Goldman Sachs lowered the target price for CR BEVERAGE to 8.5 yuan and downgraded the earnings forecast, maintaining a "Neutral" rating

Goldman Sachs published a research report indicating that CR Beverage (02460.HK) performed in line with expectations last year. Considering the intense market competition, it has lowered the sales forecast for 2026 to 2028 by 2% to 4%. At the same time, due to a decline in the gross margin of the beverage portfolio and an increase in the expense ratio, it has reduced the profit forecast for the same period by 9% to 14%.

The bank has lowered the target price for CR Beverage from HKD 9 to HKD 8.5, maintaining a "Neutral" rating. The new target price is based on a projected price-to-earnings ratio of 16.5 times for 2027, consistent with the target price-to-earnings ratios of peers Kang Shifu (00322.HK) and Uni-President (00220.HK).

Goldman Sachs quoted management during the earnings conference stating that the goal for the packaged water business in 2026 is to restore positive growth, with a good start observed in January and February, as both shipments and terminal sales recorded positive growth. The beverage business aims to return to the level of the first half of 2025, which represents a year-on-year growth of 21%. The long-term goal is to increase the proportion of beverage sales to 30% by 2030. The company will focus on expanding product lines such as "Mulene," "Chrysanthemum Tea," and "Jasmine Tea" to capture changes in consumer preferences.

Regarding costs, management indicated that raw material inventory and forward contracts can secure costs at least until May or June. The company has also initiated several cost-saving plans, including deepening digitalization and shifting packaging from cardboard boxes to film packaging to partially offset raw material inflation pressures. In terms of channel strategy, the company will focus on enhancing channel capabilities in 2026, optimizing traditional channel investments and distributor incentives, and expanding collaborations with brand headquarters of food discount chains such as "Snack You Ming," "HotMaxx," and "Happy Monkey," as well as exploring dining and large retail channels. In terms of production capacity, self-owned production has reached 61%, and this year will focus on advancing the commissioning of the Danjiangkou water plant, along with adding sterile beverage production lines in Zhaoqing and Yixing