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]

Investment Rating - The report maintains a "Buy" rating for Hengan International (1044) with a target price of 31.08 RMB [5] Core Views - Hengan International's 2024H1 performance met expectations, with revenue of 11.836 billion RMB (-3.0% YoY) and net profit of 1.409 billion RMB (+14.9% YoY) [5] - The company's gross margin improved to 33.3% (+2.3pct YoY) due to lower raw material costs and reduced exchange losses [5] - Product structure continued to improve, with high-end product sales growing over 10% in 2024H1 [5] - E-commerce channels performed well, contributing 36.4% to tissue, 25.6% to sanitary napkins, and 53.5% to diaper sales [5] Business Segment Analysis Tissue - Revenue of 6.951 billion RMB (-3.1% YoY) in 2024H1 [5] - Wet wipes revenue grew 20.4% to 592 million RMB, accounting for 8.5% of tissue sales (+1.6pct YoY) [5] - Gross margin improved to 19.6% (+1.9pct YoY) driven by product upgrades [5] Sanitary Napkins - Revenue of 3.147 billion RMB (-2.2% YoY) in 2024H1 [5] - High-end products helped offset industry competition pressure [5] - Gross margin reached 62.7% (+0.9pct YoY) [5] Diapers - Revenue of 711 million RMB (+7.0% YoY) in 2024H1 [5] - New retail and maternal-infant channels contributed 53.3% and 20.0% respectively [5] - Gross margin improved significantly to 45.3% (+9.3pct YoY) due to strong growth of high-end Q•MO diapers [5] Cost and Expense Management - Sales and administrative expenses decreased to 2.472 billion RMB (-3.6% YoY), accounting for 20.9% of revenue (-0.1pct YoY) [5] - Exchange losses reduced by 80.3% [5] Future Outlook - The company is expected to maintain profit improvement through enhanced cost control and product upgrades [5] - Continued focus on high-end product development and new retail channels like Douyin [5] - Maintained net profit forecasts for 2024-2026 at 2.923/3.012/3.203 billion RMB [5]

Revenue and Profit Performance - Revenue for the six months ended June 30, 2024, was RMB 11,835.893 million, a decrease of 3.0% compared to RMB 12,204.605 million in the same period of 2023[3] - The company's overall revenue for the first half of 2024 decreased by 3.0% year-on-year to approximately RMB 11,835,893,000, compared to RMB 12,204,605,000 in the same period of 2023[95] - Group revenue for the six months ended June 30, 2023, was RMB 12,204,605 thousand, with the largest contribution from the tissue products segment at RMB 7,170,110 thousand[48] - Gross profit margin increased to 33.3% in 2024 from 31.0% in 2023[3] - Gross profit increased by 3.9% to approximately RMB 3,936,242,000, with gross margin rising to 33.3% from 31.0% in the first half of 2023[96] - Operating profit rose by 11.4% to RMB 1,895.891 million in 2024 from RMB 1,701.681 million in 2023[3] - Operating profit rose by 11.4% to approximately RMB 1,895,891,000, and net profit attributable to shareholders increased by 15.0% to RMB 1,408,992,000[96] - Profit attributable to equity holders of the company increased by 14.9% to RMB 1,408.992 million in 2024 from RMB 1,225.768 million in 2023[3] - The company's net profit attributable to equity holders was RMB 1,225,768 thousand, with a basic earnings per share of RMB 1.055[48][54] - Net profit for the period was RMB 1,408,992 thousand, contributing to a comprehensive income of RMB 1,430,532 thousand[14] - Basic earnings per share were RMB 1.234 in 2024, compared to RMB 1.055 in 2023[3] - The weighted average number of ordinary shares outstanding for the six months ended June 30, 2023, was 1,162,121 thousand shares[54] Asset and Liability Management - Total assets as of June 30, 2024, were RMB 46,430.098 million, up from RMB 40,215.901 million as of December 31, 2023[10] - Total assets as of June 30, 2023, amounted to RMB 48,397,012 thousand, with cash and bank deposits being the largest component at RMB 26,749,710 thousand[48] - The group's total assets as of June 30, 2024, amounted to RMB 46,430,098 thousand, with cash and bank deposits totaling RMB 21,023,706 thousand[46] - Cash and bank balances increased to RMB 21,023.706 million in 2024 from RMB 18,189.943 million in 2023[10] - Total cash and bank deposits reached RMB 21,023,706,000 as of June 30, 2024, up