CMSC: Rated IFBH (06603) as "hold" with pressure relief concentrated in 25H2

CMSC released a research report stating that IFBH (06603) was given a "buy" rating, considering the industry is in a growth phase and has a large potential for performance recovery. The company's 25-year revenue/adjusted net profit attributable to parent company increased by 11.9%/-22.0% year-on-year, with revenue/profit for 25H2 decreasing by -4.5%/-55.1% year-on-year. Revenue was greatly affected by a significant decline in Innococo, while profit was affected by exchange rate fluctuations, increased marketing and listing expenses dragging down profit margins. The key points of the CMSC report are as follows: - 25H2 revenue/adjusted net profit decreased by -4.5%/-55.1%, performance under pressure - The company achieved a revenue of $176 million in 2025, a year-on-year increase of 11.9%, with a net profit attributable to parent company of $23 million, a year-on-year decrease of 31.7%, and an adjusted net profit of $27 million, a year-on-year decrease of 22.0%. Revenue for 25H2 was $82 million, a year-on-year decrease of -4.5%, with a net profit of $8 million, a year-on-year decrease of -55.7%, and an adjusted net profit of $8.4 million, down by 55.2% year-on-year. The overall performance in the second half of the year was under pressure, with revenue being affected by a substantial decline in Innococo and profit margins being impacted by exchange rate fluctuations, increased marketing and listing expenses. The company paid a cash dividend of $0.026 per share at the end of the year, totaling $6.93 million. - IF main brand continues to grow, Innococo operation undergoes a temporary decline, overseas markets show high growth - By brand: IF main brand revenue for 2025 was $167 million, a year-on-year increase of 26.9%; Innococo revenue was $10 million, a year-on-year decrease of -63.2%. For 25H2, IF main brand revenue was $83 million, a year-on-year increase of 14.5%, with growth slowing down mainly due to delayed shipments in June causing inventory shortages in the second half of the year. Innococo brand was affected by internal management issues in major distributors, causing shipment interruptions starting in June and only recovering in December, leading to a significant year-on-year decline in H2. - By region: Revenue from China mainland in 2025 was $159 million, a year-on-year increase of 9.4%; revenue from China Hong Kong + Taiwan was $12 million, a year-on-year increase of 40%; revenue from overseas was $5 million, a year-on-year increase of 47.3%, with markets such as Australia, the Philippines, and Laos achieving growth of over 100%, driven by low base in areas outside of China mainland and brand and channel expansion strategy. - By product: Revenue from coconut water products in 2025 was $172 million, a year-on-year increase of 14.1%, with revenue accounting for 94.5%. Other coconut water-related products, other beverages, and plant-based snacks decreased year-on-year by -55.2%, -12.6%, -96.7%, respectively. - Gross profit margin declined due to exchange rate impact, marketing and one-off expenses dragging down profit - The company's gross profit margin for 2025 was 32.9%, a decrease of 3.8pcts year-on-year, mainly due to exchange rate fluctuations and the impact of the increasing proportion of low-margin 1L products on the overall structure. Sales and distribution expense ratio was 5.0%, an increase of 1.6pcts year-on-year, mainly due to an increase in freight and transportation personnel costs and a one-off cost increase in repackaging. Marketing expense ratio was 7.4%, an increase of 2.7pcts year-on-year, mainly because of the endorsement of Innococo by the New Boyz Group and an increase in advertising and outdoor marketing expenses. Management expense ratio was 5.6%, an increase of 2.5pcts year-on-year, mainly due to one-off expenses related to the listing totaling $4.1 million, an increase of nearly $3 million year-on-year. In addition, the company's tax rate for 2025 was 20.2%, an increase of 3.3pcts year-on-year, mainly due to non-deductible one-off listing expenses. Overall, the company's net profit margin for 2025 was 12.9%, a decrease of 8.2pcts year-on-year. For 25H2, the company's gross profit margin was 31.9%, a decrease of 3.3pcts year-on-year, with sales and distribution expense ratio, marketing expense ratio, and management expense ratio increasing by 3.1pcts, 7.5pcts, and 2.2pcts year-on-year, respectively, and the net profit margin was 9.5%, a decrease of 11.0pcts year-on-year. Coconut water industry is currently in a growth phase - With the industry rapidly expanding, competition intensifying, IF as a leading company in the industry has a first-mover advantage. The company is actively expanding its domestic brands and channels in the face of competition, and if industry regulations are implemented in the future, the company is expected to benefit and maintain a leading market share. In 2025, the company's performance was under pressure due to the interruption in Innococo shipments, exchange rate fluctuations, and expenses. In 2026, with the establishment of a localized team in China and the completion of Innococo channel adjustments, the company's revenue is expected to return to a high-growth trend, with strong potential for profit recovery. Risk warning: -Demand falls short of expectations, increased industry competition, rising raw material costs, slower-than-expected new product promotion and channel expansion.