[ET Net News Agency, 23 August 2019] Nomura lowered its target price for Hengan
International (01044) to HK$56 from HK$58.2 and maintained its "neutral" rating.
The research house said Hengan's 1H revenue grew 6.3% but net profit declined 3.6%.
Weaker bottom-line growth was mainly due to a business mix shift with a higher
contribution from the lower-GPM other business. Nomura also noted that operating cash flow
fell 48%, mainly due to a higher number of inventory days (45 in 1H 2019 versus 37 in 1H
2018) and receivable days (51 versus 44).
Nomura cut FY2019-21 earnings 2-4% to reflect the lower sales growth and margins, partly
offset by assumptions of higher interest income and lower wood pulp cost, the key positive
factor for GPM. (KL)