External broker reports(aggregated public sources), CMB International

CMB International

External broker reports(aggregated public sources)

Incorporated in Hong Kong, supported by the mainland and targeting in global market, CMB International Capital Corporation Limited (“CMBI”) is an integrated financial institution providing comprehensive and professional services. As a wholly-owned subsidiary of China Merchants Bank ("CMB"), by leveraging on the Group’s synergy and coordination in domestic and overseas markets, as well as CMB’s strong resources and outstanding social reputation, CMBI and its subsidiaries have been actively implementing diversified business strategies and set up an overall layout of main business segments including Corporate Finance, Asset Management, Wealth Management, Global Markets and Structured Finance, etc. Adhering to the philosophy of “being clients oriented and increasing our own values by the way of creating value for clients”, CMBI endeavors to provide quality and integrated financial services to institutional, corporate and individual customers both domestic and overseas including Hong Kong IPO sponsorship and underwriting, share placement and rights issue for listed companies, financial advisors, bonds issuance services, asset management, direct investment, wealth management, equity sales and trading, etc.

Equity Bottom-Up

<ul><li>Nongfu’s 1H24 revenue missed company’s guidance given its market share loss in the packaged water segment.</li><li>We expect low single digit revenue growth for the segment since market share recovery takes time.</li><li>Tea beverage revenue grew 59% YoY and delivered revenue share close to water of 38%, with a 10ppt higher in OPM than water segment. </li></ul>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Nongfu’s 1H24 revenue missed company’s guidance given its market share loss in the packaged water segment.We expect low single digit revenue growth for the segment since market share recovery takes time.Tea beverage revenue grew 59% YoY and delivered revenue share close to water of 38%, with a 10ppt higher in OPM than water segment. Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Nongfu Spring (9633 HK) - 1H24 Missed, Tea Became Top Profit Contributor

<ul><li>1H revenue and net profits grew faster than we expected at 23%/25% (vs CMBIe: mid-teen growth) to RMB20.5bn/5.8bn.</li><li>The strength came in along with a higher gross margins at 60.2%.</li><li>In our view, both were largely driven by 60% YoY revenue growth in tea beverages, of which ASP and gross margins are higher. </li></ul>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

1H revenue and net profits grew faster than we expected at 23%/25% (vs CMBIe: mid-teen growth) to RMB20.5bn/5.8bn.The strength came in along with a higher gross margins at 60.2%.In our view, both were largely driven by 60% YoY revenue growth in tea beverages, of which ASP and gross margins are higher. Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Nongfu Spring (9633 HK) – 1H rev/np +23%/25%; a neat beat on tea beverage

Thematic (Sector/Industry)

<ul><li>We had diverging takeaways from our distributor chancel check after the Dragon Boat Festival holiday, with beer being the only segment with positive momentum over 2Q.</li><li>Considering the price gap between beer and other alcoholic drinks, and also the growing preference of low alcoholic content, in our view, breweries still offer a multi-year story that looks to be sustainable in the next 4-5 years.</li><li>In the contrary, we continue to see near-term drags in baijiu, dairies and condiments that not only led to a lacklustre 2Q but also a possible slow 2H. </li></ul>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

We had diverging takeaways from our distributor chancel check after the Dragon Boat Festival holiday, with beer being the only segment with positive momentum over 2Q.Considering the price gap between beer and other alcoholic drinks, and also the growing preference of low alcoholic content, in our view, breweries still offer a multi-year story that looks to be sustainable in the next 4-5 years.In the contrary, we continue to see near-term drags in baijiu, dairies and condiments that not only led to a lacklustre 2Q but also a possible slow 2H. Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

China Consumer Staples – Divergence continues

<ul><li>Management prudently guided for low-teen top-line growth for the year, owing mainly to 1) the current scale of what Nongfu has already achieved, and 2) intensifying competition post COVID.</li><li>Despite this, year-todate Nongfu has achieved mid-teen sales growth, thanks to strong volume recovery in Oriental Leaf and large-sized bottled water.</li><li>Nongfu expects selling expense to “normalize” in the post-COVID era when the Company plans to step up and rejuvenate its brand image among consumers.</li></ul>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Management prudently guided for low-teen top-line growth for the year, owing mainly to 1) the current scale of what Nongfu has already achieved, and 2) intensifying competition post COVID.Despite this, year-todate Nongfu has achieved mid-teen sales growth, thanks to strong volume recovery in Oriental Leaf and large-sized bottled water.Nongfu expects selling expense to “normalize” in the post-COVID era when the Company plans to step up and rejuvenate its brand image among consumers.Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Nongfu Spring (9633 HK) – Mid-Teen Top-Line Growth

<ul><li>We had positive takeaways on F&amp;B demand over the New Year holiday break from our chancel check with distributors.</li><li>In view of the strong foot traffic and hence gifting demand, Baijiu and Beer exceeded expectation, followed by soft drinks and RTD.</li><li>Dairies (including IMF) had a good recovery despite a relatively high inventory level. Both packaged snacks and instant noodle had good momentum.</li></ul>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

We had positive takeaways on F&amp;B demand over the New Year holiday break from our chancel check with distributors.In view of the strong foot traffic and hence gifting demand, Baijiu and Beer exceeded expectation, followed by soft drinks and RTD.Dairies (including IMF) had a good recovery despite a relatively high inventory level. Both packaged snacks and instant noodle had good momentum.Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

China Consumer – Positive Takeaway from F&B Distributors

China

Nongfu Spring Co. Ltd. supplies soft drinks. The Company develops, produces, and sells bottled mineral water, fruit juice, sports drinks, and tea drinks. Nongfu Spring also offers barreled mineral water door-to-door services.

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Nongfu Spring (9633 HK)