Group 1 - The incident involving "Heart to Heart" flagship store customer service has sparked significant public interest, with reports of a customer being insulted and offered "1000 yuan in ghost money" as compensation [1][2] - The company, Hengan Group, has confirmed that the police have initiated an investigation into the matter, and they have reached out to the affected consumer for compensation [1][2] - Initial findings indicate that there was no actual dispute between the parties involved, but the customer service account showed signs of abnormal login activity, prompting further investigation by the company's technical department [2] Group 2 - The company has stated that they take the incident seriously and are conducting an internal review, which may lead to penalties for the involved personnel [2] - The customer service representative's comments included a dismissive attitude towards complaints, suggesting that such responses were common practice within the company [1][2] - The company aims to resolve the situation and restore its brand image following the negative impact of the incident [1]

Group 1 - The State Council of China, led by Premier Li Qiang, approved the draft of the "Regulations on Government Data Sharing," aiming to enhance public services and create a unified national government big data system [3] - The People's Bank of China announced a new loan program for service consumption and elderly care, with a total quota of 500 billion yuan and an interest rate of 1.5% [7] - The People's Bank of China released the first quarter monetary policy report for 2025, indicating a moderately loose monetary policy to support economic recovery [8] Group 2 - The G20 Trade and Investment Working Group held its second meeting, discussing global trade challenges and criticizing unilateral tariff policies by the U.S. government [6] - Panasonic announced plans to cut approximately 10,000 jobs globally, including 5,000 in Japan, as part of a strategy to terminate unprofitable businesses [18] - Tencent launched a new open-source video generation tool, indicating ongoing innovation in the multi-modal video technology sector [23] Group 3 - Alibaba's founder Jack Ma visited the company's headquarters to encourage employees to maintain their entrepreneurial spirit [17] - The Chinese government is intensifying efforts to combat the smuggling of strategic minerals, emphasizing the importance of resource export control for national security [12] - The China Securities Regulatory Commission and the Ministry of Finance are seeking public opinions on the revised draft of the "Securities Settlement Risk Fund Management Measures" [10]

Group 1 - The core issue involves a customer service incident at Hengan International's "Heart to Heart" e-commerce platform, where a customer was insulted by a service representative, leading to a public outcry and company investigation [1] - Hengan International reported that the customer service account in question showed unusual login activity, prompting further investigation into whether it was a personal misconduct or a technical issue [1] - The company emphasized its commitment to addressing the situation, stating that if the behavior was intentional, appropriate disciplinary actions would be taken against the employee, and compensation would be provided to the affected customer [1] Group 2 - Hengan Group's latest financial report for 2024 shows a revenue of 22.669 billion RMB, a year-on-year decrease of 4.6% [2] - Operating profit for the same period was 3.355 billion RMB, down 15.7% year-on-year, while net profit fell to 2.299 billion RMB, a decline of 17.9% [2] - The "Heart to Heart" brand, which is a significant contributor to the company's revenue, accounted for 59.2% of total income, with a year-on-year drop of 2.4% to 13.42 billion RMB [2] - The sanitary napkin segment represented 25% of total revenue, experiencing a decline of approximately 8.1% [2]

Core Viewpoint - The incident involving the "Heart to Heart" flagship store's customer service has raised significant public concern, leading to an investigation by the parent company, Hengan Group, regarding the abnormal login of the involved customer service account [1]. Group 1 - A customer reported being insulted by the customer service of the "Heart to Heart" flagship store, with the representative suggesting compensation in "ghost money" [1]. - Hengan Group confirmed that the customer service account had an abnormal login, with the login location differing from the work location, and is currently investigating the matter [1]. - The company stated that there was no actual dispute between the parties involved, and they plan to compensate the affected consumer while also taking disciplinary action against the responsible personnel [1].

