Huafu Securities: Initiates coverage of goodbaby international (01086) with a "buy" rating. Leading global infant and child brand.

Huafu Securities released a research report stating that it is expected that GOODBABY INTL (01086) will have a net profit attributable to shareholders of 150 million Hong Kong dollars, 344 million Hong Kong dollars, and 385 million Hong Kong dollars in 2025-2027, with growth rates of -58%, +129%, and +12% respectively. The current market value corresponds to a PE ratio of approximately 12X and 5X in 2025 and 2026. Considering the good growth potential of the company's Cybex brand, and the profit optimization potential of Evenflo and gb brands in 2026, the valuation level is lower than the average of comparable companies. The current valuation of the company is low, with cash flow and EBITDA supporting the market value, and if future profits improve, the valuation is expected to recover, giving a "buy" rating for the first coverage. Huafu Securities main points are as follows: The categorization and differentiation of the domestic infant and child products industry, and the relative stability of the overseas market size and structure 1) In the domestic market, the scale of the Chinese parenting product market (including durable goods, consumer goods sub-markets) classified by product type increased from 121.8 billion yuan in 2020 to 144.1 billion in 2024, with a CAGR of 4.3%. In the sub-categories of infant and child products in China, the CAGR of durable goods from 2020-2024 is approximately 7.2%, faster than the 2.6% CAGR level of consumer goods during the same period; the mid-to-high-end parenting product market has a CAGR of approximately 7.4% from 2020-2024. In terms of distribution structure, offline channels account for approximately 60% of the infant and child durable goods in China, with increasing competition in recent years on e-commerce platforms, causing a decline in gb brand market share. 2) In overseas markets, the European and American infant and child durable goods industry is a stable and growing market with high market concentration. From manufacturing perspective, about 60% of baby carriages and 80% of car seats exported globally come from China. The brand Cybex under GOODBABY INTL has a leading market share in the European market, while Evenflo is in the second tier in the US, with a relatively stable competitive position in the industry. A globally leading infant and child durable goods enterprise, successfully transitioning from ODM to a global brand, with significant business differentiation The company was founded in 1989 by Mr. Song Zheng, who independently developed and designed the first children's pram and established the brand "Goodbaby" in 1993. In 1994, the company started its internationalization strategy, gradually entering the US and European markets, becoming the world's largest manufacturer of baby carriages in major markets in 2009. Before 2014, the company's business was mainly based on ODM, but from 2014-2017 through the acquisitions of Cybex, Evenflo, and Goodbaby's Chinese business, it gradually developed into a company operating in multiple countries with multiple brands in the infant and child durable goods industry. Currently, the company's overseas business accounts for approximately 80% of revenue, with Europe and other markets accounting for about 50%, and the remaining mainly in the North American market. After completing large-scale acquisitions, from 2018-2024, revenue grew at a rate of +0.26%, with Cybex, Evenflo, gb, OEM, and other businesses growing at rates of 13.6%, -5.2%, -21.1%, and -4.3% in the first half of 2025, with significant business differentiation. Profit benefiting from business adjustments, net profit reached a historic high in 2024, disturbances in 2025, improvements expected in 2026 Historically, the company's net profit attributable to shareholders has fluctuated significantly, mainly due to the global supply chain disruptions and fluctuations in raw material and shipping prices under the impact of the pandemic in 2021-2022, further magnifying pressures on the company's OEM and domestic brand businesses, leading to a historic low in profitability. In 2024, with the weakening of the aforementioned disruptions and the company's deepening of operational optimization for the gb brand, revenue growth resumed, and net profit attributable reached a historic high of 356 million Hong Kong dollars. However, in 2025, due to the impact of US tariff policy and changes in child safety seat regulations, the company's operations in the North American region faced pressure again, with net profit down by -43% year-on-year in the first half of 2025. Looking ahead to 2026, with the US tariff policy becoming more normal and showing signs of relaxation, it is expected that the profit disturbances caused to the company in 2025 will decrease. Combined with operational optimization of the gb brand, and Cybex maintaining high-quality growth, the company's profitability is expected to recover from the low in 2025, continuing the trend of improvement seen since 2024. Risk factors: Fluctuations in demand in overseas markets and industry policy, business operations in China falling below expectations.