$NONGFU SPRING(09633.HK) First take: After a series of PR incidents from family nationality issues to the backlash over Nongfu's Japanese-style design post-Spring Festival, the summer face-off with C'estbon in the purified water market, and even the twists and turns with the Hong Kong Consumer Council, the market has fully anticipated and judged Nongfu Spring's underwhelming performance in the first half of the year based on actual results.

Total revenue growth plummeted from 33% YoY in the second half of last year to just 8% YoY in the first half of this year, with profits also growing by a mere 8% YoY. The impact of the online backlash and the "1-yuan water war" on both revenue and profits in the water business is glaringly obvious.

The structural impact is particularly stark: While the RTD tea segment still grew by 60%, with half-year sales approaching 9 billion yuan, the main issue lies in the packaged water segment, which saw an unprecedented drop of -18%—worse than even during the pandemic! This has reduced the water business to nearly the same scale as the tea segment. Due to the summer water war, the profitability of packaged water also declined noticeably quarter-over-quarter.

Looking ahead, excluding the one-time impact of PR incidents like the online backlash, the key concern is the worsening industry competition—specifically, the trend of the "1-yuan water war." Dolphin Research, however, is notably optimistic about this issue: We believe this is more a reflection of Nongfu Spring's strategic initiative to provoke competition in its core business (packaged water) now that its second growth curve—RTD tea—is thriving. With C'estbon's IPO looming, Nongfu Spring timed its aggressive move perfectly. On one hand, it diverted public attention from the PR storm; on the other, as the market leader in bottled water, its offensive seems more like stirring the pot in a mature market. Because this was a calculated provocation, Nongfu is more likely to emerge unscathed: Market intelligence suggests the "1-yuan water war" may conclude after this year's National Day holiday. Throughout the process, Nongfu sacrificed profits to aggressively promote its green-bottled water. Given Nongfu's control in this battle, Dolphin Research believes that after consecutive valuation cuts over the first half of the year, the once-unattainable Nongfu Spring now presents an opportunity for ordinary investors to climb aboard.

Fortunately, judging by the upcoming trends, Colin Huang can probably breathe a sigh of relief—the title of richest person likely won’t land on him, leaving the pressure on Zhong Shanshan.