Soochow Securities has issued a research report maintaining a "Buy" rating on H&H International Holdings. The firm has made slight adjustments to its net profit attributable to parent company forecasts for 2025-2027, now projecting RMB 277 million, RMB 637 million, and RMB 882 million, representing year-on-year growth turning positive, 130.33%, and 38.37%, respectively. This corresponds to current price-to-earnings ratios of 28.84x, 12.52x, and 9.05x. The adjusted net profit remains largely consistent with prior estimates, coinciding with both the operational and debt reduction cycles.
Key points from the report are as follows: The company has released a profit alert for 2025, indicating low double-digit growth in revenue and a significant turnaround to profitability for reported profit, with revenue performance surpassing market expectations. For 2025, overall Swisse revenue, revenue in China, and revenue in other expansion markets are expected to achieve mid-single-digit, low double-digit, and robust double-digit growth, respectively, aligning with trends observed in the first three quarters. The impact on the Australia-New Zealand market is anticipated to gradually diminish by the first half of 2026. With clear growth objectives from management and a resonance with new product cycles, Swisse's growth rate is believed to be entering a new upward cycle.
The Baby Nutrition and Care segment and the infant formula business are projected to achieve robust double-digit revenue growth in 2025. The infant formula business is expected to see revenue growth between 20-30%, while probiotics and nutritional products are forecast for single-digit growth. Supported by completed inventory destocking, improved market structure, and high-quality growth, a high single-digit growth rate is anticipated for 2026, with remaining elasticity.
The Pet Nutrition and Care segment is forecast for high single-digit growth in 2025, with pet nutritionals within the segment achieving steady mid-teens growth. Solid Gold in China is expected to see single-digit growth, while performance in the US is likely to follow a similar trend as in the first three quarters.
For 2025, the company's adjusted EBITDA and adjusted net profit are expected to increase by 2-6% and 15-25%, respectively. The overall adjusted net profit margin is projected to be in the mid-single digits. Adjustments for 2025 include foreign exchange effects, financial amortization, impairment of intangible assets related to the previously acquired infant food brand Good Gout, and other non-cash and non-recurring factors. Compared to the previous year, this implies growth exceeding 400%, corresponding to a reported net profit surpassing RMB 270 million.
Debt repayment in 2025 exceeded market expectations, laying a solid foundation for optimizing interest expenses in 2026. According to the announcement, the company's cash balance exceeded RMB 1.7 billion. Leveraging strong operating cash flow and an optimized capital structure, the deleveraging process accelerated, with total debt reduced by over RMB 600 million during the year. Significant room remains for further optimization of financial expenses in 2026.
Risk factors include fluctuations in raw material prices, food safety risks, and intensifying industry competition.