: Expecting profit elasticity after the self-production rate increases, the non-water beverage business is positively poised to look forward to the company's future growth space: 1) On the revenue side, the main bottled water business (accounting for 92% of revenue in 23 years) still has room for channel expansion and market expansion, and the non-water beverage business (accounting for 8% of revenue in 23 years) also has the potential to create explosive products. 2) On the profit side, the company's net interest rate in '23 was only 9.9% (vs. Nongfu Spring 28.1%). The future improvement path mainly relies on gross margin boosting and sales expense ratio optimization: the company plans to reduce the OEM ratio of nearly 70% in 23 years to ~ 30% over the next 3-5 years, and with supply chain optimization and beverage business scale effects, the company's gross margin improvement path is clear; in addition, there is room for improvement in the company's human efficiency. As brand dividends continue to be exploited after listing, there is room for optimization at the cost ratio level.
How we differ from the market view
The market has some concerns about the short-term intensification of competition in the packaged water industry. We believe that the company has taken a strong consumer mentality through omnichannel layout and multi-dimensional marketing, and has a stable leading position in the pure water circuit. At the same time, the company has a forward-looking layout of large products to avoid the current more competitive small-sized packaged water segmentation circuit. Moreover, under fierce competition, some small and medium-sized water companies may be eliminated in this round of price competition. In the medium to long term, the expansion of the industry and the increase in the concentration of leaders are still the main lines.
Profit forecasting and valuation
We expect the company's net profit to be 1.69/2/2.3 billion (YoY +27.2%/+18.5%/+14.9%), corresponding to EPS of 0.70/0.83/0.96. Referring to comparable companies' 25-year average PE 18x (Wind consistent expectations), we will give 25-year 18x PE, with a target price of HK$15.97.
Risk warning: impact on water purifiers, food safety issues, increased industry competition, fluctuating raw material costs.
