Nongfu Spring: The packaged water business hits the brakes, while the tea beverage segment surges ahead independently.

On the evening of August 25 Beijing time, Nongfu Spring (9633.HK) released its 2026 H1 financial results. Overall, revenue and profit still maintained double-digit growth, but in terms of structure, tea beverages continued to grow rapidly with profit margins hitting new highs, while packaged water almost stagnated and its profitability declined. This is a performance with "qualified total volume but unsatisfactory structure".

Specific key points are as follows:

1. Packaged water steps on the brake. In the first half of the year, the revenue of Nongfu's packaged water reached 9.64 billion yuan, with a year-on-year increase of only 2.1%, and the growth rate dropped significantly compared with the previous quarter. The core reason is that the temperature in most areas of the country was low and there was more rainfall in the second quarter, which suppressed the most core outdoor and instant consumption scenarios of packaged water.

According to third-party survey data, the sales volume of China's packaged water industry declined by 7-9% year on year, although Nongfu's growth rate outperformed the overall market, it was still affected. The profit margin fell 1.7pct year on year to 33.8%, mainly because the cost of PET rose sharply and Nongfu chose not to follow the price increase to ensure its own market share when most peers raised their prices.

2. Tea beverages grow rapidly alone, with profit margins hitting new highs again. The revenue of tea beverages reached 13.12 billion yuan, a year-on-year increase of 30.1%. The proportion of total revenue further increased by 4.8pct to 44.2%, widening the gap with packaged water again. The profit margin soared to 49%, up 0.5pct year on year to a record high, with extremely impressive performance. Among them, the first low-temperature tea "Cold Brew Longjing" has ranked first in Sam's unsweetened drink bestseller list since its debut in Sam's Club in April.

3. Functional beverages sacrifice short-term profits for new product promotion. The revenue of functional beverages reached 3.35 billion yuan, a year-on-year increase of 15.6%, but the profit margin fell 2.4pct year on year to 44.7%. In the first half of the year, Nongfu launched a brand new "Nongfu Spring" electrolyte drink series, and invested heavily in advertising on CCTV in conjunction with the 2026 World Cup, sacrificing short-term profits to seize market share.

4. Gross profit margin increased slightly, but pressure will rise in the second half of the year: Although the company's core raw material PET bottle flakes rose from 6,300 yuan/ton in January to about 9,000 yuan/ton in mid-April (an increase of over 40% in three months), Nongfu basically withstood the pressure in the first half of the year by relying on the pre-locked low-cost inventory, and its gross profit margin increased by 0.6pct year on year to 60.9%, reaching the highest level in history, which also means that the company's cost-side pressure will increase in the second half of the year.

Marketing expenses increased slightly, but will not affect core profitability: In terms of expenses, in the first half of the year, Nongfu increased the marketing & promotion of electrolyte drinks during the World Cup, and strengthened the brand building of new categories. The sales expense ratio was 19.7%, a slight increase of 0.1pct year on year, but the management expense investment remained restrained. Finally, Dolphin Research calculated that Nongfu's core operating profit margin increased slightly by 0.9pct to 37.5%.

Overview of financial information:

Overall view of Dolphin Research:

First of all, for packaged water, the logic in the past year has always been "the green bottle has completed its market positioning, the red bottle takes over, and the profitability of packaged water has repeatedly hit new highs". However, this time the growth rate of packaged water dropped to 2.1% and the profit also declined, the performance is obviously unsatisfactory.

In addition to the overall decline in the demand prosperity of the packaged water industry in the second quarter mentioned above by Dolphin Research, channel survey information shows that competing products including C'estbon, Ganten, Wahaha and Jinmailang continued to carry out large-scale whole-box promotions, and low-priced purified water diverted a large number of mass consumers, which reflects that the competition in the packaged water industry has intensified in the stock game stage.

The performance of tea beverages is still very impressive, the company previously stated that it is difficult for unsweetened tea to further increase its market share. Under this premise, the profit margin can still reach a new high, indicating that the growth source of unsweetened tea has further shifted from simply seizing market share to the stage of "increasing customer unit price + expanding scenarios", with high growth quality.

In addition, it is worth noting that Nongfu has regarded Sam's Club as a new product incubator and a springboard for high-end development. Both "Cold Brew Longjing" and "Lily and Ophiopogon Soup" made their debut in Sam's Club, and the earlier 17.5°NFC also relied on Sam's Club to open up family consumption scenarios. This strategy bypasses the most difficult part of traditional beverage innovation - new products have to compete for shelf space with dozens of SKUs in mom-and-pop stores, resulting in an extremely low success rate, while the selection mechanism of Sam's Club itself is a strong endorsement for products. Whether this path can be continuously replicated is the key to judging Nongfu's "third growth curve", which is more important than deploying tens of thousands of additional freezers.

The following is a detailed interpretation of the financial report

Since Nongfu's performance is disclosed in four categories: packaged water, tea beverages, functional beverages and fruit juice, we will analyze them one by one in this order in the following part.