from RMB 18,189,943,000 at the end of 2023[69] - As of June 30, 2024, the company had cash and bank deposits, long-term bank deposits, and restricted bank deposits totaling approximately RMB 26,075,451,000, an increase from RMB 19,628,406,000 as of December 31, 2023[114] - Total equity increased to RMB 21,068,770 thousand as of June 30, 2024, compared to RMB 20,629,851 thousand at the end of 2023[12] - Total liabilities rose to RMB 25,361,328 thousand, up from RMB 19,586,050 thousand at the end of 2023, primarily due to an increase in borrowings[12] - Total liabilities stood at RMB 25,361,328 thousand, including borrowings of RMB 20,670,121 thousand[46] - Total liabilities as of June 30, 2023, were RMB 28,116,975 thousand, with borrowings constituting the largest portion at RMB 23,859,992 thousand[48] - The company's financial liabilities as of June 30, 2024, totaled RMB 25,060,757 thousand, with short-term liabilities (less than one year) accounting for RMB 22,589,002 thousand[31] - The company's borrowings increased to RMB 20,670,121 thousand as of June 30, 2024, compared to RMB 14,237,625 thousand at the end of 2023[31] - Total borrowings increased by RMB 19,487,199 thousand during the first half of 2024, with repayments of RMB 13,085,006 thousand[77] - The company's debt-to-equity ratio as of June 30, 2024, was approximately 99.1%, up from 69.8% as of December 31, 2023, primarily due to low-cost funding supporting operations[115] Cash Flow and Financing Activities - Cash and cash equivalents increased by RMB 152,374 thousand to RMB 8,180,200 thousand as of June 30, 2024[16] - Cash and cash equivalents, including bank demand deposits and short-term highly liquid investments, totaled RMB 8,180,200,000 as of June 30, 2024[69] - Operating activities generated net cash of RMB 1,558,348 thousand, a decrease from RMB 1,938,954 thousand in the same period last year[16] - Investment activities used net cash of RMB 6,520,453 thousand, mainly due to increased purchases of property, plant, and equipment[16] - Financing activities generated net cash of RMB 5,114,479 thousand, driven by increased borrowings of RMB 19,487,199 thousand[16] - The company completed the issuance of two batches of ultra-short-term financing bills in March 2024, totaling RMB 5 billion, with a coupon rate of 2.1% and a maturity of 180 to 182 days[115] - The company issued two ultra-short-term financing bills totaling RMB 5,000,000 thousand with an interest rate of 2.10% and maturing in September 2024[75] Inventory and Accounts Receivable - Inventory turnover days increased to 38 days in 2024 from 33 days in 2023[3] - Accounts receivable and notes turnover days decreased to 39 days in 2024 from 43 days in 2023[3] - Accounts receivable and notes receivable increased to RMB 2,787,244,000 as of June 30, 2024, from RMB 2,718,998,000 at the end of 2023[66] Financial Risk and Management - The company's financial risk management policies remained unchanged since the end of the previous year[27] - The company's financial liabilities are categorized into maturity groups, with the majority (RMB 22,589,002 thousand) due within one year[31] - The company's financial liabilities are subject to market risk, credit risk, and liquidity risk, with no significant changes in risk management policies[27] - The group's financial risk management team reports directly to the CFO and audit committee, with valuation processes reviewed at least every six months[41] Shareholder Equity and Dividends - Retained earnings grew to RMB 17,839,658 thousand, up from RMB 17,391,515 thousand at the end of 2023[12] - The company paid dividends of RMB 797,245 thousand for the 2023 final dividend[14] - The company declared an interim dividend of RMB 0.70 per share, totaling RMB 813,485,000, consistent with the previous year[97] - The company will pay an interim dividend of RMB 0.70 per share for the six months ended June 30, 2024, unchanged from the previous year[131] - The company will suspend share registration from September 11 to September 13, 2024, for the interim dividend distribution[132] Business Segment Performance - The sanitary napkin product segment contributed the highest revenue at RMB 3,146,946 thousand, followed by tissue