CICC: initiates coverage on NATURAL FOOD IH (01837) with an outperform rating, target price of 2.20 Hong Kong dollars.

Zhongjin released a research report stating that it has initially covered NATURAL FOOD IH (01837) with an outperform rating, with a target price of HK$2.20, representing an upside potential of about 33.3% from the current level. The current trading P/E ratios for 2026 and 2027 are 9.8 and 8.0 times, respectively. Based on the relative valuation method, the corresponding P/E ratio for 2026 is 13.2 times. It is estimated that the company's EPS for 2026 and 2027 will be 0.15 and 0.18 yuan respectively, with a CAGR of 22% from 2025 to 2027. The company is a leading company in the domestic Chinese medicinal food and nutrition grain powder sector, and the firm is optimistic about the development of the medicinal food and Chinese health maintenance industry, as well as the company's ability to maintain a leading advantage in the future. Key points from Zhongjin: - The industry of medicinal food and Chinese health maintenance is still a blue ocean market, and with the support of policies, demand driving, and technological progress, development is expected to accelerate. - By 2025, the industry of medicinal food and Chinese health maintenance has surpassed 370 billion yuan, with the beverage industry exceeding 10 billion yuan. The company believes that the main barrier in the medicinal food and Chinese health maintenance sector is the ability to gain consumers' trust, followed by the differentiation of products through research and development investment and efficacy verification, as well as channel layout and penetration. - The company is the leader in the grain nutrition powder sector, with a strong competitive advantage after twenty years of deep cultivation in the Chinese health maintenance sector. 1) Strong product power, outstanding flagship products. The company's functional improvement products have high repurchase rates above the industry average through precise functional positioning, long-term investment in research and development technology and efficacy verification. 2) Balanced channel structure, efficiency improvement. The offline direct-operated counters focus on experience, product promotion, and member retention; e-commerce and new shelf channels reach a wider range of consumers, converting deep users. 3) Deep cultivation in the supply chain end with raw materials, technology, and efficacy verification, building a barrier of trust for consumers. - The company's direct-operated counter model has medium and long-term growth potential. The company's decades of adherence to product effectiveness, direct access to consumers through direct-operated counters, and investment in process patents have built brand awareness that "consumers trust." Brand trust will radiate to e-commerce, new shelf channels, opening up medium and long-term growth space. - Potential catalysts: The company achieves rapid growth during the 2026 Spring Festival, validating the improvement in product efficacy. In the future, the company's core flagship products will be promoted through multiple channels, potentially achieving rapid growth. Risk warning: Consumer demand changes rapidly, food safety issues, intensified industry competition, large fluctuations in raw material costs, and underperformance in new product performance and channel expansion.