Hengan (1044.HK): Positive view on Ameba reform; expansion to beauty-care and upstream pulp businesses July 11, 2018 463

Investment Summary

  • Regarding the recent trade disputes between China and USA, we expect that the Chinese government will pay more attention to the contribution of domestic demand to overall economic growth. With the increase in per capita income, it will help to boost the fast-moving consumer goods market growth, including the necessities market. As the market leader in paper towels and sanitary napkins industries in China, Hengan is expected to benefit from the trend.
  • Facing intensified market competition and rising cost of raw materials (i.e. wood pulp), Hengan responded by launching new high-margin products, and implementing the “small sales team” operation model (also known as “Hengan`s Amoeba model”) in late April last year. The improvements of the financial figures like top line and expenses savings have been showed in the second half of last year. The improvements are expected to reflect in the whole year of 2018, to offset part of the impact from rising pulp cost on gross profit margin.

About the author

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Tracy Ku
Investment Analyst

Graduated from Chinese University of Hong Kong, majoring in Economics for Bachelor Degree, and Journalism for Master Degree. Worked in financial news industry for more than four years.
Currently cover retailing, property sectors and IPOs. Good at analysis for the companies with economic policies and industry prospects.

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