| Valuation method | Value, HK$ | Upside, % |
|---|---|---|
| Artificial intelligence (AI) | 32.80 | 16 |
| Intrinsic value (DCF) | 19.91 | -30 |
| Graham-Dodd Method | 7.70 | -73 |
| Graham Formula | 8.20 | -71 |
Hengan International Group Company Limited is a leading Chinese personal hygiene products manufacturer with a comprehensive portfolio spanning tissue products, feminine care, baby diapers, and adult incontinence products. Founded in 1985 and headquartered in Jinjiang, China, Hengan has established itself as a dominant player in China's consumer defensive sector through its extensive distribution network and strong brand recognition. The company operates across multiple product categories including sanitary napkins, pantiliners, disposable diapers, tissue papers, and wet wipes, serving both domestic and international markets. Hengan's vertically integrated manufacturing capabilities and focus on quality control have enabled it to maintain competitive pricing while ensuring product consistency. As China's population continues to urbanize and disposable incomes rise, Hengan is well-positioned to benefit from increasing hygiene awareness and consumption upgrades. The company has also expanded into e-commerce and new product categories including maternal and child care products, medical instruments, and household goods, diversifying its revenue streams beyond traditional hygiene products.
Hengan International presents a mixed investment case with several attractive fundamentals offset by concerning financial metrics. The company operates in the defensive household and personal products sector, providing stable demand through economic cycles, and maintains strong market positions in tissue and feminine hygiene products in China. With a beta of 0.5, the stock offers lower volatility than the broader market. However, concerning factors include elevated debt levels of HKD 13.1 billion against cash of HKD 14.3 billion, resulting in net cash of only HKD 1.2 billion despite the company's size. The operating cash flow of HKD 3.1 billion, while positive, appears constrained relative to the business scale, and capital expenditures of HKD 1.6 billion suggest ongoing investment needs. The dividend yield appears reasonable but must be evaluated against the company's debt servicing requirements and growth capital needs in a competitive market.
Hengan International maintains its competitive position through extensive distribution networks, brand portfolio strength, and manufacturing scale that enables cost efficiencies. The company benefits from first-mover advantage in China's personal hygiene market and has built trusted household brands over nearly four decades. However, Hengan faces intensifying competition from both international giants and domestic players. Procter & Gamble and Kimberly-Clark bring superior R&D capabilities and global brand power, while local competitors like Vinda International offer aggressive pricing and deeper regional penetration. Hengan's competitive advantages include its comprehensive product portfolio that allows cross-selling opportunities and its deep understanding of Chinese consumer preferences. The company's vertical integration provides cost control benefits, though this also results in significant capital expenditure requirements. In the rapidly evolving Chinese market, Hengan must contend with the rise of e-commerce platforms that enable smaller brands to reach consumers directly, potentially eroding the value of traditional distribution networks. The company's expansion into adjacent categories like maternal and child care represents both diversification opportunity and increased competitive exposure to specialized players in those segments.