CICC has released a research report stating that H&H INTL HLDG (01112) recorded revenue of RMB 13.45 billion in the first three quarters of 2026, representing a year-on-year growth of 24.5%. Third-quarter revenue reached RMB 4.75 billion, up 25.5% year-on-year, with operating data exceeding market expectations, primarily driven by better-than-expected revenue performance in the BNC and ANC businesses. The brokerage has raised its earnings forecasts for 2026 and 2027 by 5% and 12% to RMB 1.27 billion and RMB 1.55 billion, respectively, and lifted its target price by 45% to HK$29, corresponding to forecast P/E ratios of 13x and 10x for 2026 and 2027, implying 30% upside from the current share price. The "Outperform Industry" rating is maintained. CICC's main views are as follows:

3Q26 BNC and ANC Revenue Performance Shines, PNC Operations See Adjustments

Breaking down by segment, the BNC business posted third-quarter 2026 revenue of RMB 2.11 billion, up 43.5% year-on-year, of which infant formula revenue grew 47.9% year-on-year to RMB 1.82 billion, and probiotic revenue rose 28.2% year-on-year to RMB 230 million. Biostime's share in China's super-premium infant formula market climbed to 22.3% in the third quarter, a record high, mainly driven by the company's continued consumer education efforts and new customer acquisition. In the first three quarters of 2026, retail sales of the company's stage 1 and stage 2 infant formula grew 63.5% and 45.5% year-on-year, respectively; as of August, the combined share of stage 1 and stage 2 formula rose to over 61%, above the industry level of 49%. The brokerage expects the strong formula sales performance to continue.

The ANC business recorded third-quarter 2026 revenue of RMB 2.2 billion, up 21.9% year-on-year. In the first three quarters of 2026, China revenue grew 21.5% year-on-year, partly affected by the timing shift of Double Eleven sales shipments, while emerging channels and new products contributed to growth, with Douyin and new retail channel revenue growing 52.2% and 24.3% year-on-year, respectively. Australia-New Zealand revenue declined 4.3% year-on-year on a comparable basis in the first three quarters of 2026, but grew 4.5% year-on-year in the third quarter, as the impact of corporate daigou business adjustments gradually diminished.

The PNC business saw third-quarter 2026 revenue decline 13.5% year-on-year, or 9.3% on a comparable basis, to RMB 440 million. In the first three quarters of 2026, North America revenue grew 9.3% year-on-year, with Zesty Paws and Solid Gold revenue growing 8.8% and 7.3% year-on-year, respectively. Zesty Paws' third-quarter revenue performance saw adjustments, mainly due to the timing mismatch of promotional events such as Amazon Prime Day. Meanwhile, Solid Gold's China revenue declined 36.3% year-on-year, largely continuing the trend from the first half.

Full-Year Group and BNC Revenue Guidance Raised Again, Margins Expected to Remain Healthy

The company has raised its full-year group revenue growth guidance to high teens percentage, and its BNC revenue growth guidance to over 40%; ANC revenue growth guidance remains at low teens percentage. Considering the timing shift impact of Double Eleven sales shipments, the brokerage expects ANC revenue growth to potentially slow in the fourth quarter. PNC revenue growth guidance has been lowered to low-to-mid single digits. The full-year group EBITDA margin guidance remains at mid-to-high teens percentage, and the adjusted net margin guidance remains at mid-to-high single digits; ANC and BNC margin guidance remains at approximately 20% and mid-to-high teens percentage, respectively, while PNC EBITDA margin guidance remains at mid single digits. As of the end of September, the company had reduced debt by RMB 1.3 billion. The brokerage believes that the company's performance has remained consistently strong this year, having exceeded expectations three times through the third quarter of 2026, and the growth momentum of core products and new products is likely to be highly sustainable. Risk factors include weak demand, intensifying competition, slower-than-expected new product expansion, and tariff uncertainty.