products at RMB 6,950,578 thousand[46] - Sales revenue for the sanitary napkin business decreased by 2.2% to approximately RMB 3,146,946,000, but outperformed the overall industry's negative growth[98] - Gross margin for the sanitary napkin business improved to 62.7% in the first half of 2024, up from 61.8% in the same period last year[99] - Tissue business sales revenue decreased by 3.1% YoY to approximately RMB 6,950,578,000 in the first half of 2024, accounting for 58.7% of the company's total revenue[100] - Tissue product gross margin increased to 19.6% in the first half of 2024, up from 17.7% in the same period last year, driven by lower wood pulp costs and higher sales of premium products[100] - Wet wipes business achieved explosive growth with a 20.4% YoY increase in sales revenue to approximately RMB 591,953,000, accounting for 8.5% of the tissue business sales[101] - Wet wipes gross margin reached 52.2%, the highest among tissue products, with strong growth momentum expected to continue[101] - The diaper business sales increased by 7.0% to approximately RMB 711,624,000, with a gross margin of 45.3% in the first half of 2024, up from 36.0% in the same period last year[105] - The adult diaper business accounted for 22.5% of sales, benefiting from the growing domestic adult incontinence market[105] E-commerce and New Retail - E-commerce and new retail sales accounted for approximately 32.0% of total sales, up from 29.0% in the first half of 2023, representing a year-on-year growth of 6.5%[96] - E-commerce and new retail channels sales for tissue business grew over 6.0%, accounting for 36.4% of tissue sales[103] - The new retail channel contributed 36.4%, 25.6%, and 53.5% to the sales of tissue, sanitary napkins, and diaper businesses, respectively[110] - The e-commerce and new retail channels sales grew by 6.5% to over RMB 3.76 billion, accounting for 31.8% of total sales in the first half of 2024[110] Capital Expenditures and Investments - Capital expenditures for the first half of 2024 were approximately RMB 774,423,000, a decrease from RMB 989,348,000 in the first half of 2023, mainly used to increase production capacity[115] - The company's capital commitments for machinery and equipment as of June 30, 2024, were RMB 553,298,000, compared to RMB 539,801,000 as of December 31, 2023[92] - The company's capital commitments for leased land and buildings as of June 30, 2024, were RMB 597,671,000, compared to RMB 729,342,000 as of December 31, 2023[92] - The company's joint venture investments increased by RMB 3,000,000 in the first half of 2024, with a net profit contribution of RMB 1,000[89] Corporate Governance and Compliance - The company adheres to the "Standard Code" of the Listing Rules and confirms full compliance by all directors[134] - The company maintains high corporate governance standards and complies with the "Corporate Governance Code" of the Listing Rules, except for one independent non-executive director who was unable to attend the annual general meeting due to other commitments[135] - The company did not purchase, sell, or redeem any of its listed securities during the six months ended June 30, 2024[133] Employee and Management Compensation - The company employed approximately 24,000 employees as of June 30, 2024, and implemented a more scientific and reasonable "target salary" system to improve employee efficiency[116] - The company's management compensation for the six months ended June 30, 2024, was approximately RMB 13,951,000, compared to RMB 27,003,000 in the same period of 2023[93] - Total employee training hours exceeded 202,300 hours, and 101 employees were promoted to management positions[126] ESG and Sustainability Initiatives - The company's MSCI ESG rating reached "BBB," and it was included in the FTSE4Good Index Series for two consecutive years, reflecting improved ESG transparency and performance[119] - The company focused on green innovation, exploring biodegradable materials and establishing a biodegradability evaluation system to enhance product sustainability[120] - Hengan Group's six paper companies have all obtained FSC/CoC certification, and 100% of pulp suppliers have FSC or PEFC system certificates[124] - Hengan (China) Paper Co., Ltd. was the only company in the tissue paper and tissue paper industry to be selected for the 2023 "Key Industry Energy Efficiency Leader Enterprise List"[124] - Hengan Group has implemented the ISO 45001 Occupational Health and Safety Management System and established a Safety Management Committee[127] - Hengan Group launched the fifth phase of its comprehensive safety work project in the first half of 2024, aiming for "zero hidden dangers, zero violations, and zero accidents"[127] Future Outlook and Strategic Plans - The company expects continued pressure on investment and consumer confidence due to geopolitical tensions, trade frictions, and high interest rates in the second half of 2024[128] - The company expects wood pulp prices to rebound in the second half of 2024 and plans to offset the impact on gross margin by reducing costs, increasing the proportion of high-end products, and improving sales performance[129] - The company will continue to focus on its three core strategies: "focus on main business," "brand leadership," and "long-termism," to ensure sustainable development[129] - The company plans to optimize its product brand image through strategies such as upgrading product quality, changing packaging, and precise marketing resource allocation[129] - The company is implementing technological upgrades, including using IBM's blockchain platform (IBP) to enhance supply chain management efficiency and migrating SAP systems to the cloud[130] - The company plans to expand production capacity and upgrade technology, including establishing a new base in Fujian and expanding tissue production capacity in Guangdong, with some new capacities expected to be operational in the second half of 2024 and 2025[130] Corporate Social Responsibility (CSR) - Hengan Group donated 2,000 hygiene gift packages to female soldiers stationed in the western border of China in January 2024[122] - Hengan Group donated 20 million RMB to the Autism Care Fund through the Quanzhou Charity Federation in April 2024[122] - Hengan Group donated 1,630 gift packages to nurses at Xiamen University Affiliated First Hospital in May 2024[122]

Investment Rating - The report maintains a "Buy" rating for the company with a target price of HKD 29.73, which is equivalent to 10.5 times the forecasted earnings per share for 2024 [4][5]. Core Insights - Despite intense industry competition, the company is expected to outperform the industry due to its stable pricing strategy, continuous product upgrades, and increased penetration of high-end products [4][5]. - The company reported a revenue growth of 5.1% to HKD 23.77 billion in 2023, driven by a 12.2% increase in tissue paper sales and a 17.7% growth in e-commerce channels [3][4]. - The gross profit margin decreased by 0.3 percentage points to 33.7% due to rising raw material costs and increased promotional expenses [3][4]. Summary by Sections Financial Performance - In 2023, the company achieved a net profit of HKD 2.80 billion, representing a 45.5% increase compared to the previous year [5][6]. - The operating profit rose by 38.6% to HKD 3.98 billion, with a decrease in operating expense ratio by 0.3 percentage points to 21.3% [3][5]. - The company maintained a robust balance sheet with net cash of approximately HKD 5.39 billion, an increase of HKD 0.86 billion from the previous year [3][4]. Business Segments - Tissue paper business grew by 12.2% to HKD 13.75 billion, benefiting from a nationwide sales network and strong growth in high-end products [4][5]. - Sanitary napkin sales increased by 0.4% to HKD 6.18 billion, with gross margin improving from 61.8% in the first half to 66% in the second half [4][5]. - The adult diaper segment saw a 4.3% growth to HKD 1.25 billion, with gross margin rising from 36% to 40% due to lower raw material prices [4][5]. Future Outlook - For 2024, the company anticipates low single-digit revenue growth in tissue paper, sanitary napkins, and adult diapers, despite ongoing competitive pressures in the personal care industry [4][5]. - The report highlights that the company’s stable pricing strategy and product upgrades are expected to help it outperform the industry amid challenging market conditions [4][5].

