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].

Financial Performance - Total revenue for the year ended December 31, 2024, was RMB 22,669,215, a decrease of 4.6% compared to RMB 23,767,936 in 2023[3] - Operating profit decreased by 15.7% to RMB 3,354,591 from RMB 3,977,931 in the previous year[3] - Profit attributable to equity holders of the company was RMB 2,298,535, down 17.9% from RMB 2,800,533 in 2023[3] - Basic and diluted earnings per share decreased by 16.6% to RMB 2.015 from RMB 2.415 in the previous year[3] - The gross profit margin decreased to 32.3% from 33.7% in 2023[3] - The group reported total revenue of RMB 22,669,215 thousand for the year 2024, with a breakdown of RMB 5,677,965 thousand from sanitary napkin products, RMB 1,260,631 thousand from diaper products, RMB 13,422,445 thousand from tissue products, and RMB 2,308,174 thousand from other categories[20] - The group's operating profit for the year was RMB 3,354,591 thousand, with a pre-tax profit of RMB 2,971,791 thousand and a net profit attributable to equity holders of RMB 2,298,535 thousand[20] - The group achieved a total profit of RMB 2,296,604 thousand for the year, after accounting for income tax expenses of RMB 675,187 thousand[20] Assets and Liabilities - Total assets decreased to RMB 39,804,411 from RMB 40,215,901 in 2023[9] - Total liabilities decreased to RMB 18,658,830 from RMB 19,586,050 in the previous year[11] - Cash and bank deposits decreased to RMB 14,261,723 from RMB 18,189,943 in 2023[9] - The group’s total liabilities were RMB 19,586,050 thousand in 2023, compared to RMB 18,658,830 thousand in 2024, showing an increase of about 5%[26] - The total assets as of December 31, 2023, amounted to RMB 40,215,901 thousand, a decrease from RMB 39,804,411 thousand in 2024, reflecting a reduction of approximately 2.5%[26] Dividends - The company proposed a final dividend of RMB 0.70 per share, unchanged from the previous year[3] - The board declared a final dividend of RMB 0.70 per share, maintaining a stable total dividend payout of RMB 1,626,970,000[53] - The total dividend payout for the year was RMB 1,626,970,000, unchanged from the previous year[40] Sales and Revenue Breakdown - The sales revenue from the sanitary napkin business recorded a decline of about 8.1% to approximately RMB 5,677,965,000, accounting for about 25.0% of total revenue[55] - The sales revenue for the tissue business decreased by approximately 2.4% to about RMB 13.42 billion in 2024, down from RMB 13.75 billion in 2023, primarily due to increased promotional expenses exceeding 10% and a significant drop in raw paper sales by over 26%[59] - The wet wipes business recorded a significant revenue increase of 30.7% to approximately RMB 1.22 billion in 2024, up from RMB 931 million in 2023, capturing about 9.1% of the tissue business sales[63] - The diaper business sales rose by approximately 0.5% to about RMB 1,260,631,000, accounting for about 5.6% of total revenue[67] Market and Sales Strategy - E-commerce and new retail sales accounted for approximately 34.1% of total sales, up from 30.1% in 2023, with a year-on-year sales growth of about 8.0%[51] - The company plans to continue its multi-channel sales strategy and brand optimization, expecting stable revenue in 2025[50] - The company is focusing on high-quality personal care products and expanding its market presence through e-commerce and new retail channels[50] - The company plans to expand its new retail channel share and develop high-quality products while maintaining stable pricing to promote long-term growth and solidify its leading position[58] - The company aims to enhance its market leadership in tissue and hygiene products while focusing on three main business areas: tissue, sanitary napkins, and diapers, to improve brand image and seize opportunities in the "new retail" era[107] Research and Development - The group’s research and development expenses decreased to RMB 209,638 thousand in 2024 from RMB 339,836 thousand in 2023, a reduction of about 38%[29] Financial Management - Financial expenses totaled RMB 567,859,000 in 2024, a decrease of 14.2% from RMB 661,562,000 in 2023[31] - Income tax expenses amounted to RMB 675,187,000 in 2024, down 15.4% from RMB 798,000,000 in 2023[33] - The group recorded an operating foreign exchange loss of approximately RMB 170 million, similar to RMB 180 million in the previous year, primarily due to the depreciation of the RMB against the USD and HKD[80] Corporate Governance and ESG - The company emphasizes the importance of corporate governance and has adhered to the principles of the corporate governance code as per the Hong Kong Stock Exchange, with a commitment to high standards of accountability and transparency[116] - The company achieved an ESG rating upgrade to "A" in 2024 and was included in the Hang Seng Sustainable Development Corporate