Morgan Stanley lowered its target price for Hengan International (01044) to HK$57 from HK$73 and downgraded its rating to "equal-weight" from "overweight".
The research house said Hengan's business reforms during 2015-17 yielded 10-13% sales growth for 2018-19, higher than the 3-6% level of 2015-17. However, likely because of a slower push in e-commerce and new product rollout, it recorded 1% sales decline in 2020, underperforming peers.
Hengan is working on new initiatives to better operate in e-commerce and with new products. The market's expectations are low, given Hengan's trough valuation, but Morgan thinks it could take a few more years for the company to conduct a thorough corporate adjustment.