H&H International Holdings (01112.HK) disclosed its 2025 annual report on March 24, presenting a high-quality performance that exceeded expectations across revenue, profit, and financial structure at the critical juncture of its tenth year of strategic transformation. The company achieved a record-high annual revenue of 144 billion yuan, a 10% year-on-year increase. Its three core nutrition and care businesses—Adult, Baby, and Pet—all demonstrated growth, with key brands leading their respective market segments. The gross profit margin rose to 62.45%, the highest in nearly four years, while the net leverage ratio dropped significantly to 3.45x, outperforming management guidance. With ample cash on hand, the company has successfully entered a new phase characterized by an upward business cycle and declining financial leverage, laying a solid foundation for long-term development.
All three business segments achieved leading positions, supporting sustained growth momentum. Nutrition supplements emerged as the dominant contributor, generating 93 billion yuan in revenue, accounting for 65% of the total and marking four consecutive years of growth. This solidifies the company's strategic position as a leader in family nutrition and health. The three business units exhibited a pattern of diversified and synergistic growth. The Baby Nutrition and Care (BNC) segment stood out with revenue of 5.26 billion yuan, a sharp 20% year-on-year increase, representing 36.6% of total revenue. Although the youngest segment, Pet Nutrition and Care (PNC) was the growth leader, with revenue of 2.15 billion yuan, up 8.7% year-on-year, and a compound annual growth rate exceeding 12% since its full consolidation in 2022. The Adult Nutrition and Care (ANC) business, serving as a steady anchor, reported revenue of 6.95 billion yuan, a 4.4% increase, contributing 48.4% of total revenue and establishing itself as a core performance pillar.
The market performance of key brands was particularly noteworthy, setting benchmarks in their niches. Swisse reached a milestone with global revenue surpassing one billion dollars and, for the first time, topped the Vitamin, Herb, and Mineral Supplements (VHMS) market in mainland China, marking a significant achievement from a decade of mergers and integration. Biostime smoothly completed the transition to new national standards for infant formula, with its ultra-premium market share surging to 17.1% in 2025 from 13.3% in 2024, reaching 19.5% in the fourth quarter alone, thereby further cementing its industry leadership. Zesty Paws maintained its position as a highly recognized brand in the U.S. pet nutrition market, with 2025 revenue growing 12.8% year-on-year. Solid Gold completed its channel and product premiumization strategy, with the premium pet nutrition category growing 14.3% year-on-year, demonstrating the success of its upmarket shift.
Furthermore, the company's profitability continued to strengthen, with significant improvements in earnings quality. The overall gross profit margin for 2025 increased by 1.8 percentage points compared to 2024. Each segment showed differentiated growth: the ANC business's gross margin rose 2.9 percentage points to 67.9%, benefiting from optimized procurement costs and an improved channel mix; the PNC business's gross margin jumped 5.6 percentage points to 57.2%, primarily driven by a higher contribution from premium products; the BNC business's gross margin remained stable at 57.4%, highlighting overall profit resilience. On the bottom line, adjusted comparable EBITDA reached 2.051 billion yuan, a 5% year-on-year increase, returning to above the average level since 2022. Adjusted comparable net profit surged 22.7% to 664 million yuan, with the net profit margin rising to 4.6%. The company achieved a net profit of 196 million yuan for the full year, successfully returning to profitability and entering a sustained upward trend.
The acceleration of financial deleveraging and the return of strong cash generation were evident. H&H's characteristics as a "cash cow" became more pronounced. Net operating cash flow for 2025 was 1.537 billion yuan, with an adjusted EBITDA cash conversion rate as high as 88%. Cash on hand at year-end was 1.709 billion yuan, up 6.5% year-on-year, providing solid funding for operations and R&D. The faster-than-expected progress in financial deleveraging was a key highlight of the report. The company continued to optimize its debt structure, reducing total debt by 613 million yuan in 2025, a decrease of 6.52%. By year-end, the proportion of RMB-denominated debt had increased to 82.2%, the debt-to-asset ratio dropped from 49.3% to 45.8%, and the net leverage ratio fell from nearly 4x to 3.45x, significantly better than the guidance of 3.7-3.8x, indicating an accelerating trend in deleveraging.
At the start of 2026, H&H International Holdings stands at an inflection point, transitioning from a "high-leverage operating model" to a "high-quality, stable growth model." The company has clearly stated its continued focus on the core objectives of "growth priority, healthy profitability, and sustained deleveraging." All three business segments possess potential for efficiency gains. The ANC business will deepen Swisse's omni-channel presence to enhance brand influence; the BNC business will focus on product transition and conversion, expanding into new child nutrition categories; the PNC business aims to complete localized supply in mainland China within the year, driving growth through category innovation and channel expansion.
Reflecting on the past decade, H&H has evolved from a single-product infant formula leader into an enterprise with three synergistic business units. Now, with the positive feedback from its leverage management becoming apparent, the company's earnings potential is poised for full release. Its market valuation methodology may shift from a singular discounted cash flow model to a more appropriate PE-based approach. For long-term investors, this could mark the beginning of a classic value re-rating story.
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