Financial Performance - In 2024, the company's revenue was RMB 22,669.2 million, a decrease of 4.6% from RMB 23,767.9 million in 2023[23]. - The net profit attributable to shareholders of the company for 2024 was RMB 2,298.5 million, down 17.9% from RMB 2,800.5 million in 2023[23]. - The basic earnings per share decreased to RMB 2.015 in 2024 from RMB 2.415 in 2023, representing a decline of 16.6%[23]. - The net profit margin based on profit attributable to shareholders was 10.1% in 2024, down from 11.8% in 2023[16]. - The Group's overall revenue decreased by approximately 4.6% to about RMB 22,669,215,000 for the year ended December 31, 2024, compared to RMB 23,767,936,000 in 2023[66]. - Profit attributable to shareholders fell approximately 17.9% to RMB 2,298,535,000 from RMB 2,800,533,000 in the previous year[42]. - Operating profit fell by 15.7% to approximately RMB 3,354,591,000, primarily due to the decline in overall gross profit[69]. - The Group's overall gross profit decreased by approximately 8.6% to about RMB 7,324,940,000, with a gross profit margin of approximately 32.3%, down from 33.7% in 2023[68]. Product Performance - The product revenue breakdown for 2024 showed sanitary napkins at 59.2%, tissue paper at 25.0%, disposable diapers at 10.2%, and others at 5.6%[22]. - Revenue from the sanitary napkin business decreased by approximately 8.1% to about RMB 5,677,965,000, accounting for approximately 25.0% of the Group's overall revenue[75]. - The tissue paper business revenue decreased by approximately 2.4% year-on-year to about RMB 13.42 billion, accounting for approximately 59.2% of the Group's total revenue[92][93]. - The gross profit margin for the sanitary napkin business remained stable at around 63.7% in 2024, with expectations for improvement in 2025[78]. - The gross profit margin for the tissue paper business declined to approximately 18.9% in 2024, down from 21.7% in 2023[96]. - The premium "Q • MO" series of disposable diapers contributed significantly, with its sales proportion increasing to 43.5%, enhancing gross profit margin[48]. - The "Fluffy Cube" series in the tissue paper business and the "Tianshan Cotton Series" in sanitary napkins received positive market responses, driving category growth[48]. Market Strategy - The company aims to enhance its corporate culture and brand image to become a leading manufacturer and distributor of fast-moving consumer products in China[4]. - The Group focused on product upgrades and premiumisation, resulting in strong sales performance for premium products amid intensified market competition[38]. - Hengan International actively expanded its e-commerce platforms and new retail channels to enhance market share and solidify its leading position[38]. - The Group plans to continue its omni-channel strategy and brand optimisation to stabilize revenue in 2025[64]. - The Group's e-commerce and new retail sales increased to approximately 34.1% of total sales, up from 30.1% in 2023, with revenue growth of approximately 8.0% year-on-year[65]. - The Group's strategy includes expanding emerging sales channels while reinforcing advantages in traditional channels amid intensified market competition[75]. Financial Position - The Group's total assets as of December 31, 2024, were RMB 39,804,411,000, a slight decrease from RMB 40,215,901,000 in 2023[28]. - Total liabilities decreased to RMB 18,658,830,000 from RMB 19,586,050,000 in the previous year[28]. - The gearing ratio was approximately 62.6% as of December 31, 2024, compared to 69.8% in 2023[146]. - The net gearing ratio was approximately negative 27.7% as of December 31, 2024, compared to negative 26.4% in 2023, indicating a net cash position of approximately RMB 5.80 billion[146]. - As of December 31, 2024, the Group's cash and bank balances totaled approximately RMB 18,892,708,000, while bank borrowings amounted to approximately RMB 13,089,848,000[138]. - The Group's total borrowings amounted to approximately RMB 13.09 billion, down from RMB 14.24 billion in 2023[143]. Sustainability and ESG Initiatives - Hengan is committed to integrating sustainable practices into its operations and has established a four-level ESG governance structure[160]. - Hengan's greenhouse gas emission intensity was 0.63 tons of CO2 equivalent per ten thousand yuan of sales revenue in 2024[166]. - Hengan's MSCI ESG rating reached "BBB" as of the end of the reporting period, and it has been included in the FTSE4Good Index Series[158]. - The company was awarded the "Prestigious ESG Accomplishment of the Year" in Hong Kong in 2024, becoming the only consumer goods company shortlisted for the award[159]. - Hengan has initiated the "100% Native Wood Pulp as Quality Certification Mark for Life Paper" initiative to promote quality standards in the tissue industry[173]. - The Group encourages suppliers to improve their ESG performance, integrating it into the supplier evaluation system[198]. Community Engagement - The Group donated 20 million yuan to the Quanzhou Autism Care Foundation to support special children[197]. - A total of 452 boxes of loving materials were donated to 27 elderly welfare institutions in Jinjiang City[197]. - The Group was awarded the "Quanzhou Charity Enterprise" at the Quanzhou Charity Conference in 2024[200]. - The "Pink Wings" initiative focuses on the health education of adolescent girls in over ten towns in northwestern Sichuan[199]. - The Group emphasizes social responsibility and community support as a core mission since its establishment in 1985[199].

