Hengan International 1044

[winston]

DJ MARKET TALK: CS Raises Hengan International Target To HK$47.00

1408 [Dow Jones] STOCK CALL: Credit Suisse raises Hengan International's (1044.HK) target price to HK$47.00 from HK$41.11, revises up EPS forecast by 5% to HK$1.72, as broker expects better-than-expected operating margins due to falling raw material prices, rising sales.

Keeps Outperform call; expects more earnings upgrades from other brokerages following firm's interim results in early September. Shares +4.6% at HK$39.75.

[winston]

Not vested. I'm not as positive as Dr. Check of The Standard below...

Look out for stars falling to earth

I mentioned yesterday that some stocks can revisit their all-time highs even under adverse market conditions.

Follow such stocks closely. It is never too late to buy these shares when their prices decline. Hengan International (1044) - known as China's Procter & Gamble - is one such star.

Hengan makes, distributes and sells personal hygiene items such as sanitary napkins, disposable diapers, tissue paper and skincare products.

Hengan's net profit rose 33 percent to HK$1.34 billion at the end of December from a year earlier.

Almost half its revenue came from the sale of tissue paper. Sanitary napkins and disposable diapers account for 25 percent and 23 percent of total revenue respectively.

Gross profit margin for these three products were 31.6 percent, 57.9 percent and 35.3 percent respectively. Dearer wood pulp and petrochemical prices have raised production costs.

But Hengan hiked profits by improving its sales network, selling more high-end products, raising prices and cutting costs.

A lower tax rate also helped the bottom line.

Its share price rose more than nine times from around HK$5 in early 2005 to a record high of HK$49.50 in intraday trade yesterday.

Dr Check recommended this stock three times in this column - on December 17, 2007 when Hengan was trading at HK$35.90; June 10, 2008 (HK$27.90); and December 12 (HK$23.70).

This stock is worth focusing on near HK$43 on hopes of good interim results due out next month.

[winston]

Not vested. From UOB Kay Hian:-

Results
Net profit soared 54% yoy to HK$967m in 1H09, above our estimate of HK$879m. Pre-tax profit grew 65% yoy to HK$1.2b. Sales surged 36.1% yoy to HK$5.1b. The company has recommended an interim dividend of HK$0.50/share (2008: HK$0.32/share).

Earnings revision
We have raised our 2009, 2010 and 2011 earnings forecasts by 11%, 17% and 24% respectively.

Valuation/ Recommendation
The three leading consumer companies reported their 1H09 results. Hengan led the pack with the highest earnings growth. Want Want (151 HK) reported a 6.4% yoy decline in net profit. Tingyi (322 HK) reported a 40.6% increase in net profit.

Hengan also led the pack in sales growth momentum in 1H09 followed by Tingyi (22.1% yoy) and Want Want (12.5% yoy). Hengan is trading at 20.3x 2010 PE vs Tingyi at 23.2x and Want Want at 18.2x. At this stage, we think Hengan deserves a premium in the league. We continue to set our target 2010 PE at 24.7x (historical average 2006-08). As we have revised up our 2010 earnings forecasts, we have raised our target price from
HK$43.20 to HK$50.70. Maintain BUY.

[winston]

DJ MARKET TALK: Hengan Pft Margins Likely To Remain High - ICBCI

0933 [Dow Jones] Hengan's (1044.HK) short-term upside hinges on investors willing to accept premium valuations as suggested by analysts, with most assigning HK$47-HK$52 targets (DBS Vickers: HK$47.40, Macquarie: HK$50.00, UOB KayHian: HK$50.70, ICBC International: HK$52.00) based on 23X-25X FY10 earnings.

ICBCI says target P/E of 25X not too aggressive given Hengan's solid business base, market leading position, product innovation, full-year contribution from QinQin (snacks unit); tips "rosy prospects" as margins expected to maintain at high level in 2H09, 1H10 as 260,000 tons of low-priced wood pulp stocked up, can be used for production up to March 2010.

[winston]

Not vested.

DJ MARKET TALK: Macq Upgrades Hengan To Outperform; HK$50 Target

0835 [Dow Jones] STOCK CALL: Macquarie upgrades Hengan International (1044.HK) to Outperform from Neutral, raises target price to HK$50 from HK$45.

Notes revenue +36% on-year to HK$5.1 billion with net profit +54% on-year to HK$966.7 million; says results were better than expectations. Says gross margin improved from 39.2% to 45.0% with assistance of lower raw material costs, while operating costs were kept under control; tissue segment was key driver with segment margin up from 9.2% to 20.7%.

