CMSC has released a research report assigning an "Overweight" rating to IFBH (06603), citing the company's position in a growth-stage industry and significant potential for earnings recovery. For the full year 2025, the company's revenue and adjusted net profit attributable to shareholders increased by 11.9% and decreased by 22.0% year-on-year, respectively. However, performance in the second half of 2025 was under pressure, with revenue and adjusted net profit declining by 4.5% and 55.1% year-on-year. The revenue drop was primarily due to a significant slump in the innococo brand, while profitability was impacted by foreign exchange effects on gross margin, alongside increased marketing and listing expenses.

The key points from CMSC's report are as follows:

**H2 2025 Performance Under Pressure** IFBH achieved revenue of $176 million (approximately RMB 1.27 billion) in 2025, a year-on-year increase of 11.9%. Net profit attributable to shareholders was $23 million (approximately RMB 160 million), down 31.7% year-on-year, while adjusted net profit was $27 million (approximately RMB 190 million), down 22.0% year-on-year. In the second half of 2025, revenue was $82 million, down 4.5% year-on-year. Net profit attributable to shareholders was $8 million, down 55.7% year-on-year, and adjusted net profit was $8.4 million, down 55.2% year-on-year. The overall weaker performance in H2 was attributed to a sharp decline in innococo sales, while profitability was dragged down by foreign exchange impacts on gross margin and increased spending on marketing and listing activities. The company declared a year-end dividend per share of $0.026, with a total cash dividend payout of $6.93 million.

**Core IF Brand Grows, innococo Adjusts, Overseas Markets Surge** 1) By Brand: In 2025, the core IF brand generated revenue of $167 million, up 26.9% year-on-year. Revenue from the innococo brand was $10 million, down 63.2% year-on-year. In H2 2025, IF brand revenue was $83 million, up 14.5% year-on-year, though growth moderated partly because some inventory replenishment occurred in June. The innococo brand experienced a significant H2 decline due to shipment disruptions starting in June, caused by internal management issues with a major distributor, with recovery only beginning in December. 2) By Region: In 2025, revenue from Mainland China was $159 million, up 9.4% year-on-year. Revenue from Hong Kong and Taiwan was $12 million, up 40% year-on-year. Overseas revenue reached $5 million, surging 47.3% year-on-year, with markets like Australia, the Philippines, and Laos more than doubling their sales. High growth in regions outside Mainland China was achieved from a low base, supported by brand and channel expansion strategies. 3) By Product: Revenue from coconut water products in 2025 was $172 million, up 14.1% year-on-year, increasing its share of total revenue to 94.5%. Revenue from other coconut water-related products, other beverages, and plant-based snacks fell by 55.2%, 12.6%, and 96.7% year-on-year, respectively.

**Margin Squeezed by Forex, Profits Weighed Down by Costs** The company's gross profit margin for 2025 was 32.9%, down 3.8 percentage points year-on-year, mainly due to foreign exchange volatility and a sales mix shift towards lower-margin 1-liter products, while input costs remained relatively stable. The sales and distribution expense ratio was 5.0%, up 1.6 percentage points, primarily due to increased freight and transportation personnel costs, as well as one-time repackaging expenses. The marketing expense ratio was 7.4%, up 2.7 percentage points, largely driven by signing the youth idol group Teens in Times as endorsers for innococo and increased spending on advertising and outdoor marketing. The administrative expense ratio was 5.6%, up 2.5 percentage points, mainly due to one-time listing-related expenses of $4.1 million, an increase of nearly $3 million year-on-year. Additionally, the effective income tax rate for 2025 was 20.2%, up 3.3 percentage points, primarily because the one-time listing fees were non-deductible. Overall, the net profit margin attributable to shareholders for 2025 was 12.9%, down 8.2 percentage points year-on-year. In H2 2025, the gross margin was 31.9%, down 3.3 percentage points year-on-year. The ratios for sales and distribution, marketing, and administrative expenses increased by 3.1, 7.5, and 2.2 percentage points year-on-year, respectively. The H2 net profit margin attributable to shareholders was 9.5%, down 11.0 percentage points year-on-year.

**Industry Outlook and Company Prospects** The coconut water industry is currently in a high-growth phase with rapid market expansion but intensifying competition. As an industry leader, IFBH's brand enjoys a first-mover advantage. Amid current competition, the company is actively strengthening its domestic brand presence and distribution channels. Future industry standardization could benefit IFBH, allowing it to maintain a leading market share. While 2025 performance was pressured by the innococo shipment disruption, forex headwinds, and elevated costs, 2026 holds promise for a return to high revenue growth following the establishment of a local Chinese team and the completion of innococo's channel adjustments, with significant potential for profit recovery.

Risks include weaker-than-expected demand, heightened industry competition, rising raw material costs, and potential setbacks in new product launches and channel expansion.