Citi released a research report stating that it maintains a 'Neutral' rating on Hengan Int'l (01044), lowering the net profit forecast for 2024 to 2026 by 15% to 17% to reflect weakening sales and profit prospects in the face of industry challenges and intense price competition. The target price has been revised down from HK$25 to HK$21.1, equivalent to a forecast PE ratio of 9 times next year.
The bank indicated that after recent meetings with Hengan Int'l management, it believes that due to intense price competition, operational deleveraging, and reduced government subsidies, the company's sales and profit margin in the second half of the year will face more severe challenges compared to the first half. However, the management maintains the fixed annual dividend at RMB 1.4 per share, with a dividend yield of 6.9%, an attractive level.
