Key takeaway

As a leading CDMO in the domestic nutrition and health foodsector, the company has platform development capabilitiesacross all dosage forms. It has established production bases andmarketing centers in China, the U.S., and Europe. Leveraging theadvantages of Chinese engineers and a global supply chain, thecompany's market share in the global nutrition and health foodCDMO market is expected to continue rising. In 2025, thecompany demonstrated resilience in the U.S. market under tariffstress tests, rapidly embraced new consumption trends in thedomestic market, and continued to break through with newcustomers in the European market, with growth highlights inboth the U.S. and Europe. In 2026, the BF personal care businesswas divested, allowing the company to streamline operations andfocus on its core business. New products continued to achievebreakthroughs in overseas channels, supporting a positiveoutlook for sustained growth driven by global businessexpansion.

Event

The company divests BF personal care businessOn June 1, the company announced it had successfullycompleted the delivery of core assets from the personal carebusiness of its subsidiary Best Formulations PC LLC. This marksthe company officially shedding this loss-making businessburden and fully focusing on its core nutrition and health foodsolutions business, injecting strong momentum for stableoperations and high-quality development.

Quick Take

BF personal care business successfully divested, refocusing on core business to reignite growthOn May 29, 2026, U.S. local time, PC Company signed an Asset Purchase Agreement with the buyer RIE, LLC, totransfer specific core assets related to the contract manufacturing, formula development, packaging, and sales ofpersonal care products, including machinery and equipment, accounts receivable, intellectual property, andinventory, for a price of USD3mn. The transaction does not constitute a connected transaction or a major assetrestructuring. On the same day, the company successfully received the first payment of USD2mn, and the closingwas completed efficiently.

The personal care business had been operating at a loss for an extended period, consistently weighing on thecompany's overall performance and exerting persistent pressure on its profitability. Following the suc cessfulcompletion of this asset transaction, all core production and operating assets related to PC's personal careproducts have been properly disposed of. Only routine legal procedures and the winding-up of a small numberof non-core assets remain to be completed. These remaining matters are straightforward and manageable, andwill not consume the company's core resources in main business operations, R&D and innovation, marketexpansion, or supply chain management, thereby substantially eliminating the drain and consumption ofoperating resources by non-core businesses. From this point forward, the company has completed thedivestiture of its loss-making non-core business, resulting in a clearer business structure and more precisedevelopment positioning. It can now fully concentrate high-quality resources, including talent, capital, andtechnology, on deeply cultivating the core track of nutritional health food solutions. Adhering to the "ThreeIrreversibles" strategy to build a solid foundation for long-term development1) Market demand orientation is irreversible. The company fully embraces new consumption trends and adaptsto the rise of new demographics, the emergence of new demands, and the advent of new scenarios. In 2025, theChina region adapted to the new consumption transformation, with its revenue structure optimized. Revenuefrom new consumption track businesses grew by over 50% YoY, and its share increased from 30% to nearly 50%. Bycustomer segment, revenue from MCN clients grew by nearly 50% YoY, while revenue from private domain clientsexceeded RMB100mn, representing approximately 50% YoY growth. 2) International business expansion isirreversible: the company adheres to the dual-wheel drive of China exports and localized overseas operations.

Overseas business revenue accounted for nearly 60% of the total, with products sold to over 50 countries andregions worldwide. For global key accounts, the company continues to expand the dimensions and breadth ofcooperation. By initiating multiple new collaboration projects, it is gradually unlocking revenue potential. It hasalso built a coordinated operations system to precisely deliver localized, customized solutions, thereby solidifyingthe foundation of its global market presence. 3) Trust relationships are irreversible: the launch of the WELMAX

Evidence-Based Nutrition Technology Platform uses clinical data to substantiate product value, helping clientsbuild trust assets around "scientifically proven effectiveness" and reducing consumer decision-making costs,thereby establishing a first-mover advantage that is difficult to replicate.

Earnings forecast and investment recommendation: We estimate revenue for 2026-2028 will beRMB4.667bn/5.269bn/5.773bn, and net profit will be RMB339mn/454mn/530mn. We maintain "Buy" rating.

Risks:

1. Food safety issues: The company's products emphasize health and wellness benefits, requiring strict controlduring processing and production. Any significant adverse reactions or food safety incidents could negativelyimpact the company's image.

2. Raw material price fluctuation risk: The company's upstream raw materials, such as fish oil and gelatin, aresubject to price fluctuations. Continued increases in raw material prices could erode profitability and significantlyimpact net profit.

3. Economic underperformance: If demand in Europe and the U.S. weakens, exports decline, or the domesticeconomy slows down, leading to reduced consumer purchasing power, the desire to purchase health-relateddiscretionary foods may decrease, which may affect the company's revenue.