China Beverages: Factoring in Higher and More Enduring Cost Inflation

Goldman Sachs updates the China Beverages sector, downgrading Tingyi to Neutral while reiterating Buy on Nongfu and Eastroc due to rising PET cost pressures and high competitive intensity.

Key Takeaways

• 1.PET cost headwinds are increasing as raw material prices hit 2022 levels, driven by high oil prices; effects will manifest from May 2026 onwards.
• 2.Nongfu Spring is the top sector pick due to its scale, high margins, and successful cross-selling of new products like electrolyte water.
• 3.Tingyi is downgraded to Neutral as its PET price lock-in buffer expires and competitive intensity in tea remains high.

Table of Contents

• Earnings and TP revision
• Stock Recommendations
• Valuation- What's Priced In
• Cost Sensitivity Analysis
• Investment Thesis - Tingyi
• Valuation comps
• Earnings Change Summary Table
• Price Target Risks and Methodology - Eastroc Beverage
• Price Target Risks and Methodology - China Resources Beverage
• Price Target Risks and Methodology - Nongfu Spring
• Price Target Risks and Methodology - Tingyi
• Price Target Risks and Methodology - Uni-President China
• Disclosure Appendix

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