EB SECURITIES: NONGFU SPRING (09633) saw accelerated revenue growth in the second half of last year, with sufficient long-term development momentum.

EB Securities report stated that NONGFU SPRING (09633) is expected to achieve operating revenue of 52.553 billion yuan in 2025, a year-on-year increase of 22.5%; net profit attributable to shareholders is expected to be 15.868 billion yuan, a year-on-year increase of 30.9%. In terms of specific businesses, revenue from all sectors has shown double-digit growth, with revenue growth accelerating in the second half of last year. Among them, packaged drinking water revenue reached 9.266 billion yuan, a year-on-year increase of 24.9%, mainly due to the company enriching the product specifications, strengthening the advantage of natural water sources, and promoting the increase in market share of packaged water. The bank believes that since the beginning of 2016, the company has been operating well, with a strong brand, a robust supply chain, excellent channels, and high-quality products supporting its long-term development. The main contents of the research report are as follows: Event: NONGFU SPRING announced its 2025 financial report, achieving operating revenue of 52.553 billion yuan, a year-on-year increase of 22.5%; net profit attributable to shareholders reached 15.868 billion yuan, a year-on-year increase of 30.9%. Operating revenue for the second half of 2025 reached 26.931 billion yuan, a year-on-year increase of 30.0%, with net profit attributable to shareholders of 825 million yuan, a year-on-year increase of 40.2%. Revenue from all business sectors has shown double-digit growth, with revenue growth accelerating in the second half of 2025. In terms of product categories: 1) Packaged drinking water revenue in 2025 was 18.709 billion yuan, a year-on-year increase of 17.3%; packaged drinking water revenue in the second half of 2025 was 9.266 billion yuan, a year-on-year increase of 24.9%, mainly due to the company enriching water product specifications, strengthening the advantage of natural water sources, and promoting the market share increase of packaged water. 2) Ready-to-drink tea revenue in 2025 was 2.596 billion yuan, still growing by 29.0% on a high base; ready-to-drink tea revenue in the second half of 2025 was 11.507 billion yuan, a year-on-year increase of 38.4%. This is mainly due to the company introducing new flavors, launching large packaging to enrich the consumption scene, and the "open and win prizes" activity having a good effect. 3) Functional beverage revenue in 2025 was 5.762 billion yuan, a year-on-year increase of 16.8%; functional beverage revenue in the second half of 2025 was 2.864 billion yuan, a year-on-year increase of 20.2%, mainly due to the rapid industry growth, the company closely integrating brand promotion with sports scenes, and accurately positioning customer groups. The company launched a new product in March 2026 - "electrolyte" beverage, continuing the marketing strategy of "open and win prizes", and has already completed the distribution of nationwide dealers. 4) Fruit juice beverage revenue in 2025 was 5.176 billion yuan, a year-on-year increase of 26.7%; fruit juice beverage revenue in the second half of 2025 was 2.612 billion yuan, a year-on-year increase of 32.5%, mainly due to the company actively introducing new products, expanding channels such as member supermarkets, and achieving good market performance with its 17.5 and NFC series products. 5) Revenue from other products in 2025 was 1.309 billion yuan, a year-on-year increase of 10.7%; revenue from other products in the second half of 2025 was 680 million yuan, a year-on-year increase of 7.3%, mainly due to the company continuously enriching product specifications and flavors, and expanding channels such as member supermarkets. Cost advantages and economies of scale drive profit growth, with the sales expense ratio decreasing year-on-year. In 2025, the company's gross profit margin reached 60.5%, an increase of 2.4 percentage points year-on-year, with a gross profit margin of 60.7% in the second half of 2025, an increase of 3.4 percentage points year-on-year. This was mainly due to the decrease in raw material costs such as PET, cardboard, and sugar, combined with the company stabilizing distribution prices through the e-commerce channel, and the release of economies of scale in revenue. In 2025, the sales expense ratio/management expense ratio were 18.6%/4.7%, a year-on-year decrease of 2.8/+0.1 percentage points respectively, with the sales expense ratio/management expense ratio in the second half of 2025 being 17.8%/5.1%, a year-on-year decrease of 2.5/+0.1 percentage points respectively. The decrease in the sales expense ratio was mainly due to a decrease in advertising and promotion expenses, as well as a decrease in logistics costs resulting from changes in product structure. In terms of profit margins by division, the operating profit margins for packaged drinking water/ready-to-drink tea/functional beverages/fruit juice/ other products in 2025 were 37.4%/48.0%/46.8%/34.3%/35.9%, an increase of 6.3/+2.9/+4.6/+9.4/+2.7 percentage points year-on-year respectively; of which, the fruit juice operating profit margin increased significantly mainly due to product structure optimization and revenue scale effects. In 2025, the company's other income and gains reached 1.72 billion yuan, a year-on-year decrease of 19.2%, mainly due to a decrease in interest income caused by lower interest rates and a reduction in government subsidies. Overall, benefiting from the increase in gross profit margin and the decrease in sales expense ratio, the net profit margin attributable to shareholders in 2025 reached 30.2%, an increase of 1.9 percentage points year-on-year. The company has been operating well since the beginning of 2026, with a strong brand, a robust supply chain, excellent channels, and high-quality products supporting its long-term development. The company has been performing well since the beginning of 2026, with all product categories developing in a balanced manner. Marketing expenses may increase due to the 30th-anniversary celebration and new product promotions; in terms of costs, facing pressure from rising PET prices since 2026, the company has implemented price locking and currently has no plans to adjust product prices, relying on supply chain capabilities to hedge cost fluctuations. Overall, the company adheres to the development philosophy of "stable, slow, and far-reaching", focusing on improving product quality, strengthening supply chain construction, nurturing brand awareness, and deepening channel cooperation to ensure the healthy development of the company. In addition, the company's globalization layout is steadily progressing, with sufficient long-term growth momentum. Against the backdrop of intense industry competition, the company is expected to surpass industry cycles and continue to consolidate its leading position. Risk warning: Market competition exceeds expectations; new product launches fall short of expectations; weakening control over channels; risks of contamination in water sources.