Investment Rating - The report maintains an investment rating of "Outperform the Market - A" [5] Core Insights - The application of Human Milk Oligosaccharides (HMOs) is expected to accelerate, driven by their recognized nutritional benefits and expanding regulatory approvals [3] - The infant formula market is experiencing increased concentration, with the top 10 companies' market share rising from 68% in 2017 to 83% in Q3 2025, indicating a shift towards premium product offerings that include HMOs [2] - The potential market space for HMOs in the Chinese infant formula sector is estimated to be between 5.86 billion to 11.72 billion yuan, based on projected production and pricing [2] Summary by Sections HMO Nutritional Benefits - HMOs are the third largest nutritional component in breast milk, consisting of various structures that contribute positively to infant health, including growth, gut health, immunity, and cognitive development [1] Market Dynamics - The implementation of stringent new standards for infant formula has led to significant market consolidation and a focus on nutritional enhancement, with major brands introducing HMO-enriched products [2] - The expected production of infant formula in China for 2024 is approximately 1.563 million tons, with a significant portion anticipated to be high-end products requiring HMO addition [2] Regulatory Developments - Recent approvals by health authorities to expand the use of HMOs in various food products indicate a growing recognition of their value, which could lead to exponential market growth if HMOs are utilized beyond infant formula [3] - Companies like Ganbaiyou and Qiu Tian Man Man are already responding to these regulatory changes by launching HMO-added products [3] Company Focus - Companies such as Langkun Technology, Baolingbao, and Jiabiyou are actively developing HMO production capabilities, with significant annual production capacities planned [10]

Core Points - The National Health Commission and the State Administration for Market Regulation have released 50 national food safety standards, including updated regulations for prepackaged food labeling [1][2] - The new standards prohibit the use of terms like "no additives" and "zero additives" to emphasize food ingredients, aiming to guide the food industry towards innovation and nutritional upgrades [1][2] - The updated labeling standards include a two-year transition period for compliance [1] Group 1: Labeling Standards - The new prepackaged food labeling standards optimize the display requirements for consumer information [1][2] - The prohibition of "zero additives" is based on the premise that approved food additives are safe when used correctly, and it aims to eliminate misleading marketing practices [2] - The standards enhance quantitative labeling requirements to address industry irregularities and promote correct consumer understanding [2][3] Group 2: Digital Labels - The introduction of digital labels allows for more accessible information regarding ingredients, storage conditions, and nutritional content [3] - Consumers can scan QR codes to access food safety and nutrition information through audio and video formats, improving the reading experience [3] - The expiration date labeling has been standardized to a year-month-day format for easier consumer comprehension [3] Group 3: Nutritional Labeling - The new nutritional labeling standards require mandatory labeling of saturated fats and sugars, emphasizing the need to reduce salt, oil, and sugar intake [4][5] - The standards allow companies to use familiar terms and graphics to explain nutritional information, making it easier for consumers to understand [5] - Specific standards for special medical use infant formula have been updated to include new product categories and nutritional requirements [5]