China Investment Securities: Covering China Resources Drinks (02460) for the first time, giving Yibao a “buy-A” rating, and a stable position in the industry as a leading brand

The Zhitong Finance App learned that SDIC Securities released a research report stating that China Resources Drinks (02460) is a pure faucet company, and Yibao has a stable position as a leading brand in the industry. As a newly needed product, demand for packaged water is relatively stable over the long term. At the same time, the company's beverage business covers the three popular categories of tea, juice, and sports functions, and continues to promote a two-wheel drive strategy for packaged water and beverages, and is highly competitive in the long term. Referring to the 25-year average valuation of comparable companies, a buy-A investment rating is given, corresponding to 22x, with a target price of RMB 13.86 for 6 months. (Exchange rate: 1CNY=1.1004HKD).

The main views of SDIC Securities are as follows:

Residents' health awareness has increased, and the drinking water industry has been steadily expanding

Packaged water is a product that people need in their daily lives. As the health awareness of Chinese residents increases, the use of medium to large bottled water and bottled water in scenarios such as home and outdoor travel is gradually increasing. With its flexible advantages, small-sized bottled water is also more widely used in sports and other scenarios. According to Euromonitor statistics, China's bottled water market size (RSP) in '24 was 245 billion yuan, and the compound growth rate in 16-24 was about 5.7%. The market size is expected to reach 251.7 billion yuan in 25 years, +2.75% over the same period last year. As a leader in the packaged water industry, the company's Yibao is one of the leading brands for drinking pure water, which is expected to benefit from the expansion of the industry.

The overall pressure of packaged drinking water is under pressure, and the growth rate on the beverage side is impressive

The company's 25H1 achieved operating income of 6.206 billion yuan, -18.52% year on year; realized net profit of 805 million yuan, -28.63% year over year; realized net profit of 769 million yuan without return to mother, or -31.56% year on year. By product, 25H1 packaged drinking water/beverages achieved revenue of 52.5/960 million yuan respectively, or -23.1%/+21.28% year-on-year. Among them, small-sized bottled water/medium- to large-sized bottled water/bottled water achieved revenue of 31.9/18.3/23 billion yuan, or -26.2%/-19.4%/-1.5% compared to the same period last year. Drinks is the second curve created by the company. 25H1 launched a total of 14 new SKUs. Revenue achieved steady growth, and the revenue share increased to 15.4%. In terms of channels, the company continues to increase the coverage of terminal outlets. Currently, it has traditional, KA, special communication, education, leisure and entertainment, e-commerce, catering and other channel types, and is deeply bundled as the national team's official drinking product with international sporting events to raise brand awareness.

Investment proposal: The company plans to build 2 additional factories in the second half of the year. Among them, the self-built Zhejiang plant is expected to be put into operation in Q4, and production efficiency is expected to improve. The bank expects the company's revenue growth rates from 2025 to 2027 to be -11.97%, 6.61%, and 8.64%, respectively, and the net profit growth rates of -7.10%, 9.32%, and 5.49%, respectively. The 25-year average valuation of comparable companies was 21.49X.

Risk warning: Demand recovery falls short of expected risk, new product expansion falls short of expected risk, industry competition increases risk.