Company Reports

We will discontinue analyst coverage of Hengan International on or about Sept. 1, 2026.

We review our 2026 forecasts for Hengan International ahead of its interim results in August.

Hengan International operates in the tissue, sanitary napkin, and diaper markets in China and is one of the leading brands in tissue and sanitary napkins. Being one of the early movers in personal-care products, it has developed an extensive offline distribution network in China. In recent years, the company's focus is to strengthen its market position in e-commerce platforms and emerging channels such as online-to-offline and video-streaming platforms, as consumers look for bargains amidst a soft macro and small brands emerged in these new channels.

Hengan's 2025 revenue and net profit rose 1.8% and 10.3% year on year, respectively, to CNY 23.1 billion and CNY 2.53 billion. Sales growth accelerated in the second half across both sanitary napkin and tissue categories.

Soft consumer sentiment and stiff competition continue to weigh on the sanitary napkin sector, which is the major profit driver for Hengan.

Hengan International operates in the tissue, sanitary napkin, and diaper markets in China and is one of the leading brands in tissue and sanitary napkins. Being one of the early movers in personal-care products, it has developed an extensive offline distribution network in China. It has also penetrated lower-tier cities, which contributed close to 80% of its sales in 2021. With its focus on lower-tier cities, the majority of the firm's products sit in the mass market below-premium segments.

Hengan International operates in the tissue, sanitary napkin, and diaper markets in China and is one of the leading brands in tissue and sanitary napkins. Being one of the early movers in personal-care products, it has developed an extensive offline distribution network in China. It has also penetrated lower-tier cities, which contributed close to 80% of its sales in 2021. With its focus on lower-tier cities, the majority of the firm's products sit in the mass market below-premium segments.

Hengan International reported first-half 2025 results, with revenue falling 0.2% year on year while operating profit declined by 7.3%. The company reclassified its business segments, combining sanitary napkins and diapers into the new hygiene products segment.

We review our 2025 forecasts for Hengan International ahead of the release of its interim results in August.

No-moat Hengan International’s 2024 revenue was in line with our forecast, but net income missed our estimate by 9% due to higher sales and marketing expenses amid stiff market competition. We lowered our 2025-26 net income projections by 8%-13% while leaving longer-term forecasts largely unchanged. We bake in more pressure on Hengan’s selling prices in the tissue products over the next two years, although the company could still achieve volume growth. Consequently, we cut our fair value estimate by 6% to HKD 30 per share, which implies 14 times 2025 price/earnings and 7 times enterprise value/EBITDA. We see shares as undervalued currently, supported by an attractive 2025 dividend yield of 6.8%.

Hengan International operates in the tissue, sanitary napkin, and diaper markets in China and is one of the leading brands in tissue and sanitary napkins. Being one of the early movers in personal-care products, it has developed an extensive offline distribution network in China. It has also penetrated lower-tier cities, which contributed close to 80% of its sales in 2021. With its focus on lower-tier cities, the majority of the firm's products sit in the mass market below-premium segments.

Hengan International operates in the tissue, sanitary napkin, and diaper markets in China and is one of the leading brands in tissue and sanitary napkins. Being one of the early movers in personal-care products, it has developed an extensive offline distribution network in China. It has also penetrated lower-tier cities, which contributed close to 80% of its sales in 2021. With its focus on lower-tier cities, the majority of the firm's products sit in the mass market below-premium segments.

We review our 2024-25 forecasts for no-moat Hengan and lower our net profit projections by 14%-16% due to expectations for continued price competition in the tissue and sanitary napkin markets. Despite positive volume growth for tissues, Hengan had to increase promotions and lower ex-factory prices. We expect this situation to persist into at least first-half 2025 as consumers continue to look for bargains and small brands, selling via e-commerce channels, offer competitive pricing.

No-moat Hengan reported 2024 interim results where net income marginally exceeded our forecast but missed on revenue. It's worth noting that despite a 3% year-on-year sales decline, gross profit rose 4% thanks to growing volume and favorable input costs. The disappointing top line was primarily due to price competition, as tissue sales volume increased by double digits. We are positive on the company's progress in ramping up new products in the sanitary napkin business as well as improving mix shift in diapers segment. Sales growth in new channels also outperformed traditional channels, showing continued progress in channel transition, which Hengan previously lagged peers. We think the 7% share price drop post-results is an overreaction to near-term top-line pressure and overlooks the steps that management has taken to improve the earnings quality of the business. We left our earnings projections largely unchanged and retain fair value estimate at HKD 35 per share, which implies 12 times 2024 price/earnings, 6 times EV/EBITDA and 4.2% dividend yield. We continue to view shares as undervalued, underpinned by an attractive dividend yield of 6.4%.

Hengan International operates in the tissue, sanitary napkin, and diaper markets in China and is one of the leading brands in tissue and sanitary napkins. Being one of the early movers in personal-care products, it has developed an extensive offline distribution network in China. It has also penetrated lower-tier cities, which contributed close to 80% of its sales in 2021. With its focus on lower-tier cities, the majority of the firm's products sit in the mass market below-premium segments.

We reduce no-moat Hengan’s 2024 net income projection by 4% due to lower expectations for its tissue segment, which more than offset the improvement in the diaper segment. We think competition in the tissue industry has dampened Hengan’s sales in the first half as lower wood pulp prices allowed smaller players to offer cheap offerings via new retail channels such as video streaming platforms.

Hengan International operates in the tissue, sanitary napkin, and diaper markets in China and is one of the leading brands in tissue and sanitary napkins. Being one of the early movers in personal-care products, it has developed an extensive offline distribution network in China. It has also penetrated lower-tier cities, which contributed close to 80% of its sales in 2021. With its focus on lower-tier cities, the majority of the firm's products sit in the mass market below-premium segments.

No-moat Hengan International reported 2023 results that trailed our estimates on revenue but beat on gross and net profit. A favorable cost environment drove better-than-expected margins for major categories, while the notable increase in net profit was due to a significant reduction in foreign exchange loss compared with last year. The company has demonstrated decent progress in penetration into e-commerce and new retail channels, which lifted revenue growth, and we think these are good venues to drive product mix shift in the long term.

Hengan International operates in the tissue, sanitary napkin, and diaper markets in China and is one of the leading brands in tissue and sanitary napkins. Being one of the early movers in personal-care products, it has developed an extensive offline distribution network in China. It has also penetrated lower-tier cities, which contributed close to 80% of its sales in 2021. With its focus on lower-tier cities, the majority of the firm's products sit in the mass market below-premium segments.

We lower our 2023-24 earnings forecasts by 6% to 10% for no-moat Hengan International following a recent discussion with management and update our view for 2024. We reduce our fair value estimate slightly to HKD 35 per share from HKD 37 per share, which implies 13 times 2024 P/E and is consistent with its five-year historical average. We think the tissue segment will be Hengan’s medium-term top-line growth driver. While sanitary napkins will remain the primary profit driver, the new normalized gross margin should be in the low 60% range, versus around 70% in the past, due to stiff competition. The company should face a cost tailwind in 2024 as wood pulp and petrochemical prices are expected to fall, but price competition would be a headwind to revenue growth. We think the company’s shares are undervalued with an implied 10 times 2024 P/E and over 5% dividend yield for 2024. In our view, concern about the modest medium-term growth outlook is priced in.