CICC: Maintains IFBH(06603) "Outperform Industry" rating, target price lowered to HKD 19.5

CITIC Securities APP has learned that China International Capital Corporation (CICC) issued a research report maintaining an “Outperform Industry” rating for IFBH (06603). Based on Innococo’s impact on the 2025 base year, the report lowered net profit forecasts for 2025/2026/2027 by 12.2%/11.6%/11.7% to $23.34 million / $29.90 million / $34.90 million. The current stock price is trading at 17.1/14.6 times P/E for 2026/2027 estimates. The target price has been reduced by 11.36% to HKD 19.50, corresponding to 22.4/19 times P/E for 2026/2027, representing a 31.05% upside from the current price.

CICC’s main views are as follows:

Forecasted YoY profit decline of 27%-32%

The company released its 2025 earnings forecast, expecting full-year net profit to decline by 27% to 32% YoY to between $22.65 million and $24.32 million. Adjusted net profit (excluding listing expenses and other costs) is expected to decrease by 25% to 20%, slightly below the bank’s expectations.

Healthy growth of the IF brand; Innococo faces short-term channel adjustments

The bank expects revenue in the second half of 2025 to see a decline, with IF brand revenue projected to grow by 15% to 20% YoY, maintaining rapid growth. Due to short-term channel adjustments, Innococo’s revenue is expected to decline by double digits in the second half of 2025, putting pressure on overall company revenue. Looking ahead to 2026, under the trend of health beverage consumption, the bank believes the coconut water industry still has potential for double-digit growth, with IF continuing to benefit from industry tailwinds. The company is actively responding to challenges; in 2025, it added COFCO Mingzhuang Hui as Innococo’s distributor in China. The bank expects channel adjustments to be nearing completion.

Exchange rate fluctuations and marketing expenses pressure H2 2025 profits

According to the company’s earnings forecast, net profit in the second half of 2025 is expected to decline by 51% to 41% YoY to between $7.68 million and $9.34 million. Net profit margin is expected to decrease by 9.3 to 11.3 percentage points to 9.2%–11.2%. The Thai Baht has appreciated against the US dollar in H2 2025, and the bank expects gross margin to continue its downward trend from H1 2025. The bank also anticipates that sales and distribution expense ratios will be negatively affected by foreign exchange fluctuations, rising in H2 2025. Due to the appointment of Innococo brand ambassadors and product promotion activities, Innococo’s revenue decline has led to increased marketing expenses as a percentage of sales. On administrative expenses, the bank expects a slight reduction in H2 2025 compared to H1 2025, mainly due to decreased listing expenses. The bank expects that with the company adopting financial instruments to hedge foreign exchange risks, gross margin and distribution expense ratios may stabilize in 2026. Additionally, as Innococo’s revenue recovers, marketing expense ratios are expected to decline, improving profit margins.

Risks

Risks include fluctuations in raw material prices, intensified competition, product quality and safety issues, dependence on sales channels, foreign exchange volatility, reliance on a single product or market, and the risk of new product development not meeting expectations.