Core Insights - The women's hygiene products market in China is experiencing significant growth, with the industry size projected to increase from 56.3 billion yuan in 2018 to 66.9 billion yuan in 2024, reflecting a rising demand for high-quality products [1][10]. Industry Overview - Women's hygiene products, also known as absorbent hygiene products, are essential personal care items designed for menstrual and postpartum hygiene [1][6]. - The market for women's hygiene products accounts for over 60% of the total absorbent hygiene products market in China and more than 50% globally [4]. Global Market - The global women's hygiene products market is expanding, with a projected size of $45.42 billion in 2024 and an expected growth to $89.29 billion by 2033 [8]. - The Asia-Pacific region holds the largest market share at 35%, while North America is anticipated to experience the fastest growth during the forecast period [8]. Domestic Market - The domestic market is witnessing a shift towards mid-to-high-end products, driven by increased consumer awareness and demand for quality [10][19]. - Online sales channels for women's hygiene products have grown significantly, with their share rising from 27.48% in 2018 to 49.86% in 2024 [12]. Competitive Landscape - The market features a mix of foreign and domestic brands, with foreign brands like Procter & Gamble and Unicharm holding significant market shares due to their established quality and technology [14]. - Domestic brands such as Hengan International and Baiya Co. are gaining traction by focusing on brand marketing and product innovation [14][15]. Development Trends - The market is expected to continue expanding, driven by a large female population and increasing quality demands [19]. - There is a noticeable trend towards product diversification and personalized services to cater to varying consumer preferences [20]. - Environmental sustainability is becoming a key focus, with companies adopting biodegradable materials and reducing carbon footprints [22]. - The integration of online and offline sales channels is accelerating, with e-commerce playing a growing role in the market [23].

Core Viewpoint - The financial performance of Hengan International has declined, with both revenue and net profit decreasing in 2024, primarily due to rising raw material costs and negative public sentiment surrounding sanitary napkins [2][3]. Financial Performance - In 2024, Hengan International reported a revenue of 22.669 billion yuan, a year-on-year decrease of 4.62% [2]. - The net profit for the same period was approximately 2.299 billion yuan, down 17.93% year-on-year [2]. - The tissue paper business, which accounts for over 50% of revenue, generated 13.422 billion yuan, a decline of about 2.37% [2]. - The sanitary napkin segment saw the largest drop, with revenue of 5.678 billion yuan, down 8.09% year-on-year [2]. - The only growth came from the diaper segment, which achieved revenue of 1.261 billion yuan, an increase of 0.52% [2]. Cost Issues - Hengan International attributed its performance decline to rising raw material prices, particularly the cost of wood pulp, which increased in the second quarter, affecting third-quarter inventory costs [3]. - Overall gross profit fell by approximately 8.6% to about 7.325 billion yuan, with the gross margin decreasing to around 32.3% [3]. - The company faced significant pressure from rising raw material costs, which have been a recurring issue impacting profitability [3]. Industry Sentiment - Recent controversies regarding the safety and quality of sanitary napkins have negatively affected Hengan International's performance, with the sanitary napkin segment being the most impacted [4]. - Multiple brands, including Hengan's competitors, have faced scrutiny over product quality, leading to consumer doubts about safety standards [4]. - Analysts suggest that the entire sanitary napkin industry is under pressure due to these safety concerns, which could further impact brand development and consumer trust [4][5].

Core Viewpoint - The paper towel giant Hengan International is facing significant challenges due to rising costs and intense price competition in the industry, leading to a decline in both revenue and net profit for 2024 [1][2][4]. Financial Performance - Hengan International reported a revenue of 22.67 billion RMB for 2024, a decrease of 4.6% compared to the previous year [2][4]. - The net profit attributable to shareholders was 2.30 billion RMB, down 17.9% year-on-year [2][4]. - The gross profit margin fell to 32.3%, down 1.4 percentage points from the previous year [4]. Business Segment Analysis - The paper towel segment, despite generating over 14.1 billion RMB in revenue, reported a rare loss of 245 million RMB [5][9]. - The sanitary napkin segment, with a gross margin exceeding 60%, has become a key profit driver for the company [1][9]. Market Conditions - The domestic market for daily necessities is becoming increasingly competitive, with many brands engaging in aggressive price promotions, leading to a decline in average selling prices [4][7]. - The cost of raw materials, particularly wood pulp, has increased, impacting profit margins [4][7]. Strategic Response - Hengan International is focusing on diversifying its product offerings and enhancing high-margin products to offset the weak performance in the paper towel segment [1][9]. - The company is emphasizing the development of its sanitary napkin business, which has shown strong profitability despite a slight revenue decline [9][10]. - Hengan International plans to upgrade its product lines and increase the penetration of high-end products to mitigate the effects of price competition in the paper towel market [10].

