20220826-招银国际-农夫山泉-09633.HK-1H22_beat_on_GPM__tea_beverage_should_continue_to_drive_growth_over_2H_4页_1mb

Nongfu Spring (9633 HK) Summary

Core Content

Nongfu Spring (9633 HK) reported strong first-half of 2022 (1H22) results, with net profits of RMB4.6bn (+14% YoY) and revenue of RMB16.6bn (+9% YoY). The performance exceeded both the analyst's and consensus estimates, primarily due to a higher-than-expected gross profit margin (GPM) of 59.3% and significant growth in tea beverages, which grew by over 50%.

Main Points

• Performance Highlights:

  • 1H22 results beat expectations with RMB4.6bn net profits (+14% YoY) and RMB16.6bn revenue (+9% YoY).
  • Gross margin reached 59.3%, surpassing the previous year and contributing to the strong performance.
  • Tea beverages drove the growth with over 50% YoY increase, attributed to new product launches under Tea Pai and Oriental Leaf.

• Outlook for 2H22:

  • The growth momentum in tea beverages is expected to continue.
  • Packaged water may recover if large-scale lockdowns are avoided.
  • Juices could accelerate, but functional beverages may remain under pressure due to a gradual resumption of outdoor activities.

• Revenue and Profit Forecasts:

  • The analyst raised 2022/23E revenue estimates by 2.2% and 5.7%, respectively.
  • GPM was lifted by 0.4pp and 1.0pp, translating to a 15% and 18% increase in net profits.
  • Revised target price is HK$57.6, up 23.7% from the current price of HK$46.6.

• Business Segments:

  • Four out of five business segments showed positive growth in 1H22.
  • Tea beverage (+51.6% YoY), packaged water (+4.8% YoY), juice beverage (+4.2% YoY), and functional beverage (+0.9% YoY).

• Financial Ratios:

  • Gross profit margin for 2022E is 57.1%, and for 2023E is 58.2%, with a projected 60.0% for 2024E.
  • Net margin is expected to rise to 25.6% in 2024E.
  • ROE is projected to be 32.1% in 2024E, with a consistent trend of improvement.

• Valuation:

  • The revised target price is based on a 60.0x mid-23E P/E ratio, which is still above the 2-year average since IPO.
  • The 12-month forward P/E band and trailing P/B band are provided for reference.

Key Financials

Analyst Ratings

• CMBIGM Rating: BUY
• Target Price: HK$57.6
• Previous Target Price: HK$53.0
• Potential Return: +23.7% from current price

Share Performance

Shareholding Structure

• Yangshengtang Co: 66.8%
• Zhong Shanshan: 17.2%

Market Data

• Market Cap (HK$ mn): 522.961
• Avg 3 mths t/o (HK$ mn): 187.24
• 52w High/Low (HK$): 51.98 / 33.42
• Total Issued Shares (mn): 11,246

CMBIGM Ratings

• BUY: Stock with potential return of over 15% over next 12 months

• HOLD: Stock with potential return of +15% to -10% over next 12 months

• SELL: Stock with potential loss of over 10% over next 12 months

• NOT RATED: Stock is not rated by CMBIGM

• OUTPERFORM: Industry expected to outperform the relevant broad market benchmark

• MARKET-PERFORM: Industry expected to perform in-line with the relevant broad market benchmark

• UNDERPERFORM: Industry expected to underperform the relevant broad market benchmark

Important Disclosures

• The report is not an offer or solicitation to buy or sell any security.
• The information is for the use of intended recipients only.
• CMBIGM does not provide individually tailored investment advice.
• The report is subject to change without notice and may have conflicts of interest.

Legal Disclaimer

• The information is based on publicly available data and is not guaranteed for accuracy or completeness.
• CMBIGM is not a registered broker-dealer in the United States or Singapore, and accordingly, the report is not subject to certain U.S. or Singapore regulations.
• Recipients in the UK and the U.S. are subject to specific legal restrictions.