Guotou Securities: First coverage of CR BEVERAGE (02460) rated "buy-A" for the first time, Yibao's leading brand position is solid.

Guotou Securities released a research report stating that CR BEVERAGE (02460) is a leading company in the bottled water industry, with Nongfu Spring, as a top brand, enjoying a stable position in the industry. As a daily necessity product, the demand for packaged water is expected to remain stable in the long term. At the same time, the company's beverage business covers popular categories such as tea drinks, fruit juices, and sports drinks. It continues to promote the strategy of dual-drive of packaged water and beverages, with strong long-term competitiveness. Referring to the average valuation of comparable companies over the past 25 years, a buy - A investment rating is given with a corresponding target price of 13.86 Chinese Yuan in 6 months. (Exchange rate: 1 CNY = 1.1004 HKD). Guotou Securities' main points are as follows: Residents' awareness of health is increasing, leading to steady expansion in the drinking water industry Packaged water is a daily necessity product for people. With the increase in residents' awareness of health in China, the use of larger bottled water and barrelled water in households and outdoor activities is gradually increasing. Smaller bottled water, with its flexible advantages, is also becoming more widely used in sports and other scenarios. According to Euromonitor International, the size of the bottled water market in China was 245 billion CNY in 24, with a compound annual growth rate of about 5.7% from 16 to 24. It is estimated that the market size in 25 could reach 251.7 billion CNY, a year-on-year increase of 2.75%. The company, as a leader in the packaged water industry, owns Nongfu Spring, one of the leading brands of drinking purified water, and is expected to benefit from the industry's expansion. Pressure on the overall packaged drinking water industry, with a strong growth rate in the beverage segment In the first half of 25, the company achieved operating income of 6.206 billion CNY, a year-on-year decrease of 18.52%; net profit attributable to equity holders was 8.05 billion CNY, a year-on-year decrease of 28.63%; and profit attributable to equity holders excluding non-recurring items was 7.69 billion CNY, a year-on-year decrease of 31.56%. In terms of products, in the first half of 25, packaged drinking water/beverages generated revenue of 5.25/0.96 billion CNY, with year-on-year changes of -23.1% and +21.28% respectively. Among them, small bottled water / large bottled water / barrelled water generated revenues of 3.19/1.83/0.23 billion CNY, with year-on-year changes of -26.2%/-19.4%/-1.5%. Beverages are the company's second line of defense. In the first half of 25, the company launched a total of 14 new SKUs, achieving stable revenue growth, with the revenue share increasing to 15.4%. In terms of channels, the company continues to increase the coverage of terminal distribution points, currently covering traditional, KA, special channels, education, leisure and entertainment, e-commerce, catering, and other types of channels. It is also an official beverage product of the national team, deeply integrated with international sports events to enhance brand awareness. Investment advice: In the second half of the year, the company plans to add 2 new factories, with the Zhejiang factory, which is under construction, expected to start production in Q4, improving production efficiency. The bank predicts that the company's revenue growth for 2025-2027 will be -11.97%, 6.61%, and 8.64%, while net profit growth will be -7.10%, 9.32%, and 5.49% respectively. The average valuation of comparable companies in 25 is 21.49X. Risk warning: risks include lower than expected demand recovery, slower than expected expansion of new products, and increased industry competition.