Hengan’s Sales Reaccelerated in 2H17 but Margin Drops from High Input Costs; Shares Fairly Valued
No-moat Hengan’s second-half 2017 results slightly fell short of our expectations, mainly attributable to higher-than-expected raw material costs (wood pulp and superabsorbent polymer), leading to gross margin erosion. The 45.3% gross margin was 4.1 percentage points lower than the year-ago period, as the company was unable to pass on the rising costs to customers, given the intensified competitive nature of the tissue paper industry. However, the implementation of the firm’s small sales team op...Hengan International Group Co. is an investment holding company. Through its subsidiaries, Co. is engaged in the manufacturing, distribution and sale of personal hygiene products including sanitary napkins products, disposable diapers products and tissue papers products and food and snack products in the People's Republic of China, Hong Kong and certain overseas markets.
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