2025年上半财年业绩短期承压，长期受益于产能扩张和渠道改革

1H25earnings under ST pressure, LT gainsfrom capacity expansion and channel reform TheCompany’s 1H25 revenue/NPdropped18.5/29% YoY,in line with the profitwarning.The weaknesswasattributable toa 23% YoY decline in the waterbiz(hit by weakdemand, fierce competition and channel reform) andmoderatedbeverage growth(+21% YoY)driven by volume growth but price decline.Weexpect full-year revenue decline to narrow given low 2H24 base and positivesalesin Jul-Aug.Capacity expansion proceeds as planned,while positiveimpacts are muted by sales pressure.Since in-depth channel reform is ongoingwhich isexpected to be completed by 2026, we anticipate the combined benefitsof both to materialize inFY26 or beyond.We cutourTPby 41% to HK$12.85toreflectearningspressure. The newTP implies18x 2026E P/E, as we believe2026will be the year when the impacts ofreformgraduallyeaseand its businessshifts to steady-state operation. Meanwhile, as a centralSOE,the Company’sbusiness plan will be incorporatedinto the Five-Year Plan, and it is reasonableto clearearningsdrags before the new phase,in our view. MaintainBUY. Target PriceHK$12.85(Previous TPHK$18.61)Up/Downside15.0%Current PriceHK$11.17 China Consumer Staples Miao ZHANG(852) 3761 8910zhangmiao@cmbi.com.hk Stock Data Waterbiz under ST pressure,Beveragebiz growthmoderates.Waterbiz revenue declined 23% YoY to RMB 5,251mnin 1H25,with small-sized/medium-to-largesized/barreled water down 26.2%/19.4%/1.5% YoYrespectively,due toweak demand, fierce competition andthecompany’schannel reform.Beverage grew 21% YoYtoRMB955mn(vs.40%/31% in1H24/FY24)as promotionspending weighed on ASPeven though14 newSKUswere launched in1H25.Lookinginto2H25: 1)theCompany notedwaterbizdecline has narrowed since peak season, with both water andbeverage posting positive YoY growth in Jul-Aug; 2) late launches (Jun-Jul)ofcompetitive beverages maydeliver positive impacts in 2H; 3) low 2H24base. Weexpectwaterrev.declinetonarrow and beveragerev.growthtoexpand slightlyin FY25.Capacityexpansion on track,payback period may extend.The Company is executing its capacity expansion plan as scheduled: Wuyishanlarge-size production line commenced operations in 1H25,with twofactories to come online in 2H25. The 2025 target of 60% self-ownedcapacity remains unchanged. We previously calculated that a10%higherself-owned capacity ratio could drive a 1.5-2pptGPmargin improvement(report),but this benefitwas muted bysoft salesin 1H25. We believe thatas consumption sentiment recovers and capacity expansion is implementedontrack, positive impacts will graduallyemergeover a longerhorizon.Channel reformweighson ST earnings, benefits to emerge post FY26. Related Reports1.Nongfu Spring (9633 HK)-Solid TheCompany has launched in-depth channel reforms,including:1)flattening distribution channels in tier-1 cities from4 to 3 levels; 2) addingover 100 distributorsdedicatedfor beverage products; 3)settingspecializeddistributors for e-commerce,careering, and emerging channels; and 4)dedicateddistributors for lower-tier markets(counties/towns/villages).Theseinitiatives,scheduled for completion by FY26,will delivercompounded benefits alongside ongoing capacity expansion,in our view.Maintain Buy.We slash ourTPby41% to HK$12.85 to reflect earnings 1H25 fuelled by strong non-waterbiz 2.Proya Cosmetics (603605 CH)-1H25earnings saved by sub-brands; Maintain BUY pressure. The newTPis equivalentto 18x 2026E P/E, as weview 2026 asthe year when the company’s reform impacts graduallyeasewith operationshifting from transformation stage to a steadystate.Risks:1)greater-than-expected economic downturn; 2) slower-than-planned capacity expansion;3) underwhelming channel reform results; 4) food safety incidents; 5) rawmaterial price hikes, etc. Disclosures& Disclaimers Analyst CertificationThe research analyst who is primary responsible for the content of this research report, in whole or in part, certifies that with respect to the securities or issuer that the analyst covered in this report: (1) all of the views expressed accurately reflect his or her personal views about the subject securities or issuer; and (2)no part of his or her compensation was, is, or will be, directly or indirectly, related to the specific views expressed by that analyst in this report.Besides, the analyst confirms that neither the analyst nor his/her associates (as defined in the code of conduct issued by The Hong Kong Securities and Futures Commission) (1) have dealt in or traded in the stock(s) covered in this research report within 30 calendar days prior to thedate of issue of this report; (2) willdeal in or trade in the stock(s) covered in this research report 3 business days after the date of issue of this report; (3) serve as an officer of any of the HongKong listed companies covered in this report; and (4) have any financial interests in the Hong Kong listed companies coveredin this report.CMBIGM or its affiliate(s) have investment banking relationship with the issue