CICC: Maintains "Outperform" Rating on H&H INTL HLDG (01112), Baby Formula Performance Impressive.

China Gold released a research report stating that it maintains a target price of HK $17.7 and an "outperform" rating for H&H International Holdings (01112). The performance in the third quarter was impressive, with revenue increasing by 28.1% year-on-year to HK $3.79 billion, mainly due to the better-than-expected growth in the infant formula business (BNC segment revenue increased by 90.6% year-on-year). In addition, the ANC (adult nutrition) and PNC (pet nutrition) segments also maintained steady growth. Key points from China Gold: Performance: - Revenue for 9M25 was HK $10.81 billion, up 12% year-on-year (comparable basis up 12.3%); 3Q25 revenue was HK $3.79 billion, up 28.1% year-on-year; operating data exceeded market expectations, mainly due to the better-than-expected growth of infant formula. Impressive performance of BNC infant formula in Q3, steady growth of ANC and PNC: 1) BNC: Q3 revenue increased by 90.6% year-on-year to HK $1.47 billion, with infant formula revenue up 104% year-on-year to HK $1.23 billion. Benefit decreased expenses for the consumption move to Mom and Baby channel encourage consumer education; probiotics revenue increased by 58.8% year-on-year to HK $180 million, mainly due to online and Mom and Baby channel growing well, and pharmacy channel gradually stabilizing. 2) ANC: Revenue for 25Q3 increased by 5.6% (comparable basis 6.3%) to HK $1.8 billion, achieving steady growth. Revenue in China for 9M25 increased by 15.7%, accounting for 70.6%, with all three sub-brands of Swisse performing as expected. In terms of channels, benefited from cross-border e-commerce revenue increased by 23.1% year-on-year, and revenue from Douyin channel increased by 77.7% year-on-year; revenue from Swisse in Australia and New Zealand decreased by 19.4% year-on-year, mainly due to adjustments in corporate procurement business, which the bank expects to last for 2-3 quarters. 3) PNC: Q3 revenue increased by 7.3% to HK $510 million, showing stable performance. Revenue of N.Z. high in China increased by 8% in 9M25; revenue in North America increased by 5.9%, with Zesty Paws up 12.4%, maintaining a good growth trend, while N.Z. high in the channel structure adjustment stage decreased by 18.3% year-on-year. It is expected that revenue will increase by a high single to low double-digit percentage in 2025, and profit margins are expected to remain at a healthy level. The bank expects the company's annual revenue to achieve a high single to low double-digit percentage increase year-on-year. Revenue from the three major segments will maintain a good growth trend. ANC is expected to achieve a middle to high single-digit percentage increase in annual revenue, BNC is expected to increase by over 20% year-on-year, and PNC is expected to increase by a low double-digit percentage year-on-year. In terms of profitability, the bank expects the company to maintain a healthy level of profit margins in 2025, with the potential for continued optimization of financial costs. Earnings forecast and valuation: Considering the impressive performance of the infant formula business, the profit forecast for 25/26 has been raised by 5.1%/4.3% to HK $670 million/790 million respectively. The company currently trades at 12/10 times 25/26 P/E. The target price of HK $17.7 is maintained, corresponding to 16/13 times 25/26 P/E and a 29% upside potential in the stock price, maintaining an "outperform" rating. Risks: Weak demand; intensified competition; new product expansion below expectations; tariff uncertainties.