On Wednesday, July 24th, Nongfu Spring Company’s stock price hit a new low, dropping by 6% at one point during the trading session, marking the lowest level since September 2020. Due to concerns about the company’s sales prospects, several securities firms have downgraded its stock rating and significantly lowered its target price.
According to Bloomberg, at least five securities firms have lowered Nongfu Spring’s target price in the past week, including Goldman Sachs and Jefferies Hong Kong Limited.
Jefferies has revised down Nongfu Spring’s net profit forecast for 2024 to 2026 by 11%, 11%, and 10% respectively, reducing the stock target price from 43.9 Hong Kong dollars to 37.4 Hong Kong dollars while maintaining a “hold” rating.
Furthermore, Daiwa Capital Markets Hong Kong Limited has downgraded the company’s rating from outperforming the market to “hold,” cutting the target price from 48 Hong Kong dollars to 36 Hong Kong dollars. They have also lowered the company’s earnings per share forecast for 2024 to 2026 by 13% to 15%, mainly due to reduced revenue and gross profit forecasts for packaged drinking water.
Nongfu Spring’s stock price has fallen by nearly 36% since its peak in May.
The company is not only facing the ongoing weakness in domestic demand in China and tightened consumer spending but also has to navigate through the domestic bottled water price war.
During this year’s 6•18 shopping festival, Nongfu Spring’s official flagship store offered a 12-bottle pack of Green Bottle Purified Water for 9.9 Chinese yuan per package, averaging at 0.825 Chinese yuan per bottle. The selling price is lower than other bottled water brands such as Nongfu Spring, Nestle Pure Life, and Wahaha, which are priced in the 2 yuan range.
According to the Bloomberg Billionaires Index, as of 2024, Nongfu Spring Chairman Zhong Shanshan has lost $13 billion in wealth, with his fortune standing at $54.8 billion as of this week, slightly higher than Pinduoduo founder Huang Zheng, whose wealth amounts to $47.3 billion.