Benchmark Index for the first time[89] - The company has established a four-tier ESG governance structure to ensure stakeholder value creation and social responsibility[90] - The company is committed to sustainable supply chain practices and has implemented a supplier behavior code to promote ESG performance among suppliers[101] Employee and Operational Efficiency - The group employed approximately 24,000 staff members as of December 31, 2024, with a focus on improving employee compensation and efficiency[83] - The total training hours for employees exceeded 480,000 hours, with 125 individuals promoted to management positions[98] - The company will continue to invest in building a professional and youthful team to improve execution efficiency and operational strategies[107] Future Outlook - The company plans to expand production capacity and upgrade technology in various regions, including establishing a new hygiene product base in Fujian and expanding tissue production capacity in Hunan and Guangdong, with some new capacity expected to be operational by 2025[107] - The company plans to maintain stable pricing strategies amidst ongoing competitive pressures in the domestic hygiene products market in 2025[104] - The company aims to enhance its gross margin by controlling promotional expenses and increasing the proportion of high-end products[104]

Core Viewpoint - UBS reports that despite an increase in market share for Hengan in the tissue paper sector, a decline in sales revenue may be attributed to increased promotional expenses leading to pricing pressure on products [1] Group 1: Sales and Revenue - Management expects stable sales and profits through 2025, with slight growth anticipated in tissue and diaper businesses, while sanitary napkin sales are projected to decline modestly [1] Group 2: Earnings Forecast and Target Price - UBS has revised down Hengan International's earnings forecasts for 2024 to 2026 by 10% to 17% and has lowered the target price from HKD 31.3 to HKD 28.1, while maintaining a "Buy" rating [1]

Financial Performance - Revenue for the six months ended June 30, 2024, was RMB 11,835,893, a decrease of 3.0% compared to RMB 12,204,605 in 2023[15]. - Gross profit margin improved to 33.3% in 2024 from 31.0% in 2023[15]. - Operating profit increased by 11.4% to RMB 1,895,891 from RMB 1,701,681 in the previous year[15]. - Profit attributable to shareholders rose by 14.9% to RMB 1,408,992 compared to RMB 1,225,768 in 2023[15]. - Basic and diluted earnings per share increased to RMB 1.234 from RMB 1.055 in 2023[15]. - Profit for the period increased to RMB 1,403,267,000 in 2024 from RMB 1,226,901,000 in 2023, representing a growth of approximately 14.4%[25]. - Total comprehensive income for the period was RMB 1,421,713,000 in 2024, up from RMB 1,302,471,000 in 2023, reflecting a growth of approximately 9.1%[25]. - The company reported a significant increase in borrowings, with proceeds from borrowings amounting to RMB 19,487,199 in 2024, up from RMB 13,535,887 in 2023, marking an increase of about 43.8%[38]. - The company paid dividends of RMB 797,245 in 2024, slightly down from RMB 813,485 in 2023, a decrease of about 2.0%[38]. Assets and Liabilities - Total assets increased to RMB 46,430,098,000 as of June 30, 2024, compared to RMB 40,215,901,000 at the end of 2023, marking a rise of about 15.5%[30]. - Cash and bank balances rose significantly to RMB 21,023,706,000 in 2024 from RMB 18,189,943,000 in 2023, an increase of approximately 10.1%[30]. - Non-current assets grew to RMB 17,242,475,000 in 2024, up from RMB 13,405,939,000 in 2023, indicating a growth of around 28.0%[28]. - Borrowings increased substantially to RMB 18,258,004,000 in 2024 from RMB 13,907,195,000 in 2023, reflecting a rise of approximately 31.5%[30]. - The Group's total liabilities as of June 30, 2024, were RMB 25,361,328,000, with borrowings constituting RMB 20,670,121,000[103]. Cash Flow and Investments - Cash generated from operations for the first half of 2024 was RMB 1,942,392, down from RMB 2,298,556 in 2023, indicating a decrease of about 15.6%[34]. - Net cash generated from operating activities was RMB 1,558,348, compared to RMB 1,938,954 in the previous year, reflecting a decline of approximately 19.6%[34]. - The net cash used in investing activities was RMB 6,520,453, compared to RMB 2,709,232 in the previous year, indicating a significant increase in cash outflow for investments[34]. - Long-term bank time deposits surged to RMB 5,051,445,000 from RMB 1,438,163,000, representing a significant increase of about 251.5%[142]. - Total cash and bank balances reached RMB 26,075,451,000, compared to RMB 19,628,406,000, indicating a growth of approximately 32.9%[142]. Segment Performance - The Group's total revenue for the six months ended June 30, 2024, was RMB 11,835,893,000, with segment revenues of RMB 3,146,946,000 from