Nongfu Spring’s net profit exceeded 5.70 billion in the first half of the year, and the revenue of tea drinks such as ＂Oriental Leaves＂ increased by nearly 60%

Tea beverages have become the second growth curve of Nongfu Spring.

On the evening of August 29, Nongfu Spring joint stock company (Nongfu Spring, 09633.HK) announced the interim results of 2023. Nongfu Spring’s revenue in the first half of the year increased by 23.3% to 20.462 billion yuan; the profit attributable to the owners of the parent company increased by 25.3% to 5.775 billion yuan; basic profit per share was 0.51 yuan, an increase of 24.4%.

According to wind data, since the listing of Nongfu Spring on the Hong Kong Stock Exchange in 2020, Nongfu Spring’s half-year revenue and net profit have been growing steadily. The performance in the first half of this year reached a record high, and the performance growth rate also increased significantly year-on-year.

The performance of Nongfu Spring in the first half of the past five years. from wind

In terms of business, knock-out product packaging drinking water products still contributed more than half of the performance, but the proportion of revenue decreased by more than 5 percentage points, and the revenue of water products increased by 11.7% to 10.442 billion yuan, mainly due to the improvement of the epidemic situation, people’s outdoor activities increased, and the sales of ready-to-drink channels resumed.

Tea beverages represented by "tea π" and "Oriental leaves" have become the second growth curve of Nongfu Spring. In the first half of this year, the revenue of tea beverage products increased by 59.8% to 5.286 billion yuan, accounting for a year-on-year increase of nearly 6 percentage points to 25.8%.

Nongfu Spring’s product performance in the first half of this year

The semi-annual report pointed out that in the first half of the year, the tea beverage products of Nongfu Spring Company and its subsidiaries (hereinafter referred to as the "Group") further gained consumers’ favor. Among them, "Oriental Leaf" continued to focus on product innovation. In March, the spring limited product "Longjing New Tea" returned, and in May, the new flavor "Black Oolong" was launched, further improving the category layout of "Oriental Leaf" in tea products. And "Tea Pi" continued to strengthen communication with young consumers.

According to a research report released by Haitong International on August 7, the current sugar-free tea market is maintaining rapid growth. As the single product with the largest market share of sugar-free tea, Nongfu Spring’s "Oriental Leaf" will continue to enjoy the dividends of the rapid expansion of the sugar-free tea market in our country. In addition, Nongfu Spring launched a 900ml Oriental Leaf large bottle in February this year, and a new "Black Oolong" in April to continue to enrich the taste. The continuous enrichment of Oriental Leaf flavors and packaging specifications will better help the company occupy the end point shelf and expand more consumption scenarios.

The above research report also pointed out that Nongfu Spring maintained a high-speed growth in tea beverages last year, and the revenue scale was close to 7 billion volume (corresponding to a year-on-year increase of 50.8% in revenue last year). Looking forward to 2023, under the continuous pull of the sugar-free tea industry and "Oriental Leaves", the company’s tea beverages are optimistic about moving towards tens of billions of products as a whole.

According to the semi-annual report, the group’s functional beverage product revenue increased by 21.5% to 2.458 billion yuan in the first half of this year; fruit juice beverage product revenue increased by 32.2% to 1.686 billion yuan; other products (mainly including soda drinks, gas-flavored drinks, lemon juice drinks, coffee drinks and other beverage products, and fresh fruit and other agricultural products) revenue 591 million yuan, down 8.4% year-on-year.

In the first half of this year, the Group’s gross profit was 12.31 billion yuan, an increase of 25.1% year-on-year. The Group’s PET (polyethylene terephthalate, plastic bottle raw materials) procurement costs increased due to changes in international crude oil prices, but the raw material procurement costs for cartons, labels and some beverage contents decreased compared with the same period last year. Based on this, the Group’s gross profit margin increased by 0.9 percentage points year-on-year to 60.2%.

In the first half of the year, the Group’s sales and distribution expenses were 4.695 billion yuan, an increase of 30% year-on-year, mainly due to increased investment in advertising and marketing.

In terms of inventory, focusing on key items and improving operating efficiency in the first half of the year, the Group’s inventory increased from 2.108 billion yuan at the end of last year to 2.393 billion yuan at the end of the first half of this year. Inventory turnover days decreased from 50.5 days to 50.4 days.

"With the recovery of consumption power and the increase in outdoor travel of consumers, the market scale of the beverage industry has rebounded significantly, and the development trend of diversification, sugar-free and healthy soft drink industry has gradually emerged." Regarding the performance outlook, Nongfu Spring pointed out in the semi-annual report that from the perspective of the whole year, in China, with the recovery of the economy and the gradual strengthening of domestic demand, consumption is expected to continue to expand. However, the world situation is still complex and severe. The macroeconomic trends and policies of major economies in the world are differentiated. The world economic growth continues to slow down, and inflationary pressures remain high. The Group will continue to strengthen cost control and risk management, actively seize market opportunities, and prudently respond to various challenges.