Jinwu Financial News | According to BOC International Development Research Report, sales of Hengan International (01044) in 2023 increased 5.1% year on year, core business increased 8.0% year on year, and net profit to mother increased 45.5% year on year. The 2023 results were in line with expectations, and profit margins improved significantly in the second half of the year.
Looking ahead to 2024, the sanitary napkin business is expected to perform better than the full year of 2023. Despite the sharp drop in the price of wood pulp, increased market competition will also put pressure on the average price, compounding the high base effect. The company will increase marketing expenses in the first half of this year. It is expected that the paper towel business will achieve low single-digit year-on-year growth in the first half of this year.
Given the good performance of the high-end product portfolio and declining raw material costs, the bank is optimistic about improving profit margins. However, given that high-end products currently contribute little to the tissue business, increased competition may slow the growth of the tissue business. The bank lowered the company's earnings per share and target price to HK$33.85 (previously HK$37.6), based on 11.0 times the 2024-2025 price-earnings ratio (previously 12.5x2024 price-earnings ratio) and 1.0xPEG.