Guotai Haitong: Initiate NATURAL FOOD IH (01837) with an increase in rating, target price of HK$2.44.

Guotai Haitong released a research report stating that it is expected the EPS of NATURAL FOOD IH (01837) for the years 2026-2028 will be 0.14/0.17/0.21 yuan. Combining with comparable valuation, a 15 times PE ratio (26E) is given, with a target price of 2.44 Hong Kong dollars per share, initiating coverage for the first time and giving a "hold" rating. The firm believes that the company is a pioneer in Chinese cereal powder and a leader in the concept of medicinal food homology, with outstanding competitiveness in brand, product, channel, and supply chain. Against the background of the accelerating development of Chinese-style food therapy, the company is leveraging its strong growth momentum with a leading single product as the driver, engaging in multi-scenario and omnichannel efforts, and having great potential for long-term development. The main points of view of Guotai Haitong are as follows: Acceleration of the development of Chinese-style food therapy, large potential for brand building With the "Healthy China 2030" initiative explicitly calling for "guiding rational dietary intake" and "fully leveraging the unique advantages of traditional Chinese medicine," as well as the expansion of the homology of medicine and food catalog to 106 substances, there is ample room for the development of Chinese-style food therapy. In addition, it is expected that the aging population in China will increase from 15% to 30%, and the growing attention of young people to dietary therapy and nutrition supplements will lead to a continuous expansion of the consumer base. With the increase in industry concentration, there is enormous potential for category and brand development. Expert brand in traditional Chinese medicine and food homology with solid strength in multidimensional competitiveness The company is a pioneer in cereal food therapy powder and has built "NATURAL FOOD IH" into an expert brand in traditional Chinese medicine and food therapy. Over the past 10 years, the company's performance has maintained steady growth. With well-supported product effectiveness and pricing advantages based on a well-balanced ratio of ingredients, selection, and processing, the company has established strong brand trust and loyalty with target customers. Currently, it is upgrading from selling cereal powder to selling functional solutions, and is continuously nurturing new growth curves such as wet sesame seeds on the basis of its core product of walnut sesame black bean powder. Considering only the current market capacity of Nanfang Black Sesame Group & soy milk powder, there is still significant room for revenue growth for the company. Omnichannel efforts, closely following the traffic dividend 1) Offline direct-operated counters are the company's core channel competitiveness, achieving sales and brand asset accumulation through actions such as nutritional guidance, on-site grinding, and scene layout. The current adjustment of directly operated counters has entered a phase of revitalization, and will continue to benefit from adjustments and improvements in the supermarket industry. 2) The company has a deep understanding of e-commerce and has formed a closed-loop channel with offline counters. The company continues to seize opportunities on various new platforms, and over the past 10 years, e-commerce has maintained rapid growth. 3) The company has a long-standing cooperation with Sam's Club, and the new channel business will continue to benefit from the flourishing trend of member stores. High-quality supply chain supports long-term sustainable development The company insists on three self-owned factory supply chain layouts, patented grinding technology, and upstream source material selection to support long-term sustainable development. Risk warning (1) Food safety risks, (2) lower demand and new product expectations, (3) intensified competition, (4) fluctuations in raw material prices, (5) ineffective cost efficiency.