[ET Net News Agency, 20 January 2021] Nomura lowered its target price for Hengan
International (01044) to HK$49.1 from HK$87 and downgraded its rating to "reduce" from
"buy".
Though Hengan showed signs of sequential sales volume improvement in 2H (1H sales -2%)
driven by online, the research house believes FY2020 sales growth for the tissue segment
could still end up flattish due to higher promotional costs, especially in 4Q.
The company currently has 5 months of pulp inventory, implying that FY2021 GPM could be
relatively stable, assuming only a mild increase in pulp price from 2H FY2021.
Against the intensifying competition backdrop, Nomura forecasted the SG&A ratio to be
maintained at a high level, leading to 7.7%/12.8% downward revisions in FY2020/21 net
profit. (KL)