第一小时利润略有回升，第二小时利润率不确定性依然存在

Results China Food&Beverage 1H profit slightly beats, 2H marginuncertainty lingers Research Analyst+852-2203-5802 decent 1H26 results: revenue was in line with expectations (up 16%YoY),with aWatersegmentmiss(merelyup2%YoY)andRTDteabeat (up30%YoY).Netprofit(up 17%YoY) slightlyexceeded market expectations, withNPMup0.2ppt YoYto29.9%.Management reiterated its double-digit revenue and profit growthguidancefor2026,whilecostpressuresfromcommoditiesand jasmineremainuncertainfor2H26. Takeaways from the analyst briefingBottled water: Despite a decline in waterindustry demand this year amid unfavourableweather,Nongfushouldcontinuetooutperformandgainmarketshare,supportedby itsfurtherpenetrationacrosschannels andthedevelopmentofnewwatersources. RTDtea:Benefittingfrom positiveindustrydemand growth (including theshiftfromsugaredtosugar-freeRTDtea),managementremainsconfidentin the resilient growth of East Leaf. Meanwhile, they will continue todiversify the sugared tea portfolio, such as the reduced-sugar Tea t series(launched in Apr.2026)and Iced Tea (launched in June2025). Functional drinks (~10% of Nongfu's revenue): This segment also enjoysa promising demand outlook.Nongfu's newly launched electrolytebeverage (introduced in Mar 2026)has received positive consumerfeedbackperourchannelchecks,andNongfuwillcontinuetodifferentiateproductqualityto capture industrytailwinds. Gross profitmargin: 1) PET price has fallen from the April-May peak butiscurrentlystill upby20+%YoY(perWind),andthecompanyisprocuringPETonareal-timebasis;2)Theprocurementpriceofiasmine,impactedbyfloods in Guangxi, remains elevated compared to pre-flood levels.Webelieve operating leverage and Nongfu's diversifiedupstream sourcing oftea leaves (which may replace jasmine in certain cases) will helpmitigatethese downside risks. Meanwhile, we will continue to monitor pricemovementsfortherestoftheyear. Nongfu expected 2026 full-year net profit to grow at double digits, while2H26NPM is stillunclear given the aforementioned raw material costfluctuations. Food & BeverageNongfu Spring Factoring inNongfu's 1H26results andtakeawaysfromtheanalystbriefing,1)We lowered water revenuegrowthassumptions while raising RTDtea andfunctionaldrinksrevenuegrowthforecastsfor2026E-28E.A/so,basedonourchannelchecks,reflectpotentialpressurefromPETandjasmineprocurementcosts.3)Our2026E-28E net profits remain largely unchanged, supported by the company's ongoingeffective marketing investment and operating leverage. OurDCF-based TP is mildly trimmedtoHKD48.80 from HKD50.00tofactor in thelatestFXrate,implying26x2026EP/E.Nongfu'svaluationremainsdemanding:thestock trades at 24x2026EP/Eonan11%2026-28EEPS CAGR(vs.theChinabeverage peeraverage at 15xP/E on a 9%EPS CAGR).Maintain Hold. Food& BeverageNongfu Spring Food& BeverageNongfu Spring Reuters: 9633.HK Nongfu Spring is China's largest packaging water supplier and ranks among the top three in the Chinese market for teabeverages, functional beverages and juice beverages. Cash Flow (CNYm)Cash flow from operations BalanceSheet (CNYm) Solvency KeyCompanyMetrics Han Zhang+852 2203 5802han-a.zhang@db.com Appendix 1 Important Disclosures *Other information available upon request mportantrisk andconflictdissurescanalsobefoundathttp ImportantDisclosuresRequiredbyU.S.RegulatorsDisclosures marked with an asterisk may alsobe requiredby at least one jurisdiction inadditionto the United States.See ImportantDisclosuresRequiredbyNon-UsRegulators and ExplanatoryNotes. ImportantDisclosuresRequiredbyNon-U.S.RegulatorsDisclosures marked with an asterisk may alsobe requiredby at least one jurisdiction in additionto the United States.See ImportantDisclosuresRequiredbyNon-UsRegulators and ExplanatoryNotes. Fordisclosurespertainingtorecommendations orestimatesmadeonsecuritiesotherthantheprimarysubject ofthisresearch,pleaseseethemostrecentlypublished companyreportorvisitourglobaldisclosurelook-uppageonourwebsiteandconflictdisclosurescanalsobefoundathttps://research.db.com/Research/Disclosures/Disclaimer.Investorsarestronglyencouragedtoreviewthisinformationbefore investing. AnalystCertification Theviewsexpressedinthisreportaccuratelyreflectthepersonalviewsoftheundersignedleadanalyst(s)aboutthesubjectissuer and the securities of the issuer. In addition, the undersigned lead analyst(s) has not and will not receive anycompensationforprovidingaspecificrecommendationorviewinthisreport.HanZhang. Food& BeverageNongfu Spring 1.Hold, Target Price Change HKD 43.60, Current PriceHKD 27.05 Han Zhang2.09/02/2024Hold, Target Price Change HKD 33.00, Current PriceHKD 26.85Han Zhang3.01/27/2025Hold, Target Price Change HKD 33.10, Current PriceHKD 35.15 Han Zhang4.05/15/2025Hold, Target Price Change HKD 32.90, Current PriceHKD 38.45 Han Zhang 5.Hold, Target Price Change HKD 39.40, Current PriceHKD 46.60 Han Zhang6.08/27/2025Hold, Target Price Change HKD 41.50, Current PriceHKD 50.30 Han Zhang7.02/13/2026Hold, Target Price Change HKD 47.80, Current