CMSC released a research report upgrading IFBH (06603) to an "Overweight" rating, considering the industry's growth stage and significant earnings recovery potential. The coconut water industry is currently in a high-growth phase, characterized by rapid market expansion and intensifying competition. As an industry leader, IFBH's brand possesses a first-mover advantage. Under competitive pressures, the company is actively expanding its domestic brand and channel presence; future industry standardization is expected to benefit the company and help it maintain its leading market share. The company's performance faced pressure in 2025 due to interrupted shipments of the Innococo brand, alongside impacts from foreign exchange rates and expenses. However, 2026 is anticipated to see a return to high revenue growth with substantial profit recovery elasticity. Earnings per share for 2025 and 2026 are forecasted at RMB 0.68 and RMB 1.16, respectively, corresponding to a 2026 valuation of 14 times.
According to recent tracking, the company's overall performance was under pressure in the second half of 2025. On the revenue side, growth for the core IF brand slowed compared to the first half but remained relatively rapid. The Innococo brand experienced a significant year-on-year decline in H2, as shipments were interrupted from June due to internal management issues at a major channel partner, only recovering somewhat in December. Regarding gross margin, continued appreciation of the Thai Baht against the US dollar negatively impacted profitability, with H2 gross margin expected to be similar to H1 but down year-on-year. On the expense side, profits were affected by costs associated with signing a new brand ambassador and increased promotional spending following the company's listing.
For 2026, the company's revenue is expected to re-enter a phase of accelerated growth. The core IF brand benefits from strong consumer recognition and its first-mover advantage, positioning it for rapid growth during the industry's expansion. Furthermore, the major channel partner for Innococo has resumed supplies, and the company is actively seeking channel expansion, having signed agreements with partners like COFCO's Famous Chateau Collection and Watsons to accelerate the penetration and distribution of Innococo products. On the profit front, coconut pulp costs are forecasted to be stable or slightly lower in 2026, which should improve gross margins. Simultaneously, a reduction in one-time listing advisory and consulting fees is expected to drive a recovery in profit margins. Additionally, the effective tax rate, which increased in 2025 mainly due to non-deductible listing expenses, is projected to normalize in 2026.
The industry is currently experiencing rapid growth but lacks sufficient regulation, leading to heightened competition. The company is actively strengthening brand education, increasing marketing efforts on platforms like Xiaohongshu to enhance consumer awareness of its products' 100% natural attributes. It is also proactively promoting the establishment of domestic industry standards; successful implementation could squeeze out low-quality small brands and further increase industry concentration. Concurrently, the company is actively developing the domestic market, having established a China office in Shanghai with a dedicated team responsible for merchant recruitment, market maintenance, and channel expansion, with plans to continue broadening its domestic channels. The company currently collaborates with seven OEMs, including General Beverage, and is considering future partnerships with domestic factories to optimize its supply chain.
Risk factors include demand falling short of expectations, intensified industry competition, rising raw material costs, and slower-than-expected new product promotion and channel expansion.
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