Industrial: Beverage drives revenue growth, sugar-free leads product upgrades.

Industrial released a research report stating that leading food and beverage companies have a rich product matrix, with new products focusing on sugar-free and healthy options. Master Kong (00322) launched a high-end ready-to-drink tea "Tea Heritage", Uni-President (00220) and Nongfu Spring (09633) are expanding into the NFC juice market. Each company is continuously introducing high-end products to expand the sales share of high-margin products, achieving the dual goals of increasing revenue and profit margin. The demand for sugar-free tea and other niche segments is growing rapidly, with the recovery of consumer demand driving the recovery of soft drink demand, leading to steady revenue growth. Consumer aspirations for a healthy lifestyle and pursuit of quality remain the constant theme in the market. Industrial continues to be optimistic about the development of sugar-free beverages and healthy foods. Review: 1. Revenue and instant noodle business: Master Kong's instant noodle business and Uni-President's food business revenue showed a slight fluctuation year-on-year. In the first half of 2024, Master Kong's instant noodle business revenue was 13.81 billion yuan, a decrease of 1.0% year-on-year, with a year-on-year growth rate of -4.0pcts; Uni-President's food business revenue was 4.95 billion yuan, an increase of 0.9% year-on-year, with a year-on-year growth rate of +9.6pcts. Beverage business: The revenue of leading companies continued to grow, with a slight decline in growth rate. Master Kong's beverage business revenue was 27.07 billion yuan, a year-on-year growth of 1.7%, with a year-on-year growth rate of -7.8pcts, Uni-President's beverage business revenue was 10.02 billion yuan, a year-on-year growth of 8.3%, with a year-on-year growth rate of -4.0pcts. Snack food business: WL DELICIOUS showed revenue growth, with fast growth in vegetable products. In the first half of 2024, WL DELICIOUS's main business income was 2.94 billion yuan, a year-on-year growth of 26.3%, including 1.35 billion yuan in income from seasoning noodle products, a year-on-year growth of 5.0%; vegetable product income was 1.46 billion yuan, a year-on-year growth of 56.6%; soybean products and other product income was 120 million yuan, a year-on-year growth of 17.5%. 2. Cost and profit margin: The prices of white sugar and palm oil have risen, while PET and flour prices have fallen. In the first half of 2024, the average price of PET was 7,230.0 yuan/ton, a decrease of 3.3% from the first half of 2023; the average price of palm oil in the first half of 2024 was 7,850.3 yuan/ton, a 1.9% increase from the first half of 2023; the average price of white sugar in the first half of 2024 was 6,431.6 yuan/ton, a 1.4% increase from the first half of 2023; in the first half of 2024, the average price of flour was 3,197.2 yuan/ton, a 3.8% decrease from the first half of 2023. Due to factors such as the decline in some raw material prices and optimization of product structure, the profit margin of soft drink and food companies has increased. 3. Product structure: Leading companies have a rich product matrix, with new products focusing on sugar-free and healthy options. Master Kong continues to promote taste innovation, sugar-free products meet the health needs of consumers; Uni-President follows the trend of sugar-free, focusing on NFC fruit and vegetable juice; Nongfu Spring is back in the pure water market, continuously enriching product flavors; WL DELICIOUS actively promotes product innovation and enriches product flavors. Outlook: 1. Revenue end, product structure upgrade optimization drives average price increase. Master Kong launched high-end ready-to-drink tea "Tea Heritage", Uni-President and Nongfu Spring are expanding into the NFC fruit juice market. Each company is continuously introducing high-end products to expand the sales share of high-margin products, achieving the dual goals of increasing revenue and profit margin. The demand for sugar-free tea and other niche segments is growing rapidly, with the recovery of consumer demand driving the recovery of soft drink demand, leading to steady revenue growth. Consumer aspirations for a healthy lifestyle and pursuit of quality remain the constant theme in the market. Nongfu Spring continues to focus on sugar-free tea such as Eastern Leaf sugar-free tea and Tea fruit-flavored tea products; Master Kong and Uni-President launch new sugar-free tea drinks. We continue to be optimistic about the development of sugar-free beverages and healthy foods. 2. Cost end, except for a slight increase in flour prices compared to the previous month, in August, PET, palm oil, white sugar prices have declined. If production costs continue to decline in the second half of the year, profits are expected to further recover. In August 2024, the average prices of PET, palm oil, white sugar, and flour were 6,975.9/7,889.6/6,167.7/2,890.0 yuan/ton, respectively, a month-on-month decrease of -2.8%/-0.7%/-1.6%/+2.6%. Investment advice: We recommend focusing on high dividend and steady growth companies such as Tingyi (00322), Uni-President China (00220), and WL DELICIOUS (09985), which are gradually strengthening their second growth curve. Risk warning: Food safety issues, unexpected increases in raw material prices, lower-than-expected end sales, and higher-than-expected costs.