CICC has reaffirmed its "Outperform" rating for IFBH (06603) while reducing its target price by 11.36% to HK$19.5. The adjustment reflects the impact of Innococo on the 2025 baseline, leading to downward revisions of 12.2%, 11.6%, and 11.7% in net profit forecasts for 2025, 2026, and 2027, now projected at $23.34 million, $29.90 million, and $34.90 million, respectively. At the current share price, the stock trades at 17.1 times 2026 and 14.6 times 2027 P/E ratios. The new target price implies 22.4 times 2026 and 19 times 2027 P/E multiples, representing a potential upside of 31.05% from current levels.
The company issued a 2025 earnings guidance anticipating a 27%-32% year-on-year decline in net profit to $22.65 million-$24.32 million. Adjusted net profit, excluding listing expenses, is expected to decrease by 25%-20%, slightly below the bank's expectations. While the if brand maintains healthy growth with projected revenue increase of 15%-20% in the second half of 2025, Innococo faces high double-digit revenue decline due to short-term channel adjustments, putting overall revenue under pressure.
Looking ahead to 2026, the coconut water industry is expected to maintain double-digit growth amid healthy beverage consumption trends, with the if brand continuing to benefit from industry tailwinds. The company is actively addressing challenges by adding COFCO's Famous Chateau Collection as Innococo's distributor in China, indicating channel adjustments are nearing completion.
Second-half 2025 profitability is under pressure with net profit projected to decline 41%-51% to $7.68 million-$9.34 million. Net profit margin is expected to drop 9.3-11.3 percentage points to 9.2%-11.2%. The appreciation of the Thai baht against the US dollar is likely to continue the gross margin decline trend from the first half. Sales and distribution expense ratios are also expected to increase due to foreign exchange fluctuations.
Marketing expense ratios rose due to brand ambassador appointments and promotional activities despite Innococo's revenue decline. Administrative expenses are projected to show sequential improvement from the first half, primarily due to reduced listing expenses. The bank expects gross margin and distribution expense ratios to stabilize in 2026 as the company implements financial instruments to manage forex volatility, with potential marketing expense ratio improvement following Innococo's revenue recovery.
Key risks include raw material price fluctuations, intensifying competition, product quality and safety concerns, sales channel dependency, foreign exchange volatility, and over-reliance on single products or markets with potential new product development setbacks.