Summary of Conference Call Records Industry Overview: Health Supplements - The health supplement industry is experiencing structural growth, with a compound annual growth rate (CAGR) of 5% from 2017 to 2022, indicating mid-to-low growth but emerging opportunities under new consumption trends [1][2] - The market size for health supplements is approximately over 1 trillion yuan, with significant potential for growth as new consumption companies enter the sector [2] Key Companies and Their Performance Xianle Health - Xianle Health has successfully transformed from an OEM to a new consumption company, achieving profitability and valuation improvement since 2022 by divesting loss-making businesses [1][5][36] Yanjichu - Yanjichu, a leading OEM in bird's nest products, has a competitive edge with 2,000 clients and 70 patents. If it can penetrate the consumer market, its valuation could rise significantly from below 15 times to over 20 times [1][11][12] Yanjinpuzi - Yanjinpuzi has shown strong market performance since 2021, benefiting from bulk retail channels. Despite short-term profit margin declines, long-term growth potential remains promising [1][3][4] HH International Holdings - HH International focuses on adult health products and is benefiting from online transformation. The company is upgrading its brand matrix and reducing debt to optimize interest expenses [3][29] Tongchen Beijian - Tongchen Beijian has become a market leader in health supplements since 2019, with a stable market share of nearly 10%. The company is focusing on new product launches and online sales channels [26][35] Baihe Health - Baihe Health is expanding into new channels, particularly membership supermarkets, which are expected to double its scale this year [37] Market Trends and Dynamics - The global health supplement market is growing steadily, with China's growth rate surpassing the global average, driven by aging populations and new consumption trends [3][20][22] - The online transformation of health brands is accelerating, with e-commerce channels gaining a significant share of the market [25][27] - The health supplement industry is characterized by high gross margins, primarily due to strong brand attributes and a fragmented supply chain [14][15][16] Investment Opportunities and Risks - The health supplement sector presents substantial investment opportunities, akin to blue-chip stocks from a few years ago, with new brands needing to embrace new consumption paths [9][10] - The industry is witnessing a shift towards light asset models, with increasing product homogeneity and a fragmented brand landscape [28] - The aging population in China is a fundamental driver for the health supplement market, as older consumers have a consistent demand for health products [23][24] Conclusion - The health supplement industry is poised for growth, with several companies demonstrating strong performance and potential for further expansion. Investors are encouraged to consider the emerging opportunities within this sector, particularly as new consumption trends reshape the market landscape [1][9][24]

Group 1: Industry Overview - The consumption recovery in China is showing a clear "front low and back high" trend, with retail sales of consumer goods increasing by 5.9% year-on-year in March 2025, up 1.9 percentage points from January-February [1] - The recovery in the consumption sector is expected to be driven by two key factors: focusing on industries with growth potential and those supported by policy [1] - The infant formula market is experiencing a recovery due to improved supply-demand dynamics and the release of high-end market benefits, with a significant increase in the market share of premium products [3][4] Group 2: Company Performance - H&H International Holdings Limited (健合集团) reported a revenue increase of 10.4% year-on-year, reaching 3.17 billion RMB in Q1 2025, with the Chinese market contributing 68.8% of total revenue [2] - The BNC (Baby and Child Nutrition) segment showed remarkable growth, with revenue reaching 1.14 billion RMB, a year-on-year increase of 25.3%, driven by a 46.9% growth in infant formula sales in mainland China [2][3] - The ANC (Adult Nutrition and Care) segment also performed well, with a revenue increase of 3.2% year-on-year, and the PNC (Pet Nutrition and Care) segment grew by 8.2%, with a strong 13.7% growth in the Chinese market [7] Group 3: Market Trends - The proportion of high-end and ultra-high-end infant formula is increasing, with a 5.3 percentage point rise in the purchase of formula priced at 300-399 RMB and above [4] - The health supplement market in China is expected to grow significantly, with the market size projected to exceed 430 billion RMB by 2025, maintaining a compound annual growth rate (CAGR) of over 10% [7] - The silver economy is gaining attention, with a large retired population increasingly demanding nutritional supplements and health products [10] Group 4: Strategic Insights - H&H Group's long-term strategy has allowed it to diversify from a pure infant formula company to a comprehensive health and nutrition provider, with health products now accounting for 68% of sales [15] - The company has successfully established a three-pillar business structure comprising BNC, ANC, and PNC, allowing for shared resources and collaborative growth [15][16] - Innovation is identified as a key driver for future growth, with the company focusing on high-end product launches and expanding its market presence internationally [20][21]