Investment Rating - The report maintains an "Outperform" rating for the company [4][5] Core Views - The company's core business shows stable growth, driven by high-end product development and optimization of product mix, with a projected revenue increase of approximately 8.0% year-on-year for 2023 [4][5] - The company achieved a total revenue of 23.77 billion RMB in 2023, representing a year-on-year growth of 5.09%, and a net profit of 2.80 billion RMB, which is an increase of 45.51% year-on-year [4][5][6] - The expansion of e-commerce and new retail channels has been significant, with sales from these channels exceeding 7.16 billion RMB, accounting for about 30.1% of total revenue, and growing approximately 17.7% year-on-year [4][5] Financial Performance - The company’s three core business segments (tissue paper, sanitary napkins, and diapers) achieved stable revenue growth in 2023, with tissue paper sales increasing by 12.25% year-on-year to 13.75 billion RMB, and diaper sales growing by 4.33% year-on-year to 1.25 billion RMB [4][6][7] - The sanitary napkin segment faced intense market competition but still managed to maintain a slight revenue increase of 0.36% year-on-year, totaling 6.18 billion RMB [4][6][7] - The company’s gross profit margin for 2023 was 33.70%, a slight decrease of 0.30 percentage points year-on-year, while the net profit margin improved to 11.26%, an increase of 2.65 percentage points year-on-year [7][10] Earnings Forecast - The company is expected to achieve net profits of 2.94 billion RMB, 3.10 billion RMB, and 3.20 billion RMB for the years 2024, 2025, and 2026, respectively, with growth rates of 5.2%, 5.4%, and 3.2% [5][6][10] - The projected price-to-earnings (PE) ratio for 2024 is estimated to be between 13 to 14 times, suggesting a reasonable value range of 32.94 to 35.48 RMB per share [5][9]

[Corporate Information](index=4&type=section&id=Corporate%20Information) The report lists key corporate information including executive directors, independent non-executive directors, company secretary, legal advisors, auditors (PwC), and principal bankers - The report lists key corporate information such as the company's executive directors, independent non-executive directors, company secretary, legal advisors, auditors (PricewaterhouseCoopers), and principal bankers[3](index=3&type=chunk)[4](index=4&type=chunk) [Financial Highlights](index=6&type=section&id=Financial%20Highlights) This section presents key financial performance indicators and revenue breakdown by product category for the year 2023 2023 Key Financial Indicators | Indicator | 2023 | 2022 | Trend | | :--- | :--- | :--- | :--- | | Basic Earnings Per Share (RMB) | 2.415 | 1.657 | ▲ 45.7% Growth | | Net Profit Margin (%) | 11.8 | 8.5 | ▲ Improvement | | Debt Ratio (%) | 69.8 | 87.2 | ▼ Improvement | | Accounts Receivable Turnover Period (Days) | 42 | 48 | ▼ Improvement | 2023 Revenue Analysis by Product Category | Product Category | 2023 Revenue Share | 2022 Revenue Share | | :--- | :--- | :--- | | Tissue Products | 57.8% | 54.2% | | Sanitary Napkin Products | 26.0% | 27.2% | | Disposable Diaper Products | 5.3% | 5.3% | | Other | 10.9% | 13.3% | [Five-Year Financial Summary](index=8&type=section&id=Five-Year%20Financial%20Summary) This section provides a consolidated five-year overview of the company's performance, assets, and liabilities Five-Year Consolidated Performance Summary (RMB Thousand) | Indicator | 2023 | 2022 | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | :--- | :--- | | Revenue | 23,767,936 | 22,615,878 | 20,790,144 | 22,374,001 | 22,492,845 | | Profit Attributable to Equity Holders of the Company | 2,800,533 | 1,925,249 | 3,273,601 | 4,594,815 | 3,907,723 | | Basic Earnings Per Share (RMB) | 2.415 | 1.657 | 2.786 | 3.864 | 3.285 | Five-Year Consolidated Assets and Liabilities Summary (RMB Thousand) | Indicator | 2023 | 2022 | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | :--- | :--- | | Total Assets | 40,215,901 | 42,337,242 | 42,292,748 | 