CITIC SEC: The impact of rising PET prices is controllable, and beverage companies are expected to reduce hedging costs.

CITIC SEC released a research report stating that the recent sharp increase in PET prices, a major raw material for beverage companies, has drawn market attention and led to a significant decline in beverage company stock prices. Through a review of historical oil prices/PET price increases and cost sensitivity analysis, the bank believes that overall costs for beverage companies are manageable; if PET prices remain high in the future, it may slow down industry competition, and companies are expected to partially offset the negative impact of raw material price increases by reducing expenses. It is recommended to seize the opportunity to layout leading companies in the sector after the market downturn. Key points from CITIC SEC: PET prices are linked to oil prices and have recently experienced significant increases. PET is one of the main raw materials for beverage companies, and its price trends are closely related to the prices of crude oil. The recent US-Iran conflict has led to a sharp increase in crude oil prices, with Brent crude oil futures settlement prices reaching $100.5 per barrel (as of March 12), a 47% increase compared to the average in 2025. The increase in oil prices has been transmitted to PET prices, with spot prices for PET rising to 7910 yuan per ton (as of March 11), a 32% increase compared to the average in 2025. Historically, there is a lag between the increase in oil prices and the increase in PET prices, and the increase in PET prices is usually lower than the increase in crude oil prices. For example, during the geopolitical conflict in 2022, the price increases for Brent crude oil futures/PET were 40%/26% respectively. The future prices of PET and crude oil depend mainly on the war situation. Currently, Brent crude oil futures prices have not exceeded the peak of 128 US dollars per barrel in 2022. The future price trends mainly depend on the war situation and the situation of strait blockade. According to the report released by the US Energy Information Administration (EIA) on March 10, it is expected that Brent crude oil prices will peak in the second quarter of 2026 and maintain an average of around $91 per barrel, with a decline expected in the third and fourth quarters following the resumption of transit through the strait and production recovery. Cost sensitivity analysis: 1. Gross profit margin: the bank calculates that for every 10% increase in PET purchase price, the impact on the gross profit margin of beverage companies is between 0.6-1.4 percentage points. 2. Net profit margin: the bank calculates that for every 10% increase in PET purchase price, the impact on the net profit margin of beverage companies is between 0.5-1 percentage points. Taking into account the impact on the absolute value change in net profit of companies, for every 10% increase in PET purchase price, the impact on the net profit of beverage companies is between 3%-11%. (Note: Different beverage companies have different PET locking/purchase cycle, and the calculations above refer to the impact after a 10% increase in the company's own PET purchase price). Review of 2022: After a significant increase in raw material prices, industry competition slowed down. Reviewing the surge in PET prices in 2022, beverage companies all used price locks to reduce the adverse effects of raw material price increases, resulting in a 1-4 percentage point decrease in gross profit margins for beverage companies in 2022. At the same time, the bank found that the increase in raw material prices slowed down industry competition, and most companies partially offset the negative impact on net profit margins by reducing the sales expense ratio, resulting in net profit margin changes within 2 percentage points. The bank judges that if PET prices remain high for a long time in this round, companies may also offset the negative impact on net profits by cutting expenses. Risk factors: Unexpected increases in raw material prices; industry policy risks such as sugar taxes; food safety risks.