Nomura lifted its target price for Hengan International (01044) to HK$57.4 from HK$56 but downgraded its rating to "reduce" from "neutral", given concerns on the outlook for Hengan's most profitable segment (sanitary napkins), which could weigh on both sales and margin.
The research house said Hengan's sanitary napkin sales recovered in 4Q 2019, which could be due to distributors' restocking activities. The overall industry is experiencing a slowdown in growth to low-to-mid single digits, mainly driven by ASP hikes. Keen competition from international peers could pressurize Hengan's ability to raise prices.
Nomura maintained its FY2019 sales growth forecast of -1.6% and lowered its FY2020 from 5.1% to 2% for the sanitary napkin segment. It cut FY2019-21 earnings forecasts by 1-8% to reflect lower sales growth and margin, mainly for the sanitary napkin segment.
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