Jinwu Financial News | China Merchants issued a Research Report indicating that NONGFU SPRING (09633) has launched green bottled water, positioning it as a strategic product to capture market share, which is deemed essential. For small packaged water in ready-to-drink scenarios, sales rely more on channel push, and green bottled water offers significant benefits to channels, leading to a positive willingness to stock from Dealers and terminals after its launch, with the company's market share starting to rebound in the second half of the year. Considering that other brands find it difficult to imitate, the increase in NONGFU SPRING's packaged water share is expected to exceed expectations. The company's share target is not only to restore to the pre-public opinion incident level but to further lead the market.
The firm stated that based on the experiences of the USA and Japan, the promotion of per capita consumption of packaged beverages in our country will be driven by: 1) Economic development and improving urbanization rate, accompanied by residents' concerns over public water supply systems, resulting in an increase in water packaging rate; 2) The consumer base for beverages is expanding, with middle-aged and elderly groups beginning to consume beverages. Aside from packaged water and the rapidly growing tea drinks in recent years, fruit juice is expected to become the next category to succeed tea drinks, with NFC already becoming the leader in its segment, and Water-Soluble C100 showing impressive sales.
The firm continued by stating that the company faced external crises this year in its Operation, but responded very actively by launching green bottled water with benefits for channels, beginning to see a rebound in market share in the second half of the year, with potential share growth in the next 1-2 years possibly exceeding expectations. Regarding profit margins, after calculations, the risks for 24H2 are basically released, and it is expected that the profit margin will perform better than market expectations in 2025. The company is proactively laying out several potential categories, with short-term growth continuing for Dongfang Shuye, while fruit juices and coffee are expected to follow in the medium to long term. Short-term turbulence has caused fluctuations in the company's valuation, but true quality withstands trials, and the adjustment speed and effectiveness of outstanding leaders often surpass market expectations, with a dual boost expected for valuation and performance by 2025. The firm estimates the EPS for 24-26 to be RMB 1.08, 1.28, and 1.46, giving a Target Price of HKD 42, corresponding to a 30 times PE for 2025, and reiterates a 'strong buy' rating.
