Goldman Sachs: Eastroc Beverage’s third-quarter revenue nearly stalls as cost controls support core operating profit growth

How much did revenue slow?

In the third quarter of 2026, Eastroc Beverage reported revenue of 6.15 billion yuan, up 0.8% year on year, and net profit of 1.28 billion yuan, down 7.8% year on year. The results fell short of Goldman Sachs’ and market expectations.
Recurring net profit was 1.25 billion yuan, down 1.3% year on year. The difference from the decline in net profit mainly reflected a high base of fair-value gains in the same period of 2025.

Revenue from the core energy drink fell 9% year on year. Goldman Sachs believes possible reasons include channel destocking, a category slowdown due to weak weather conditions and construction activity, and the company’s reallocation of resources for its “1+6” strategy.
Bushuila sales were flat year on year, affected by unfavorable weather and weak mobility. Other non-tea beverages grew 17% year on year, slowing from 28% in the second quarter.
Tea drinks remained the main growth engine: third-quarter sales rose 145% year on year to 580 million yuan, accounting for more than 9% of total sales. Fruit tea and sugar-free tea were available at approximately 3 million and 2 million sales outlets, respectively.

Third-quarter core operating profit rose 6% year on year, and the core operating margin increased by 1.4 percentage points to 27.5%. Lower selling expenses and a slight improvement in gross margin together offset the impact of higher administrative expenses.
Gross margin was 45.7%, up 0.5 percentage points year on year but below Goldman Sachs’ expectations. The company locked in PET procurement costs at approximately 6000 yuan per tonne through the end of 2026; weaker cost dilution from slower core product sales may have offset some of the benefits.
Following advance spending on marketing and freezers in the first half and the second quarter, third-quarter selling expenses fell 11% year on year. The selling expense ratio declined to 13.4%，down 1.8 percentage points year on year and 1.2 percentage points below Goldman Sachs’ forecast.
Net margin fell 1.9 percentage points year on year and was also weighed down by higher foreign-exchange losses, lower fair-value gains and a higher effective tax rate.

Third-quarter cash received from sales rose 2% year on year to 6.9 billion yuan, but operating cash flow fell 25% to 1.05 billion yuan. As of the end of the third quarter, customer advances and contract liabilities rose 43% year on year to 5.1 billion yuan.
Goldman Sachs expects the company to prioritize maintaining healthy channel inventory, adjusting Bushuila packaging and developing products in the fourth quarter, rather than pursuing shipment growth. Improving weather drove a recovery in energy drink retail sell-through in early October, but replacing old packaging in the channel is expected to increase fourth-quarter channel and logistics expenses.
Goldman Sachs maintained its buy rating and set a 12-month price target of 143.3 yuan, based on a 21 times expected price-to-earnings ratio for 2027, discounted to mid-2027.