Core Insights - The nutritional supplement market is undergoing significant transformation due to rapid economic development and diverse consumer demands [1] - In 2024, the company achieved a total revenue of 13.052 billion yuan, demonstrating the effectiveness of its long-term strategy [1] - The company is actively addressing challenges posed by the transition to new national standards, paving the way for sustainable development [1] Revenue Growth - The nutritional supplement category generated revenue of 8.831 billion yuan, marking a historical high and increasing its share of total revenue from 9% a decade ago to 68% [2] - The adult nutrition care (ANC) segment achieved a year-on-year growth of 8.8%, while the pet nutrition care (PNC) segment grew by 4.4%, both reaching record revenue levels [3] Market Positioning - The company has established a solid business structure across three main segments: adult nutrition care (ANC), infant nutrition care (BNC), and pet nutrition care (PNC) [3] - The Swisse, 合生元, Zesty Paws, and Solid Gold brands are recognized leaders in their respective markets, achieving strong performance both domestically and globally [3] Strategic Developments - The 合生元 brand has strengthened its position in the ultra-premium infant formula market, with market share increasing from 12.4% to 13.3% [4] - The company is actively working on transitioning to new national standard products, expected to be completed by mid-2025, which will support future market expansion [4]

Core Viewpoint - Swisse faced significant backlash due to an inappropriate advertisement, leading to a public apology from the brand for failing to supervise third-party collaborators adequately [2][4]. Group 1: Incident Overview - On April 17, Swisse issued an apology letter addressing the negative impact caused by inappropriate remarks in an advertisement that included phrases like "that Naranaqi's same style" and "backfall to Yushi" [2]. - The controversial advertisement was posted on Xiaohongshu and quickly garnered over 100 million views, sparking intense discussions among fans and netizens [4]. - Following the backlash, Swisse's official account stated that they would terminate all business cooperation with the third-party agency responsible for the advertisement [4]. Group 2: Brand Background - Swisse is a global nutrition brand founded in 1969 by Kevin Ring, and its parent company, Health and Happiness Group, has faced multiple issues in the past [2][5]. - The brand has been involved in 395 complaints on the Black Cat Complaint platform, indicating ongoing consumer dissatisfaction [2]. - Swisse's products have been criticized for exaggerated claims, particularly regarding their milk thistle choline tablets [2][6]. Group 3: Market Position and Strategy - The brand's marketing strategy involves using celebrity endorsements to enhance brand recognition and consumer trust, but the recent incident has raised questions about the effectiveness of this approach [3]. - Swisse entered the Chinese market in 2016 and has expanded its presence across various e-commerce platforms and physical retail locations [6]. - Despite the expansion, the brand has faced numerous complaints related to product quality and misleading advertising [6][7].