Core Viewpoint - The company, Hengan International, reported a significant decline in net profit by approximately 18% for the year ending December 31, 2024, primarily due to a decrease in overall gross profit and a competitive market environment [1][3]. Financial Performance - Revenue for 2024 was RMB 22.67 billion, a decrease of 4.62% compared to RMB 23.77 billion in 2023 [2][3]. - Operating profit fell by 15.7% to RMB 3.35 billion, attributed to the decline in overall gross profit [2][3]. - Net profit was approximately RMB 2.30 billion, down 17.93% from RMB 2.80 billion in the previous year [2][3]. - The proposed final dividend is RMB 0.70 per share, unchanged from the previous year [2]. Gross Margin and Profitability - Overall gross profit decreased by about 8.6% to approximately RMB 7.33 billion, with the gross margin dropping to 32.3% from 33.7% in 2023 [3][4]. - The company anticipates a cautious approach to promotional spending in 2025, with expectations for high-end products to continue showing significant growth [3]. Business Segment Performance Sanitary Napkin Business - Revenue from the sanitary napkin segment was RMB 5.68 billion, down 8.09% year-on-year [4][6]. - The market for sanitary products is highly competitive, with price promotions affecting sales [6]. - Despite the decline, the gross margin for sanitary napkins remained stable at approximately 63.7% [6]. Diaper Business - The diaper segment saw a slight increase in revenue to RMB 12.6 billion, up 0.5% from the previous year [11][12]. - The high-end product "Q MO" experienced significant growth, with sales reaching approximately RMB 5.48 billion, a year-on-year increase of 20.1% [11][12]. - The gross margin for the diaper business improved significantly to approximately 45.4% [12]. Tissue Paper Business - Revenue from the tissue paper segment was approximately RMB 134.22 billion, a decrease of about 2.4% [9]. - The gross margin for tissue paper products fell to approximately 18.9% from 21.7% in 2023, impacted by increased promotional expenses and raw material price fluctuations [9]. Wet Wipes Business - The wet wipes segment achieved a significant revenue increase of 30.7%, surpassing RMB 1.2 billion [10]. - The gross margin for wet wipes was the highest among tissue products at 50.7% [10]. Market Trends and Strategies - The domestic consumer market remains stable, but there is a need for improved consumer spending capacity and willingness [3]. - The company is focusing on high-quality personal care products and adapting to fragmented sales channels, with e-commerce and new retail sales accounting for 34.1% of total sales [3]. - The company plans to continue promoting high-end products and enhancing its market position in the face of intense competition [6][11].

Summary of Hengan International Conference Call Company Overview - Hengan International reported a 16% year-on-year decline in operating profit to 3.4 billion yuan and a 48% drop in net profit to 2.3 billion yuan for 2024, with earnings per share approximately 2.015 yuan. Despite challenges, the company maintained a stable earnings per share of 0.4 yuan, with an annual earnings ratio of 40.8% [2][3][4]. Key Business Segments 1. **Zijin Business Segment** - Sales decreased by 2.4% to 13.4 billion yuan, while sales volume increased by 2%, leading to market share expansion. Increased promotional expenses over 30% resulted in a nearly 5% price drop [2][4]. 2. **Sanitary Napkin Business** - Revenue fell by 8% to 5.71 billion yuan, but a high-end strategy maintained a gross margin of 63.7% [2][4][5]. 3. **Diaper Business** - The diaper segment showed a slight growth of 0.5%, with high-end products now accounting for 44% of sales, boosting the gross margin from 38.1% to 45.4% [2][5]. Financial Performance - Total sales and administrative expenses rose by 40 million yuan to 5.1 billion yuan, with the expense ratio increasing from 21.3% to 22.5% due to brand promotion and employee costs, alongside a relative increase in expenses due to declining sales [2][6]. - Cash flow remained robust, with cash on hand at 18.9 billion yuan, a decrease of 700 million yuan year-on-year, while debt reduced by 1.1 billion yuan to 13.1 billion yuan, resulting in a net cash flow of 5.8 billion yuan, an increase of 400 million yuan [2][7]. Market Outlook - For 2025, the sanitary products market is expected to remain competitive, with limited potential for further increases in promotional expenses. Raw material costs are anticipated to stabilize, and the diaper business is expected to improve through high-end products, although no significant improvements are seen in the sanitary napkin sector [4][8][9]. Production Capacity and Utilization - Hengan's production capacity for household paper reached 1.62 million tons in 2024, with a utilization rate exceeding 80%. The company plans to expand capacity in Guangdong and Hubei to meet growing demand [2][10][19]. E-commerce and Retail Channels - In new retail channels, B2B e-commerce accounts for nearly 50%, while B2C channels make up about 30%. The remaining 20% is from retail centers and community group purchases [2][21]. Promotional Strategies - Promotional expenses increased in 2024 to combat fierce competition and boost brand promotion, leading to a recovery in specific channel sales. The company aims to maintain market share and promote long-term growth through stable promotional investments [2][14][26]. Challenges and Competitor Landscape - The company faced challenges from competitors engaging in aggressive promotional activities, reflecting intensified market competition. Despite not being directly affected by negative industry events, Hengan has paused marketing activities to address consumer sentiment [2][13][28][29]. Conclusion - Hengan International is navigating a challenging market environment with a focus on high-end product strategies and maintaining cash flow stability. The outlook for 2025 suggests continued competition, particularly in the sanitary products sector, with a strategic emphasis on e-commerce and promotional management to sustain market presence and profitability [2][8][30].