[ET Net News Agency, 20 August 2020] Morgan Stanley raised its target price for Hengan
International (01044) to HK$83 from HK$78 and maintained its "buy" rating.
The research house raised its operating profit (OP) estimates by 5%-7% for 2020-22, as
Hengan's GPM (gross profit margin) and OP were strong beats in 1H. In addition to the
benefit of lower pulp cost, which was well expected by the market, Morgan thinks the GPM
beat was also due to continued improvement in mix/pricing.
It also raised its net profit estimates by 1-3%, as it assumed a lower government grant
and more FX loss, to factor in the trend in 1H. Morgan thinks earnings growth should be
strong in 2020 due to sales recovery and cost tailwinds, as pulp price remain weak. (KL)