Investment Rating - The report assigns a "Buy" rating for H&H International Holdings for the first time [1]. Core Views - H&H International Holdings has established a diversified and international business strategy, focusing on three main segments: Baby Nutrition Care (BNC), Adult Nutrition Care (ANC), and Pet Nutrition Care (PNC) [8][19]. - The company is expected to recover from previous challenges, with a forecasted return to profitability and revenue growth driven by its core brands and market positioning [29][39]. - The health supplement industry in China is experiencing rapid growth, with significant potential for further expansion, particularly in online sales channels [41][45]. Summary by Sections 1. Business Overview - H&H International Holdings was founded in 1999 and has developed a strong presence in the probiotics market, maintaining a leading position in China [8][14]. - The company has expanded its product offerings through acquisitions, including the Australian health brand Swisse and pet nutrition brands Solid Gold and Zesty Paws [8][19]. - As of 2024, the revenue distribution among its three main business segments is 34% for BNC, 51% for ANC, and 15% for PNC [19]. 2. Health Supplement Industry - The Chinese health supplement market has grown from 70.14 billion yuan in 2010 to 224.04 billion yuan in 2023, with a CAGR of 9.35%, outpacing the global average [41][44]. - The shift towards online sales has been significant, with e-commerce accounting for 58% of retail sales in the health supplement sector by 2024 [61][62]. - The aging population and increasing health awareness among consumers are expected to drive continued growth in the health supplement market [45][49]. 3. Company Resilience and Growth Potential - H&H's revenue is projected to grow from 14.08 billion yuan in 2025 to 16.16 billion yuan by 2027, with a compound annual growth rate (CAGR) of approximately 7.2% [1]. - The company anticipates a significant recovery in net profit, with estimates of 520.67 million yuan in 2025, up from a loss in 2024 [1]. - The brand Swisse is expected to maintain a strong market position, benefiting from its online sales strategy and expanding product lines targeting younger consumers [64][70].

内容概况：近年来，随着健康意识的提升和科学育儿观念的普及，消费者对于婴幼儿营养品的需求发生 了显著变化。现代家庭更加注重产品的安全性、科学性和功能性，愿意为高品质的产品和服务支付更高 的价格。消费者对婴幼儿营养品的需求从简单的营养补充向多元化、高品质转变，对产品的安全性、营 养价值和功能性提出了更高要求。数据显示，中国婴幼儿营养品行业市场规模从2015年的867亿元增长 至2023年的1567.8亿元，年复合增长率为7.69%，2024年中国婴幼儿营养品行业市场规模约为1688.3亿 元。未来，随着消费者需求的多样化和个性化，婴幼儿营养品行业将更加注重产品的科技创新和研发能 力，提升产品的营养价值和安全性。 相关上市企业：中国飞鹤（06186）、贝因美（002570）、伊利股份（600887）、英氏控股 （874431）、H&H国际控股（01112）、宏辉果蔬（603336）、冠农股份（600251）、隆平高科 （000998）、北大荒（600598）、荃银高科（300087）、康欣新材（600076）等。 相关企业：惠氏营养品（中国）有限公司、雀巢（中国）有限公司、达能（中国）食品饮料有限公司、 美赞臣营养 ...

Investment Rating - The report maintains an "Increase" rating for the food and beverage industry, indicating a positive outlook for the sector [1][4]. Core Insights - The report highlights a strong expectation for domestic demand, suggesting that the food and beverage sector is showing resilience in its fundamentals [1][2]. - The white liquor segment is expected to benefit from improved performance and valuation recovery, drawing parallels to the 2018 US-China trade tensions, where the sector demonstrated strong anti-drawdown characteristics [2]. - The beverage sector, particularly Yanjing Beer, is projected to continue its high growth momentum, with significant increases in revenue and profit expected in 2024 and Q1 2025 [3]. Summary by Sections White Liquor - The white liquor sector is anticipated to achieve both performance and valuation recovery due to strong domestic demand and improved supply dynamics. Key players like Kweichow Moutai and Gujing Gongjiu are expected to report solid earnings growth, with Moutai's 2024 total revenue and net profit projected to increase by 15.7% and 15.4% respectively [2]. - Gujing Gongjiu's 2024 revenue and net profit are expected to grow by 16.4% and 20.2% respectively, indicating a robust outlook for leading brands in the sector [2]. Beer and Beverage - Yanjing Beer reported a total revenue of 14.667 billion yuan for 2024, reflecting a year-on-year increase of 3.2%, with net profit soaring by 63.74% to 1.056 billion yuan [3]. - The U8 product line from Yanjing Beer is expected to maintain a growth rate exceeding 30% in 2025, driven by internal reforms and product upgrades [3]. - The beverage sector is also seeing significant developments, with the coconut water brand IF planning to list on the Hong Kong Stock Exchange, indicating strong market positioning and growth potential [3][7]. Consumer Goods - The report emphasizes the resilience of consumer goods, with companies like Three Squirrels and H&H International showing promising growth trajectories. H&H's revenue for Q1 2025 is expected to increase by 10.4%, driven by strong performance in its infant formula segment [7]. - Three Squirrels is actively participating in channel transformation through strategic acquisitions, which may enhance its market presence and growth potential [7].

