Guotai Haitong: Initiates H&H INTL HLDG (01112) with "Overweight" rating, target price HK$34.12

Guotai Haitong released a research report initiating coverage of H&H INTL HLDG (01112) with an "Overweight" rating. The firm estimates the company's EPS for 2026-2028 to be RMB 1.63/1.88/2.04. Considering that the company is gradually deleveraging and the proportion of its health supplement business continues to rise, under the resonance of an upward business performance cycle and improving debt cycle, the company is expected to undergo a revaluation. The firm initiates coverage with an 18x PE for 2026, corresponding to a target price of HK$34.12 (based on 1HKD=0.86CNY). Guotai Haitong's main points are as follows: Health supplement business growing rapidly The health supplement industry benefits from the silver economy, with high long-term prosperity. Swisse has become the number one health supplement brand in mainland China and Australia. The firm is optimistic about its ability to continuously increase market share in a fragmented landscape, based on: 1. Australia's strict health supplement regulations enjoy a good global reputation, and Swisse possesses strong brand positioning; 2. Strong product R&D and innovation capabilities, having launched series products such as Swisse Plus and LittleSwisse that deeply target segmented consumer groups; 3. The company primarily sells through cross-border e-commerce, benefiting from the channel dividend of increasing online penetration in health supplements, while also expanding into offline new retail channels with strong momentum such as Sam's Club. Infant formula business recovering rapidly The BNC business, after inventory destocking under the impact of the new national standards in 2023 and 2024, rapidly recovered to strong growth in 2025 and 2026H1, with market share in ultra-premium infant formula rising to 20.6% by the end of 2026H1. The firm believes the growth drivers behind this are not only due to competitors being affected by additive incidents and channel restocking, but also strongly correlated with the effective execution of the company's marketing strategies including new mother education and stage 3 conversion initiatives. Looking ahead, the firm is also optimistic that driven by channel restocking, improved quality-price ratio of the Star 2.0 product, and refined channel marketing management, the infant formula business will achieve steady growth. Pet business gradually improving The NC business has high long-term industry prosperity. In 2026H1, the company's Zesty Paws actively expanded online and offline channels in North America, achieving continuous growth. Solid Gold also regained growth in North America after premiumizing its product portfolio. In the domestic market, Solid Gold experienced a temporary decline due to proactively shifting to localized supply, with expectations for subsequent improvement. Debt situation continuously optimizing Several major acquisitions in the past brought the company enormous debt and financial expense pressure. In recent years, the company has been reducing debt through repaying debt principal and lowering interest rates after refinancing. In 2026H1, total debt was reduced by RMB 1 billion, and the net leverage ratio dropped to 2.05x. The firm expects financial expenses to enter a downward trajectory going forward. Risk warnings Food safety, intensified competition, etc.