Core Viewpoint - H&H International Holdings (01112) reported a 5% year-on-year increase in total revenue for H1 2025, amounting to 7.019 billion yuan, with adjusted comparable EBITDA decreasing by 3% to 1.101 billion yuan, and adjusted comparable net profit increasing by 5% to 363 million yuan. The company is expected to see EPS of 0.79, 1.05, and 1.30 yuan for 2025-2027, with a "Buy" investment rating assigned by Huaxin Securities [1]. Revenue and Profitability - The company experienced a year-on-year revenue increase, with a notable improvement in gross margin. The gross margin for H1 2025 rose by 2 percentage points to 62.53%, driven by higher margins in adult and pet nutrition and care products, along with product mix optimization [1]. - The proportion of sales and distribution/administrative expenses relative to revenue increased by 3 percentage points and decreased by 0.4 percentage points to 42.33% and 5.68%, respectively, due to changes in the channel mix for adult nutrition and care products in mainland China and investments in new market expansion strategies [1]. - Adjusted comparable EBITDA margin and adjusted comparable net profit margin decreased by 1 percentage point and 0.02 percentage points to 15.68% and 5.17%, respectively, primarily due to high base effects from the previous year and increased selling expenses [1]. Business Segment Performance - The adult nutrition and care products segment saw a 5% year-on-year revenue increase to 3.439 billion yuan, largely attributed to the outstanding performance of Swisse's innovative anti-aging product line, which grew by 39% compared to the benchmark [2]. - Revenue from infant nutrition and care products increased by 3% year-on-year to 2.501 billion yuan, driven by effective e-commerce channel development and new mother education initiatives in specialty stores. The company successfully transitioned its products to meet new national standards, with the market share of its premium infant formula brand reaching a historical high of 15.9% [2]. - The pet nutrition and care products segment experienced a 10% year-on-year revenue increase to 1.079 billion yuan, with gross margin rising by 12 percentage points to 58.70%. This growth was supported by deepened partnerships in North America and the ongoing high-end upgrade of Solid Gold in mainland China, leading to significant improvements in profitability [2]. Regional and Channel Insights - Revenue from mainland China increased by 9% year-on-year to 4.936 billion yuan, driven by strong growth in adult nutrition and care products and rapid channel expansion. Cross-border e-commerce revenue grew by 18%, with Douyin channel revenue surging by 80%, becoming a key growth engine [3]. - Revenue from Australia and New Zealand decreased by 18% to 801 million yuan, primarily due to a decline in corporate purchasing business [3]. - North American revenue increased by 6% to 862 million yuan, benefiting from the popularity of premium pet nutrition products and a growing pet population, with major retailers like Amazon, Walmart, and PerSmart performing well [3]. - Other regions saw a 17% year-on-year revenue increase to 420 million yuan, with strong growth in the Asian expansion market [3].

Core Viewpoint - H&H International Holdings reported a total revenue of 7.019 billion yuan for H1 2025, reflecting a 5% year-on-year increase, with adjusted comparable EBITDA of 1.101 billion yuan, down 3% year-on-year, and adjusted comparable net profit of 363 million yuan, up 5% year-on-year. The company is expected to see EPS of 0.79, 1.05, and 1.30 yuan for 2025-2027, with a "Buy" investment rating assigned by Huaxin Securities [1]. Revenue and Profitability - The company achieved a gross margin increase of 2 percentage points to 62.53% in H1 2025, driven by improved margins in adult and pet nutrition and care products, along with product mix optimization [1]. - The proportion of sales and distribution/administrative expenses to revenue increased by 3 percentage points and decreased by 0.4 percentage points to 42.33% and 5.68%, respectively, due to changes in the channel mix for adult nutrition and care products in mainland China and investments in new market expansion strategies [1]. - Adjusted comparable EBITDA margin and adjusted comparable net profit margin decreased by 1 percentage point and 0.02 percentage points to 15.68% and 5.17%, respectively, primarily due to high base effects from the previous year and increased selling expenses [1]. Business Segment Performance - In H1 2025, revenue from adult nutrition and care products increased by 5% to 3.439 billion yuan, largely due to the outstanding performance of Swisse's innovative anti-aging product line, which saw a 39% growth compared to the benchmark [2]. - Revenue from infant nutrition and care products rose by 3% to 2.501 billion yuan, supported by effective e-commerce channel development and educational initiatives for new mothers in specialty stores, with the product successfully transitioning to new national standards [2]. - Revenue from pet nutrition and care products increased by 10% to 1.079 billion yuan, with gross margin rising by 12 percentage points to 58.70%, driven by deepened North American channel cooperation and the ongoing high-end upgrade of Solid Gold in mainland China [2]. Regional and Channel Insights - Revenue from mainland China in H1 2025 grew by 9% to 4.936 billion yuan, primarily due to strong growth in adult nutrition and care products and rapid channel expansion, with cross-border e-commerce revenue increasing by 18% and Douyin channel revenue surging by 80% [3]. - Revenue from Australia and New Zealand decreased by 18% to 801 million yuan, mainly due to a decline in corporate purchasing business [3]. - North American revenue increased by 6% to 862 million yuan, benefiting from the popularity of high-end pet nutrition products and the growing pet population, with major retailers like Amazon and Walmart performing well [3]. - Other regions saw a revenue increase of 17% to 420 million yuan, with strong growth in the Asian expansion market [3].

