＜Research＞CCBI Lowers NONGFU SPRING (09633.HK) TP to $37.3, Expects Gradual Recovery in 2H24

　　In a research note, CCBI forecasted NONGFU SPRING (09633.HK) -0.700 (-2.303%) Short selling $35.59M; Ratio 28.310% to report weaker-than-expected 1H24 results, dragged down by online publicity. The broker lowered its medium-term revenue forecast for packaged water products from a 9% increase to a 17% decline, reflecting the impact of a sharp drop in sales volume between April and May. In a bid to calm the storm, NONGFU SPRING offered more generous promotional offers, resulting in lower average selling prices for its products.

　　On the other hand, the company's tea beverage business grew significantly, which CCBI expected to be the main driver of 1H revenue, partially offsetting the negative impact of the water business, resulting in a lower forecast for total revenue growth in the first half from 14% to 8%. Meanwhile, in response to higher discounts and negative product mix adjustments, the broker also lowered its first-half consolidated gross margin forecast from 60.2% to 59.9%, with EBIT margin estimated to fall to 34%, while net profit grew 6% YoY to RMB7.55 billion.

　　Related NewsDaiwa Downgrades NONGFU SPRING (09633.HK) to Hold, Chops TP to $36

　　Market news this month indicated that NONGFU SPRING hiked the wholesale price of its 19-litre bottled water products by about 20%, a move the broker expected to mitigate the negative impact of changes in product mix and promotional discounts on the packaged water gross margin. Looking forward to a gradual recovery in 2H24, the YoY declines of EBIT margin and net profit are forecasted to narrow by 2.9% and 3% to 31.7% and 25.3% respectively.

　　Overall, CCBI lowered its profit forecasts on NONGFU SPRING for this year and next year by 3% and 1%, and trimmed its target price from $48 to $37.3, while maintaining its Outperform rating.

　　(HK stocks quote is delayed for at least 15 mins.Short Selling Data as at 2024-07-30 12:25.)

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