sanitary napkin products, RMB 711,624,000 from disposable diaper products, and RMB 6,950,578,000 from tissue paper products[103]. - The Group's segment profit for sanitary napkin products was RMB 1,157,207,000, while disposable diaper products and tissue paper products reported segment profits of RMB 165,432,000 and RMB 29,773,000, respectively[103]. - The total sales of Hengan's three core business segments (tissue paper, sanitary napkins, and disposable diapers) recorded a year-on-year decline of approximately 2.2%, which was better than the overall market decline[199]. Market and Strategic Focus - The company continues to focus on consumer and market needs to enhance brand image and corporate culture[3]. - Hengan International aims to become a global top-tier supplier of daily products through innovation and effective management[3]. - Hengan's market share maintained a leading position in the industry despite fierce competition and aggressive price reductions from both domestic and foreign brands[199]. - The company expanded its market share through effective price stabilization strategies and product line upgrades, tapping into the demand for high-quality personal care products[199]. Financial Management and Risks - The Group's financial risk management policies have not changed since the last year end, and it continues to face various financial risks including market risk, credit risk, and liquidity risk[63][64]. - The Group assessed the adoption of new and amended accounting standards and concluded that they did not have a significant impact on the interim results and financial position[51][54]. - The Group's significant judgements and key sources of estimation uncertainty remain consistent with those applied in the consolidated financial statements for the year ended December 31, 2023[62]. Shareholder Information - Basic earnings per share for the six months ended June 30, 2024, was RMB 1.234, up from RMB 1.055 in 2023, reflecting a growth of 16.9%[117]. - The interim dividend proposed is RMB 0.70 per share, totaling RMB 813,485,000, consistent with the interim dividend of RMB 0.70 per share in 2023[122]. - The total share capital remained unchanged at 1,162,120,917 shares, with a value of RMB 123,345,000 as of June 30, 2024[160].

Investment Rating - The report maintains a **Buy** rating for the company with a target price of **HKD 29.40**, representing a **23.0%** upside from the current price [3][4] Core Views - The company maintains its **leading position** in the industry despite intense competition in the personal care market [2] - Revenue decreased by **3.0%** to **RMB 11.84 billion** in H1 2024, but key upgraded and premium products grew by over **10%**, and e-commerce channels grew by **6.5%**, now accounting for **32%** of total revenue [2] - Gross margin improved by **2.3 percentage points** to **33.73%**, driven by lower raw material costs and growth in premium products [2] - Operating profit and net profit attributable to shareholders increased by **11.4%** and **15.0%** to **RMB 1.89 billion** and **RMB 1.41 billion**, respectively [2] - The company has a strong balance sheet with **RMB 5.41 billion** in net cash [2] Business Performance - Tissue business revenue decreased by **3.1%** to **RMB 6.95 billion**, with volume growing by double digits but average selling price (ASP) declining by **12%** [2] - Tissue gross margin improved by **1.9 percentage points** to **19.6%** [2] - Sanitary napkin business revenue decreased by **2.2%** to **RMB 3.15 billion**, with volume flat and ASP declining by **2%** [2] - Sanitary napkin gross margin improved by **0.9 percentage points** to **62.7%** [2] - Diaper business revenue grew by **7.0%** to **RMB 710 million**, with gross margin improving from **36.0%** to **45.3%**, driven by strong growth in the premium product "Q•MO" [2] Financial Projections - Revenue is expected to decline by **1.6%** in 2024 to **RMB 23.38 billion**, but grow by **2.3%** and **2.1%** in 2025 and 2026, respectively [5] - Net profit is forecasted to decline by **3.6%** in 2024 to **RMB 2.70 billion**, but grow by **5.9%** and **4.4%** in 2025 and 2026, respectively [5] - Basic EPS is projected to be **RMB 2.33** in 2024, **RMB 2.46** in 2025, and **RMB 2.57** in 2026 [5] - The company's P/E ratio is expected to be **9.5x** in 2024, **9.0x** in 2025, and **8.6x** in 2026 [5] Financial Health - The company has a strong balance sheet with a **net cash position** of **RMB 5.41 billion** [2] - Net debt ratio is expected to improve from **-0.07** in 2022 to **-0.48** in 2026, indicating a strong cash position [6] - ROE is projected to increase from **34.1%** in 2022 to **36.0%** in 2026 [6] Dividend Policy - The company has consistently paid a dividend of **RMB 1.40** per share, with a dividend yield of **6.3%** [1][3] - The interim dividend for H1 2024 is **RMB 0.70** per share [2]