Broker tips "rosy" outlook; notes new improved higher priced diaper has been launched after successful trial period, "which will assist segment revenue growth going forward."

Adds, "Hengan continues to penetrate further into second and third tier cities. It has begun to integrate the logistics, supply chain and logistics functions of snack foods and its original segments."

[winston]

When I see an Analyst use words like "Premium Valuation Justified", my alert level goes up a few notches

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DJ MARKET TALK: Hengan +1.2%; Premium Valuation Justified - KGI

1106 [Dow Jones] Hengan (1044.HK) continues post-results gain, +1.2% at HK$43.75; volume tapers off though, may hint short-term upside may be limited. KGI says low pulp costs locked in until 1H10, creating significant cost advantage over competitors; 2H09 outlook even better on diapers pickup, less promotions on tissue paper.

House ups stock to Outperform from Neutral, target price to HK$49 which translates into 23.2X FY10 P/E; while at premium to average of consumer staple plays in China, is comparable with leading names such as Tingyi (0322.HK), Mengniu (2319.HK).

"These high quality plays normally receive valuation premiums that can be justified by their leading industry position and stable solid performance," KGI says.

[winston]

Not vested.

DJ MARKET TALK: Nomura Ups Hengan Target To HK$56.80 Vs HK$42.32

1142 [Dow Jones] STOCK CALL: Nomura raises Hengan International (1044.HK) target to HK$56.80 from HK$42.32 after raising FY09-11 earnings forecasts by 14%-22%. "We appreciate management's consistent efforts to upgrade the product mix and deepen distribution coverage, which should drive strong top-line growth and offset potential cost pressures." Keeps at Buy.

Adds, rural development should benefit Hengan, given its deep penetration in rural markets and tier-2 and tier-3 cities. Stock +0.4% at HK$48.00.

Source: Dow Jones Newswire

[winston]

Not vested.

DJ MARKET TALK: Mirae Raises Hengan Target To HK$58.70 Vs HK$46

1158 [Dow Jones] STOCK CALL: Mirae Asset Securities raises Hengan (1044.HK) target to HK$58.70 from HK$46.00 after increasing FY09-11 earnings forecasts by 8%-10% as faster volume growth expected as economy, consumption sentiment continue to improve. Keeps Buy call.

Says Hengan continues to gain market share over competitors; even as pulp prices expected to gradually trend up in near term, Hengan continues to deliver over 20% volume growth vs the industry average of about 10%. Says, shift in product mix to higher-margin products should help cushion higher raw material prices.

Adds, with Hengan's leading market position, it has ability to pass on any cost spikes to customers by raising average selling prices.

Source: Dow Jones Newswire

[winston]

Not vested. Big jump in Target Price. Is the Analyst trying to catch up now because he was wrong ? If you cant forecast the numbers for sanitary pads, try forecasting the numbers for an internet company ..

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DJ MARKET TALK: DBS Raises Hengan Target To HK$72 From HK$47.40

1049 [Dow Jones] STOCK CALL: DBS Vickers bumps up Hengan International (1044.HK) target to HK$72.00 from HK$47.40, on more aggressive target P/E of 30X vs 23X previously, also expects more upbeat top-line growth of 20%-30% in all lines of operations in FY10, on back of enhanced product mix, steady flow of new products.

Adds, savings in advertising, promotion expenses to compensate loss of profitability from higher wood pulp prices. "We believe the consumer sector will continue to trade at a premium to the broader market due to favorable government policy," DBS says; adds, coupled with leading market position, well-known brand, Hengan deserves to trade at upper end of historical P/E range; keeps Buy call.

Source: Dow Jones Newswire

[winston]

Not vested.

DJ MARKET TALK: Hengan Pullback Offer Good Entry Chance - GC

1110 [Dow Jones] STOCK CALL: GuocoCapital tips recent pullback in Hengan International (1044.HK) from all-time high of HK$60.05 (Dec. 1) as good entry opportunity for long-term investors; believes release of FY09 results likely re-rating catalyst, as expects sequential sales, gross margin improvement in 2H09, underpinned by better economy, new product launches, product mix improvement.

Longer term, Hengan will "enjoy years of high growth, especially in rural areas" where disposable income rising faster, disposable paper penetration rate much lower.

House's EPS forecasts for 2009-2011 at HK$1.66, HK$2.08, HK$2.59 for EPS CAGR of 25%, rendering valuation at 32X FY09, 25X FY10 P/E undemanding; starts stock at Buy with HK$62.39 target pegged on 10X FY10 P/E. Stock down 0.8% at HK$52.40.

Source: Dow Jones Newswire