We Expect Margins to Erode in 2H 2018 From Hengan, Shares Slightly Undervalued to Our HKD 70 FVE
While we anticipate no-moat Hengan International Group’s revenue to grow at a high-single-digit rate in the second half of 2018, driven by strong sales volume from the tissue paper segment, we expect profitability to deteriorate due to increasing raw material (paper pulp) prices. Although we lower our 2018 full-year operating profit forecast to CNY 5.21 billion (down 1.2% from last year) from CNY 5.33 billion previously, our fair value estimate for Hengan remains at HKD 70 per share, given the n...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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