Furui predicts that the sales growth of Hengan International's diapers will accelerate to high single digits in 2024.
Zhitong Finance APP learned that Furui released a research report stating that due to the decrease in sales and total production costs, Furui lowered Hengan International's (01044) net income from 2024 to 2026 by 10%/12%/11% respectively. At the same time, the target price was lowered by 9%, from HKD 28.56 to HKD 26, still with a dividend yield of 5.7%. Given the limited downside, we maintain a 'hold' rating. At the same time, it pointed out that the competition in the tissue and sanitary napkin business since 2024 has been fierce, and the competition environment in the diaper business is relatively good, which is one of the bright spots.
The bank stated that the group's tissue business was affected by local enterprise promotions, but with the recent rise in pulp prices, industry insiders expect that promotion efforts may weaken in the second half of the year. Given the high base in the first half of 2023, Furui predicts that the group's tissue sales in 2024 will increase by 0.5%, and is expected to decrease by 1% in the first half of the year. The sanitary napkin business is promoted by international manufacturers. Compared with the first quarter of 2024, the competition in the second quarter is still fierce. Given the high penetration rate of sanitary cotton in China, Furui maintains a conservative attitude towards its gross margin recovery. Due to the rise in birth rate in 2024 and the withdrawal of international companies from this sub-market, Furui predicts that the sales growth of Hengan International's diapers will accelerate to high single digits in 2024.