Lyon: NONGFU SPRING (09633) outperformed expectations in the second half of last year, maintaining an outperforming market rating with a target price of 57.6 Hong Kong dollars.

Lyon released a research report stating that NONGFU SPRING (09633) exceeded expectations in the second half of last year, with sales and net profit increasing by 30% and 40.2% respectively compared to the same period last year. For the full year, sales and net profit increased by 22.5% and 30.9% respectively. All major business segments, including bottled water, ready-to-drink tea, functional beverages, and fruit juice, had sales higher than expected, and the gross profit margin for each segment also expanded. Lyon maintained a "high conviction outperform market" rating for NONGFU SPRING, with a target price of HKD 57.6. The report mentioned that in the second half of last year, revenue from bottled water increased by 25% year-on-year, higher than the bank's expected 22%; ready-to-drink tea grew by 38%, higher than the expected 35%; functional beverages increased by 20%, higher than the expected 16%; and fruit juice grew by 33%, higher than the expected 25%. The overall gross margin for the period increased by 3.4 percentage points to 60.7% year-on-year, 1.7 percentage points higher than the bank's expectations; sales and administrative expense ratio decreased by 2.4 percentage points to 22.9% year-on-year; and net profit margin increased by 2.2 percentage points to 30.6%. In terms of business segmentation, the EBIT profit margin for bottled water increased by 6.3 percentage points to 37.4% last year, ready-to-drink tea increased by 2.9 percentage points to 48%, functional beverages increased by 4.6 percentage points to 46.8%, and fruit juice increased by 9.4 percentage points to 34.3%. The group declared an annual dividend of 11.1 billion Chinese yuan, with a dividend payout ratio of 70%, equivalent to a dividend yield of around 2.3%.