Initiating Coverage of Blue Moon, an Undervalued Growth Story in China

We are initiating coverage of Chinese home and personal care manufacturer Blue Moon Group Holdings with a fair value estimate of HKD 13.50 and a narrow economic moat rating. With the benefits of scale in several Chinese provinces and a focused portfolio, we think the company sits in a sweet spot among competitors. It is large enough to have the benefits of scale, but it is focused enough to be able to allocate capital efficiently, and it leads its categories in the fast-growing premium segments and in e-commerce. There is around 17% upside to our estimate of intrinsic value, which implies 34 times 2022 earnings, and if first-half results show a resumption in the upward trend of laundry volume in China, both the business and the stock could regain momentum in the coming months.