Core Insights - H&H International Holdings reported a 10.4% year-on-year increase in total revenue to 3.17 billion yuan for the three months ending March 31, 2025 [1] Revenue Breakdown - The infant nutrition and care segment grew by 25.3%, driven by a 46.9% increase in the mainland infant formula milk powder business [1] - The adult nutrition and care segment saw a 3.2% growth on a comparable basis [1] - The pet nutrition and care segment experienced a 7.3% increase [1] - Nutritional supplements accounted for 65.1% of total revenue [1] Market Performance - Revenue from the mainland market grew by 18.1%, representing 68.8% of total revenue [1] - The infant formula milk powder business grew by 44.3% [1] - Swisse ranked first in the mainland market for vitamins, herbs, and mineral supplements [1] - The pet nutrition and care segment grew by 13.7%, with Solid Gold maintaining a leading position in the online cat dry food category [1] - The Australia and New Zealand market declined by 13.5%, while the domestic market grew by 4.5% [1] - North American revenue increased by 1.7% [1] - Other regions saw a revenue growth of 20.3% [1] Financial Position - The company reported a cash balance of 1.4 billion yuan, aiming to maintain a robust cash conversion level [1]

Financial Performance - Total revenue for the year ended December 31, 2024, was RMB 13,051.7 million, a decrease of 6.3% compared to RMB 13,926.5 million in 2023[7] - Adjusted comparable EBITDA for 2024 was RMB 1,952.3 million, down 11.9% from RMB 2,215.5 million in 2023, with an adjusted EBITDA margin of 15.0%, a decline of 0.9 percentage points[7] - The company reported a net loss of RMB 53.7 million for 2024, a significant decline of 109.2% compared to a net profit of RMB 581.8 million in 2023[7] - Gross profit for the year ended December 31, 2024, was RMB 7,915.5 million, a decrease of 4.6% from the previous year, while the gross margin slightly increased from 59.6% to 60.6%[54] - The total EBITDA for the year ended December 31, 2024, was RMB 1,405.8 million, down 29.2% from RMB 1,984.9 million in the previous year[63] - The adjusted comparable net profit for the year ended December 31, 2024, was RMB 541.2 million, a decrease from RMB 778.3 million in 2023[72] Revenue Breakdown - Revenue from nutritional supplements accounted for 67.7% of total revenue, with double-digit growth in vitamins, herbal, and mineral supplements, as well as pet supplements[17] - The infant formula segment faced challenges but continued to expand market share, contributing to the overall revenue despite a contraction in the ultra-premium segment[17] - Revenue from North America represented 12.4% of total revenue, supported by successful distribution expansion in the pet nutrition segment[17] - Revenue from the adult nutrition and care products segment in mainland China grew by 6.9% year-on-year, contributing 64.7% to the total revenue of this segment[44] - The revenue from the infant nutrition and care products segment was RMB 4,003.9 million, down 27.3% year-on-year, primarily due to a decline in infant formula sales[46] - Revenue from the pet nutrition and care products segment in mainland China decreased by 14.8% to RMB 345.8 million, attributed to product portfolio upgrades and channel optimization[47] Market Performance - The adult nutrition and care products business recorded high single-digit growth, driven by continuous product innovation and demand in core markets[19] - The infant nutrition and care products segment faced challenges, with the ultra-premium infant formula market contracting by 17.7% in 2024, although Biostime's market share increased from 12.4% to 13.3%[26] - Swisse maintained its position as the number one brand in the online vitamin, herbal, and mineral supplement market in mainland China for 2024[22] - The company achieved significant growth in various Asian markets, including Hong Kong, Thailand, and Malaysia, with Swisse being awarded the Trusted Brand (Gold) in Singapore[25] - Swisse's gummy series holds a 17.2% market share in Australia, ranking second in the vitamin, herbal, and mineral supplement market[22] Dividends and Financial Strategy - The company announced a total dividend of HKD 0.35 per share for the year, reflecting a cautious approach to leverage reduction[18] - The board recommends a final dividend of HKD 0.05 per share, leading to a total annual dividend of HKD 0.35 per share, which represents approximately 37.6% of the adjusted comparable net profit for the year ended December 31, 2024[82] - The company aims to further reduce leverage ratios and strengthen financial stability in the coming years[36] Corporate Governance - The company emphasizes high standards of corporate governance to enhance shareholder value and accountability[102] - The company has complied with all provisions of the corporate governance code as of December 31, 2024[102] - The board consists of nine members, including two executive directors, four non-executive directors, and three independent non-executive directors[110] - The board has established four committees: Nomination Committee, Audit Committee, Remuneration Committee, and Environmental, Social and Governance Committee[110] - The company has established a code of conduct for directors regarding securities trading, ensuring compliance with regulatory standards[104] Risk Management - The company has established a robust risk management framework based on the COSO risk management framework and ISO 31000, which defines roles, responsibilities, and processes for risk management[177] - The board of directors is responsible for overseeing the risk management and internal control systems, ensuring they are effective in managing risks to achieve business objectives[175] - The audit committee assists the board in supervising the design, implementation, and monitoring of the risk management and internal control systems[176] Management Team - The management team has extensive experience, with the chairman having over 25 years in the biotechnology industry[83] - The CFO has over 25 years of financial management experience, previously serving as the global VP and CFO for Henkel AG & Co. KGaA[84] - Dr. Zhang, a non-executive director, has over 20 years of experience in the biotechnology industry, previously serving as CTO and GM of various subsidiaries[86] Shareholder Engagement - The company has established a shareholder communication policy to facilitate effective communication with shareholders and encourage active engagement[195] - The company participated in 16 investment seminars and non-deal roadshows, conducting approximately 500 individual and group meetings with analysts, institutional investors, and fund managers during the year ending December 31, 2024[189]

