China Ready-To-Drink Sector: Diverging Performance but Nongfu Set To See Stronger Growth Than Tingyi

We revised our earnings forecasts for narrow-moat-rated Nongfu Spring and Tingyi after a fresh look at their growth outlook in the China ready-to-drink, or RTD, beverage market. We lifted our 2023-24 net income forecasts for Nongfu Spring by 9%-16% but lowered estimates for Tingyi by 6%-22%. Nongfu Spring has gained market share over peers including Tingyi in the RTD tea category, resulting in robust revenue growth in the second half of 2023. We expect Nongfu’s operating outperformance in this segment to continue in 2024. Tingyi, on the contrary, is set to face sales headwinds across the beverage and instant noodle categories.