CICC has released a research report maintaining its earnings forecasts for Natural Food IH (01837), projecting 2026/2027 revenues of RMB 2.957 billion and RMB 3.436 billion respectively, representing year-on-year growth of 17.1% and 16.2%. The firm expects attributable net profits of RMB 327 million and RMB 397 million for the respective years, up 23.2% and 21.4% year-on-year. At current share price levels, the stock trades at 9.0x and 7.2x forward P/E for 2026 and 2027 respectively. CICC maintains its target price at HK$2.2, corresponding to 12.8x and 10.6x forward P/E for 2026 and 2027, while keeping its Outperform rating on the stock.
The broker's key takeaways are as follows:
First-half 2026 results slightly above expectations
The company reported first-half 2026 results with revenue of RMB 1.45 billion, up 27.8% year-on-year, and attributable net profit of RMB 156 million, up 46.0% year-on-year. The results came in slightly above expectations, driven by strong performance in offline shelf channel sales and the food-nourishment gift box segment.
Offline shelf channels and e-commerce drive revenue growth; nourishment gift boxes accelerate
By channel breakdown: 1) First-half 2026 supermarket counter business generated RMB 530 million in revenue, up 12.3% year-on-year, with 125 new counters added during the period. Offline counters benefited from product optimization, improved operational efficiency, and higher repurchase rates and purchase frequency from existing customers. 2) First-half 2026 offline shelf channel revenue reached RMB 345 million, surging 65.2% year-on-year, primarily driven by outstanding performance of new products at Sam's Club. The company has also expanded partnerships with Hema, B/C-class supermarkets, and community stores. 3) First-half 2026 online e-commerce channel revenue totaled RMB 575 million, up 26.6% year-on-year, supported by increased brand marketing investment and volume growth of core hero products.
By product category, all three core product segments recorded rapid growth, with food-nourishment gift boxes contributing the most incremental revenue.
Channel mix shift and operational efficiency drive year-on-year profitability improvement
First-half 2026 gross margin declined 1.9 percentage points year-on-year, primarily due to the higher revenue contribution from offline shelf channels, which carry lower gross margins. Selling expense ratio decreased 3.2 percentage points year-on-year, reflecting lower comprehensive channel expense ratios and improved promotional efficiency. As a result, the company's net margin improved by 1.3 percentage points year-on-year in the first half, demonstrating better overall profitability.
Near-term revenue pressure expected in second half of 2026, but medium-to-long-term outlook remains positive
Looking ahead, CICC anticipates phased revenue growth pressure in the second half of 2026, as the company gradually withdraws its counters from Walmart due to the downstream customer's own operational strategy adjustments, which may impact supermarket counter channel revenue. However, over the medium to long term, the company continues to benefit from the medicinal-food homology industry trend and maintains its product innovation leadership, which should support a steady growth trajectory.
Key risks include rapidly changing consumer demand, channel expansion falling short of expectations, intensifying industry competition, and food safety concerns.