Damo predicts that Hengan International's sales will increase by 4% per year from this year to 2026.
The Zhitong Finance App learned that Morgan Stanley released a research report stating that it lowered the sales forecast for Hengan International (01044) by 2% to 4% and net profit forecast of 1% to 8% for this year and next two years to reflect a weak growth outlook based on fierce market competition and weak macroeconomic conditions. The bank's operating profit margin fell this year, partly offset by an increase in gross margin due to the continuing advertising war in the industry as a whole. The target price was reduced from HK$35 to HK$27, and the rating was “in line with the market”.
The bank predicts that sales of Hengan International will increase by 4% every year from this year to 2026, gross margin will expand by 0.4 percentage points this year, and drop by 0.2 and 0.3 percentage points next year and 2026, offsetting favorable material prices due to the increase in promotion. Based on management's plan to increase advertising and promotion-related expenses to drive revenue growth, the bank's overall forecast is that the company's profit will drop 1% this year and remain roughly the same next year and 2026.