Goldman Sachs raises the target price of NONGFU SPRING to 48 yuan and reiterates "Buy"

Goldman Sachs research report indicates that NONGFU SPRING (09633.HK) is expected to achieve sales of RMB 25.4 billion in the first half of this year, with a net income of RMB 7.3 billion, representing year-on-year increases of 15% and 17%, respectively, which is roughly in line with the bank's previous expectations. Looking ahead to the second half of the year, the bank believes that based on the low base effect, along with the group's product innovation capabilities and flexible channel and marketing strategies, performance is expected to continue improving.

The bank mentioned that it is paying attention to major competitor Wahaha, which is currently facing public pressure and potential intervention from the Hangzhou local government, which may create consumer migration opportunities. It is estimated that for every 1 percentage point loss in Wahaha's market share, the corresponding retail value is approximately RMB 2.3 billion or an income impact of about RMB 1 billion, which is roughly equivalent to 6% of NONGFU SPRING's packaged water sales last year; the impact on operating profit is about RMB 90 million, accounting for approximately 1.8% of NONGFU SPRING's drinking water business operating profit.

The bank has raised its revenue forecasts for NONGFU SPRING for 2025 to 2027 by 1% to 3%, based on an upward revision of the drinking water growth forecast by 2% to 7%, and has also raised its profit forecasts for the same period by 3% to 9%, due to better profit margin performance. The latest estimates indicate that sales and net profit for the full year of 2025 are expected to increase by 17% and 20% year-on-year, respectively, and by 14% and 16% in 2026; the target price has been raised from HKD 43.6 to HKD 48, reiterating the "Buy" rating