CITIC SEC has released a research report stating that the recent sharp rise in the price of PET, a key raw material for beverage companies, has drawn market attention, leading to significant stock price corrections for beverage firms. Through a review of historical oil/PET price surges and cost sensitivity analysis, the bank believes the current cost pressures for beverage companies are overall manageable. If PET prices remain elevated, industry competition may ease, and companies could partially offset the negative impact of raw material costs by reducing expenses. The report suggests seizing opportunities to invest in leading companies following the sector's correction. The main points from CITIC SEC are as follows: PET prices are linked to oil and have risen substantially recently. PET is a major raw material for beverage producers, and its price trend is primarily tied to crude oil prices. Recent tensions have driven a sharp increase in oil prices, with Brent crude futures settling at $100.5 per barrel (as of March 12), up 47% compared to the 2025 average. The rise in oil prices has been transmitted to PET, with spot prices increasing to 7,910 yuan per ton (as of March 11), up 32% year-on-year versus the 2025 average. Historically, there is a lag between oil price increases and PET price hikes, and PET price increases are generally lower than those of crude oil. For example, during the 2022 geopolitical conflict, Brent crude futures and PET prices rose by 40% and 26%, respectively. Future PET and oil prices will largely depend on the conflict situation. Current Brent crude futures have not yet surpassed the 2022 peak of $128 per barrel; subsequent price trends will hinge on developments and potential supply disruptions. According to a March 10 report from the U.S. Energy Information Administration (EIA), Brent crude prices are expected to peak in the second quarter of 2026, averaging around $91 per barrel, with prices likely to decline in the third and fourth quarters as transit and production normalize. Cost sensitivity analysis indicates: 1) Gross margin: The bank estimates that a 10% increase in PET procurement prices reduces beverage companies' gross margins by 0.6 to 1.4 percentage points. 2) Net margin: A 10% rise in PET procurement prices is projected to lower net margins by 0.5 to 1 percentage point. In terms of the impact on absolute net profit, a 10% increase in PET procurement prices could reduce net profit by 3% to 11%. Different beverage companies have varying PET price-lock or inventory cycles; the above analysis refers to the effect of a 10% increase in their own procurement costs. Reflecting on 2022, significant raw material price increases led to moderated industry competition. During the 2022 PET price surge, beverage companies used price-locking strategies to mitigate the adverse effects of rising costs, ultimately experiencing a 1 to 4 percentage point decline in gross margins. The bank also observed that higher raw material prices eased competitive pressures, with most firms reducing sales expense ratios to partially offset the negative impact on net margins, resulting in net margin changes within 2 percentage points. The bank concludes that if PET prices remain high for an extended period, companies are likely to employ cost-cutting measures to partially counter the negative effect on net profit. Risk factors include raw material prices exceeding expectations, industry policy risks such as sugar taxes, and food safety concerns.