[ET Net News Agency, 23 August 2019] J.P. Morgan lowered its target price for Hengan
International (01044) to HK$49 from HK$57 and maintained its "underweight" rating.
The research house said Hengan's 1H earnings decline was a negative surprise for the
market. JPM has rising concerns on the structural changes in napkin business, (1) Hengan's
70% gross margin has been attracting counterfeit makers; (2) B2B online platform are
grabbing shares from traditional distributors, and (3) competition in R&D and quality
intensifies), in addition to the faster Rmb depreciation following the trade disputes.
After 1-2% revision in 2019-21 EPS, JPM forecast earnings decline of 6.5% p.a. over
2019-21. (KL)