Investment Rating - The investment rating for the company is "Buy" with a target price of 11.28 HKD [7][8]. Core Views - The company reported a revenue of 13.05 billion RMB in 2024, a decrease of 6.3% year-on-year, and a net profit of -0.05 billion RMB, down from 0.58 billion RMB in the same period last year. The adjusted comparable net profit was 0.54 billion RMB, a decline of 30.5% year-on-year. The negative net profit in 2024 was primarily due to non-cash foreign exchange losses, one-time marketing and promotional expenses, and restructuring costs related to channel optimization [1][3]. - Looking ahead to 2025, the company is expected to maintain good growth momentum in the nutritional supplement demand, with the probiotic business likely to continue its growth trend. The infant formula business is anticipated to improve year-on-year due to ongoing fertility policy implementations [1][4]. Summary by Sections Business Performance - In 2024, the three main business segments—Adult Nutrition (ANC), Infant Nutrition (BNC), and Pet Nutrition (PNC)—achieved revenues of 6.70 billion, 4.39 billion, and 1.97 billion RMB, respectively, with year-on-year changes of +8.8%, -25.8%, and +4.4%. The ANC segment showed strong growth driven by high demand for beauty, multivitamins, and liver detox products, while the BNC segment faced challenges due to a lengthy transition to new national standards [2][3]. Financial Metrics - The company's gross margin increased by 1.1 percentage points to 60.6% in 2024, attributed to reduced inventory provisions and product mix optimization. The adjusted comparable EBITDA margin decreased by 0.9 percentage points to 15.0% [3][4]. - The forecast for 2025-2026 has been adjusted downward due to the pressure on the infant formula business, with expected EPS of 0.81 and 0.97 RMB, representing a decrease of 41% and 39% from previous estimates [4][6]. Valuation - The target price of 11.28 HKD is based on a 13x PE ratio for 2025, reflecting an increase from the previous target of 10.22 HKD. This adjustment is in line with the recent upward trend in PE valuations for related companies due to new fertility policies being implemented [4][8].