Core Viewpoint - The company reported a decline in revenue and profit for the first half of 2025, attributed to intensified competition and proactive inventory reduction measures [1] Financial Performance - The company achieved a main revenue of 9.151 billion yuan in H1 2025, a year-on-year decrease of 9.36% [1] - The net profit attributable to shareholders was 1 billion yuan, down 46.66% year-on-year [1] - The gross profit margin was 61.58%, a decrease of 6.3 percentage points year-on-year [1] - The net profit margin was 10.93%, down 7.64 percentage points year-on-year [1] Revenue Breakdown - Revenue from ultra-high-end, high-end, ordinary, and adult milk powder was 6.19 billion, 1.69 billion, 330 million, and 290 million yuan respectively, with year-on-year changes of -13%, -14%, +3%, and -4% [1] - Online sales performed better than offline, with offline revenue at 6.58 billion yuan (down 15%) and online revenue at 2.57 billion yuan (up 10%) [1] Cost and Expenses - Selling expense ratio was 34.69%, a slight decrease of 0.33 percentage points year-on-year [1] - Management expense ratio increased to 8.46%, up 1.14 percentage points year-on-year due to reduced economies of scale and increased employee compensation [1] - Other income and gains decreased, primarily due to reduced government subsidies and interest income [1] Market Position and Strategy - The company faced significant operational pressure due to intensified market competition and slow approval of new ultra-high-end products [1] - The market share declined by over 1 percentage point to 18.2% in June 2025 [1] - The company is actively adjusting its operations, with inventory levels reaching healthy targets and plans to launch three customized products in the second half of the year [1] Future Outlook - The company aims to improve its operational performance through product launches and inventory adjustments, with expectations for revenue growth [1] - The target price for 2026 is set at 5.1 HKD, with a recommendation to monitor the performance of new products [2]

Investment Rating - The report maintains a "Recommended" rating for China Feihe (06186.HK) with a target price of HKD 5.1 [1][4]. Core Views - The company reported a 9.36% year-on-year decline in revenue for H1 2025, totaling CNY 9.151 billion, and a 46.66% drop in net profit to CNY 1 billion. The interim dividend declared is HKD 0.1209 per share, amounting to CNY 1 billion [1][4]. - The company is facing significant operational pressure due to intensified competition and proactive inventory reduction, which has led to a decrease in market share [4]. - The gross margin for H1 2025 was 61.58%, down 6.3 percentage points year-on-year, primarily due to changes in sales structure and losses from raw milk powder [4]. - The company is implementing various measures to adjust operations, including inventory management and the introduction of new customized products, aiming for a recovery in performance [4]. Financial Summary - **Revenue Forecasts**: - 2024A: CNY 20.749 billion - 2025E: CNY 18.792 billion - 2026E: CNY 19.835 billion - 2027E: CNY 20.469 billion - Year-on-year growth rates: 5.6%, -9.4%, 5.5%, 3.2% [1][10]. - **Net Profit Forecasts**: - 2024A: CNY 3.570 billion - 2025E: CNY 2.190 billion - 2026E: CNY 3.001 billion - 2027E: CNY 3.384 billion - Year-on-year growth rates: 5.3%, -38.7%, 37.1%, 12.8% [1][10]. - **Earnings Per Share (EPS)**: - 2024: CNY 0.39 - 2025: CNY 0.24 - 2026: CNY 0.33 - 2027: CNY 0.37 [1][10]. - **Valuation Ratios**: - Price-to-Earnings (P/E) ratios for 2025E: 17 - Price-to-Book (P/B) ratios for 2025E: 1.4 [1][10]. Market Performance - The current share price is HKD 4.39, with a market capitalization of HKD 39.8 billion [2]. - The stock has experienced a 12-month high of HKD 6.80 and a low of HKD 3.34 [2]. Strategic Adjustments - The company is focusing on health-oriented strategies and actively promoting reforms to address operational challenges, including inventory adjustments and the launch of new products [4]. - The company aims to improve channel profitability and market presence through these strategic initiatives [4].