I. Overall Performance: Qualified Total Volume, Unbalanced Structure

In 1H26, the company achieved a total revenue of 29.72 billion yuan, a year-on-year increase of 16.0%, and a net profit of 8.89 billion yuan, a year-on-year increase of 16.6%. The trend shows a significant slowdown compared with the previous quarter, but the 16% growth rate is still good in the beverage industry.

The real change lies in the structure: Nongfu has completed the transformation from a "water-selling company" to a "tea-selling company" in this period. At the profit end, the final net profit margin was 29.9%, basically the same as the same period of last year.

II. Packaged Water Business: Sudden Slowdown with Declining Profitability

In 1H26, the revenue of packaged water was 9.64 billion yuan, with a year-on-year increase of only 2.1%. The profit margin was 33.9%, down 1.7pct year on year; the operating profit was 3.26 billion yuan, down 2.7% year on year, which is the only business among the four categories with declining profit amount.

Dolphin Research believes there are two reasons:

a: Weakened demand under high base: In the second half of last year, Nongfu carried out the "10,000-box display" activity, pushing the revenue to a year-on-year increase of 25%, which was unsustainable in terms of intensity. Coupled with the overall weakening of packaged water demand in the second quarter of this year, Nongfu's packaged water business was greatly affected.

b: Skyrocketing raw material costs: PET bottle flakes rose from about 6,300 yuan/ton in January to about 9,000 yuan/ton in mid-April, an increase of over 40% in three months. Packaged water is the category with the lowest unit price per bottle and the highest proportion of PET cost among the four categories, which also weakened the profitability of the packaged water business.

III. Tea Beverages: The Most Impressive Growth Engine

In 1H26, the revenue of tea beverages reached 13.12 billion yuan, a year-on-year increase of 30.1%, and the operating profit reached 6.41 billion yuan, a year-on-year increase of 31.3%, making it the absolute main force of the company's profit.

The company has clearly stated before that "the market share of Dongfang Shuye in the unsweetened tea segment is already very high, and it is difficult to further increase the market share. The focus should be on expanding the category and converting users of sweetened tea" —— that is to say, the part of the 30% growth that comes from seizing the market share of peers is very small, which mainly comes from category expansion, specification expansion and scenario extension. In terms of actions, Nongfu Spring's white tea has added 335ml and 900ml specifications (one for portable use and one for family stockpiling), and the "Longjing New Tea" has been launched as a spring limited edition for the fifth consecutive year.

In addition, "Cold Brew Longjing" is the first low-temperature tea product of Dongfang Shuye, which was launched in Sam's Club on April 25, adopting low-temperature cold brew technology and full-process cold chain. After that, it ranked among the top of Sam's water drink bestseller list for several consecutive months, and firmly ranked first in the unsweetened drink bestseller list. Considering the "Lily and Ophiopogon Soup" which also made its debut in Sam's Club, and the 17.5°NFC that opened up family consumption scenarios relying on Sam's Club earlier, Nongfu's development path is very clear: first verify the product strength and high pricing in membership stores, and then decide to deploy the products to all channels.

IV. Functional Beverages & Fruit Juice: One Exchanges Profit for New Products, the Other Improves Efficiency

Although these two businesses have insufficient first-mover advantages and relatively less resource input, they have developed in completely different directions in this period.

The revenue of functional beverages was 3.35 billion yuan, a year-on-year increase of 15.6%, but the operating profit only increased by 9.7%, the profit growth rate is significantly slower than the revenue growth rate.

The reason is very clear: the company has launched a brand new "Nongfu Spring" electrolyte drink series (lemon and grapefruit flavors, 550ml and 950ml specifications, focusing on "low sugar and light burden"), and combined with the 2026 World Cup to put advertisements on authoritative media such as CCTV —— It is worth noting that the main brand "Nongfu Spring" is used this time instead of "Power Station", indicating that the company regards it as a strategic investment.

The revenue of fruit juice was 2.92 billion yuan, a year-on-year increase of 14.0%, and the revenue growth rate slowed down significantly; but the profit increased by 31% year on year —— the profit growth rate is more than twice the revenue growth rate, indicating that the fruit juice business has shifted from "seeking growth through channel expansion" to "seeking profit through structural optimization" (17.5° and NFC expand family-sized specifications, and Water-Soluble C100 consolidates the vitamin C product positioning).

V. Increased Marketing Investment with Continuous Improvement of Profitability

In the first half of the year, Nongfu's gross profit margin increased by 0.6pct year on year to 60.9%, reaching the highest level in history.

As the company previously said, PET is purchased through the combination of "inventory reserve + price locking contract + spot procurement". The impact in the first half of the year is limited due to the existing inventory and locked price, and the impact will be greater in the second half of the year. In other words, the 60.9% gross profit margin is supported by the low-cost inventory in the first half of the year, and the real impact will fall on the second half of the year.