Core Viewpoint - The company's 1H25 performance met market expectations, with revenue of 7.02 billion yuan, a year-on-year increase of 4.9%, and adjusted net profit of 360 million yuan, up 4.6% year-on-year [1][2]. Revenue Performance - All three business segments recorded positive growth, with milk powder revenue rebounding. Overall revenue increased by 4.9% year-on-year, with ANC revenue up 5% and ANC China revenue up 13.1%, driven by strong performance of Swisse's new product categories and rapid growth in cross-border e-commerce and new retail channels [1]. - ANC Australia and New Zealand revenue decreased by 18.5% due to adjustments in the purchasing agent channel [1]. - BNC revenue increased by 2.9%, with milk powder revenue up 9.6%, while probiotics and infant nutrition products saw declines of 16% and 17.1%, respectively [1]. - PNC revenue grew by 9.6%, with PNC China revenue up 17.5% and North America PNC revenue up 6.4%, driven by Zesty Paws' 12.8% revenue growth, while Solid Gold's revenue fell by 23.3% [1]. Profitability Metrics - EBITDA margin remained healthy, with adjusted net profit margin improving. ANC's adjusted EBITDA margin decreased by 1.1 percentage points to 20.9%, primarily due to increased investment in overseas expansion and a higher proportion of sales through Douyin in China [2]. - BNC's adjusted EBITDA margin fell by 2.6 percentage points to 12.4%, mainly due to costs associated with the new national standard transition and consumer education [2]. - PNC's adjusted EBITDA margin increased by 1.6 percentage points to 12.4%, benefiting from improvements in product and channel mix [2]. - The company completed refinancing in 1H25, with financing costs rising by 34% year-on-year to 580 million yuan, impacting overall profit performance [2]. Future Outlook - The company is expected to achieve high single-digit revenue growth for the full year, with ANC projected to see mid to high single-digit growth [2]. - Milk powder business is anticipated to accelerate to low double-digit growth in the second half of the year, while PNC is expected to continue its growth trend [2]. - The company forecasts continued improvement in internal profit margins and ongoing optimization of financial costs [2]. Earnings Forecast and Valuation - The earnings forecast for 2025 and 2026 has been raised by 5% and 6% to 640 million yuan and 760 million yuan, respectively, due to the recovery in the milk powder business [3]. - The current valuation is set at 14 and 11 times the P/E for 2025 and 2026, respectively, with a target price increase of 23% to 17.7 HKD, corresponding to 16 and 14 times the P/E for 2025 and 2026, indicating a 20% upside potential [3].

Financial Data and Key Metrics Changes - The company reported a revenue growth of 4.9% for the first half of 2025, with an adjusted EBITDA margin maintained at 15.7% [48][49][64] - Adjusted net profit increased by 4.6%, reaching a net profit margin of 5.2% [49][64] - The gross profit margin improved by 1.4 percentage points for core product categories [55] Business Line Data and Key Metrics Changes - The ANC business grew by 5.9%, BNC by 2.9%, and P&C by 8.6% [22] - Nutritional supplements accounted for 65.6% of total revenue, up by 4.1% [18] - The P&C segment saw a 15.5% growth, while the probiotic business experienced a decline of around 10% [9][19] Market Data and Key Metrics Changes - China contributed 70% of total revenue, with a growth driven by IMF sales and nutritional products [20] - The North American market grew by 4.6%, while the ANZ market saw a decline of 15.6% due to Daigou channel sales [20][21] - Expansion markets contributed 66% of revenue, growing by 18.6% [21] Company Strategy and Development Direction - The company aims to maintain its number one position in the ANC market in China and expand into new markets [44][45] - Focus on premiumization and diversification strategies to enhance profitability and market share [46] - Continued investment in product innovation and consumer education to drive growth [15][44] Management Comments on Operating Environment and Future Outlook - Management acknowledged fierce competition in the Chinese market and emphasized the importance of adapting strategies [3] - The company expects to achieve high single-digit sales growth for the full year, with a stable EBITDA margin around 15% [66] - Confidence in overcoming challenges from the Guo Biao transition and maintaining growth momentum [8][49] Other Important Information - The interim dividend payout is set at HKD0.19 per share [12] - The company completed a refinancing of USD 300 million, which is expected to lower financial expenses [11][51] Q&A Session Summary Question: Do you have any guidance update for the whole year's performance? - The company expects high single-digit growth for the whole group, with adjusted EBITDA margin around 15% and adjusted net profit margin close to 5% [66] Question: What are the key drivers for the B&C business growth? - Main drivers include innovative products and penetration into new channels, with a focus on retail and online channels [70][71] Question: Will the IMF gross profit margin be restructured? - Adjustments are being made to improve profitability, with 80% of product categories returning to expected growth [72][73] Question: What is the expectation for the ANC business in ANZ? - The company will continue to promote domestic business growth to offset declines in the Daigou channel, maintaining guidance for the whole year [85][86]