Platform strategy and GPM expansion = resilient earnings; reiterate Buy

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Eastroc (H/A)

Platform strategy and GPM expansion =

resilient earnings; reiterate Buy

PO: 162.00 HKD | Price: 125.00 HKD

Maintain estimates but lower PO; reiterate Buy

03 August 2026

2Q revenue/NPAT rose to 11%/15%, bringing 1H growth to 16%/21%, on track to reach

its full-year target of 15% revenue growth. The company announced a three-year

shareholder-return program with a payout ratio of no less than 80% (assuming no major

capex needs). We largely maintain estimates but lower PO by 7% to HKD162/RMB168

(with a lower target multiple of 20x vs 22x previously given sector de-rating). Despite

competition and inflation headwinds, we reiterate Buy: 1) Super Drink (the core product)

growth moderated to 1% in 2Q from 13% in 1Q amid competition and rainy weather.

However, long-term growth outlook could be cushioned by Eastroc’s geographic and

category expansion underpinned by quality and unique products at competitive prices,

and strong channel capability; 2) we expect resilient margin to enhance earnings

visibility in 2026, thanks to sourcing cost lock-ins for PET and sugar, and efficiency

improvement; and 3) undemanding valuation at 15x 2026E P/E for 10% EPS CAGR with

5%+ dividend yield.

Equity

2Q26 results highlights

Sales by product: energy drinks/electrolyte water/other drinks sales +1.4%/+11.2%/

+97.3% YoY to account for 69%/16%/15% of total sales. GPM was +399bp to 49.7%,

driven by favorable cost (early lock-in), production efficiency improvement, and price

hikes (for water), which more than offset the product mix shift impact. SG&A/sales was

+318bp YoY on higher channel development and advertising expenses. As a result, 2Q26

OPM was +75bp to 28.0%, with OP +14.4%. Effective tax rate was +50bp to 21.6%.

Thus, NPAT was +15.5% YoY in 2Q26, with NPM -88bp to 24.6%.

Still multiple drivers ahead

1) Energy drinks: with new capacities in place, Eastroc’s national expansion will continue.

Commencement of new capacities can also optimize logistic costs; 2) non-energy drinks:

electrolyte water, fruit tea, and coffee will be driven by rising POS penetration (4.5mn+

POS in energy drinks, vs. electrolyte water’s 3.0mn and fruit tea’s 2.0mn POS), expansion

…