44,440,925 | 43,238,775 | | Total Liabilities | 19,586,050 | 22,561,505 | 23,012,298 | 24,779,451 | 25,086,897 | | Net Assets Attributable to Equity Holders of the Company | 20,395,840 | 19,523,607 | 19,037,040 | 19,411,390 | 17,872,941 | [Company Product Series](index=10&type=section&id=Company%20Product%20Series) The company owns multiple well-known brands covering personal and household hygiene products, categorized by product type - The company owns several well-known brands covering personal and household hygiene product markets, with main brands including: - **Sanitary Napkins**: “Space 7”, “An Er Le” - **Diapers**: “An Er Le”, “Q • MO” (baby), “An Er Kang” (adult) - **Tissue Paper**: “Hearttex”, “Pinno”, “Bamboo π”, “Yueshi”, “Jialaina” - **Other**: “Convenient Care” (first aid products), “Convenient Pass” (enema solution)[11](index=11&type=chunk)[12](index=12&type=chunk)[13](index=13&type=chunk) [Chairman's Statement](index=12&type=section&id=Chairman's%20Statement) The Chairman's Statement reviews the 2023 operating environment, highlighting significant gross profit margin improvement through strategic focus on profitability, rational promotion, and product premiumization despite global economic challenges 2023 Performance Overview | Indicator | 2023 Amount | 2022 Amount | Year-on-Year Change | | :--- | :--- | :--- | :--- | | Revenue | Approx. RMB 23.768 Billion | Approx. RMB 22.616 Billion | ▲ 5.1% | | Profit Attributable to Equity Holders of the Company | Approx. RMB 2.801 Billion | Approx. RMB 1.925 Billion | ▲ 45.5% | | Basic Earnings Per Share | Approx. RMB 2.415 | Approx. RMB 1.657 | ▲ 45.7% | | Full-Year Dividend | RMB 1.40 per share | RMB 1.40 per share | - Flat | - The group's three core businesses (tissue, sanitary napkins, diapers) saw revenue grow by approximately **8.0%** year-on-year, demonstrating strong growth momentum[16](index=16&type=chunk)[18](index=18&type=chunk) - Sales proportion from e-commerce and new retail channels increased to **30.1%**, becoming a significant growth engine[17](index=17&type=chunk)[19](index=19&type=chunk) - Looking ahead, the group will deepen its three core strategies: "focus on core business", "brand leadership", and "long-termism", actively promoting product premiumization and strengthening new retail channel penetration to consolidate market leadership[25](index=25&type=chunk)[29](index=29&type=chunk) [Chief Executive Officer's Report](index=16&type=section&id=Chief%20Executive%20Officer's%20Report) The CEO's report details the group's operational performance, business segment reviews, channel strategies, financial health, human resources, and future outlook [Business Review](index=16&type=section&id=Business%20Review) In 2023, the group's overall revenue increased by 5.1% year-on-year, with core businesses growing by 8.0%, and gross profit margin significantly improved in H2 due to lower pulp costs and product upgrades, leading to a 45.5% surge in profit attributable to equity holders 2023 Financial Performance Core Data | Indicator | 2023 | 2022 | Year-on-Year Change | | :--- | :--- | :--- | :--- | | Overall Revenue | Approx. RMB 23.768 Billion | Approx. RMB 22.616 Billion | ▲ 5.1% | | Gross Profit | Approx. RMB 8.011 Billion | Approx. RMB 7.689 Billion | ▲ 4.2% | | Overall Gross Profit Margin | Approx. 33.7% | Approx. 34.0% | ▼ 0.3 percentage points | | H2 Gross Profit Margin | 36.5% | 32.8% | ▲ 3.7 percentage points | | Operating Profit | Approx. RMB 3.978 Billion | Approx. RMB 2.869 Billion | ▲ 38.6% | | Profit Attributable to Equity Holders of the Company | Approx. RMB 2.801 Billion | Approx. RMB 1.925 Billion | ▲ 45.5% | - E-commerce and new retail channel sales increased by approximately **17.7%** year-on-year, raising their proportion of overall sales from **26.9%** to **30.1%**[35](index=35&type=chunk)[36](index=36&type=chunk) - After deducting an operating exchange loss of approximately **RMB 150 million** after tax, profit attributable to equity holders of the company increased by approximately **4.3%** year-on-year[38](index=38&type=chunk)[41](index=41&type=chunk) [Business Segments Review](index=19&type=section&id=Business%20Segments%20Review) In 2023, the group's core business segments showed mixed but overall positive performance, with strong growth in tissue, steady growth in diapers, and stable performance in sanitary napkins despite intense competition [Sanitary Napkin Business](index=19&type=section&id=Sanitary%20Napkin) The sanitary napkin business achieved stable growth with a 0.4% year-on-year revenue increase, consolidating market leadership through premium product promotion and new retail channel expansion, with H2 gross profit margin recovering to 66.0% Sanitary Napkin Business Financial Data | Indicator | 2023 | 2022 | Year-on-Year Change | | :--- | :--- | :--- | :--- | | Sales Revenue | Approx. RMB 6.178 Billion | Approx. RMB 6.156 Billion | ▲ 0.4% | | Revenue Share | Approx. 26.0% | Approx. 27.2% | ▼ | | Full-Year Gross Profit Margin | Approx. 63.8% | Approx. 66.8% | ▼ | | H2 Gross Profit Margin | Approx. 66.0% | - | - | - Sales of "Pants-style" products increased by over **73.4%** year-on-year, indicating significant growth potential[51](index=51&type=chunk)[55](index=55&type=chunk) [Tissue Paper Business](index=21&type=section&id=Tissue%20Paper) The tissue paper business demonstrated strong performance with a 12.2% revenue increase and leading market share, benefiting from lower pulp costs and product upgrades, resulting in improved gross profit margins Tissue Paper Business Financial Data | Indicator | 2023 | 2022 | Year-on-Year Change | | :--- | :--- | :--- | :--- | | Sales Revenue | Approx. RMB 13.748 Billion | Approx. RMB 12.248 Billion | ▲ 12.2% | | Revenue Share | Approx. 57.8% | Approx. 54.2% | ▲ | | Full-Year Gross Profit Margin | Approx. 21.7% | Approx. 20.7% | ▲ | | H2 Gross Profit Margin | 26.1% | 18.5% | ▲ | - Sales revenue of the premium "Cloud Soft" series exceeded **RMB 1.3 billion**, growing by approximately **26.6%** year-on-year, while wet wipes business sales revenue was approximately **RMB 931 million**, growing by nearly **10.5%**[58](index=58&type=chunk)[59](index=59&type=chunk) - E-commerce and new retail channel sales grew by approximately **26.1%**, accounting for **35.3%** of the overall tissue business sales[58](index=58&type=chunk)[59](index=59&type=chunk) [Disposable Diapers Business](index=23&type=section&id=Disposable%20Diapers) The disposable diapers business saw a 4.3% revenue increase, driven by premium baby diapers "Q • MO" and adult diapers, with gross profit margin rising to 38.1% due to lower raw material prices and a higher proportion of high-margin products Disposable Diapers Business Financial Data | Indicator | 2023 | 2022 | Year-on-Year Change | | :--- | :--- | :--- | :--- | | Sales Revenue | Approx. RMB 1.254 Billion | Approx. RMB 1.202 Billion | ▲ 4.3% | | Revenue Share | Approx. 5.3% | Approx. 5.3% | - | | Full-Year Gross Profit Margin | Approx. 38.1% | Approx. 36.9% | ▲ | - Sales of premium product "Q • MO" increased by nearly **21.8%** year-on-year, raising its proportion in the diaper business to approximately **36.4%**[63](index=63&type=chunk)[65](index=65&type=chunk) - Adult diaper business grew by approximately **11.5%** year-on-year, accounting for **25.4%** of the overall diaper business sales[63](index=63&type=chunk)[65](index=65&type=chunk) [Other Income and Household Products Business](index=25&type=section&id=Other%20Income%20and%20Household%20Products) Other business revenue decreased by 14.0% year-on-year, primarily due to a reduction in raw material trading to secure production, and household product revenue also declined due to reduced export business Other Business Financial Data | Indicator | 2023 | 2022 | Year-on-Year Change | | :--- | :--- | :--- | :--- | | Other Business Revenue | Approx. RMB 2.587 Billion | Approx. RMB 3.009 Billion | ▼ 14.0% | | Raw Material Trading Revenue | Approx. RMB 1.4 Billion | Approx. RMB 1.6 Billion | ▼ 13.6% | | Household Products Business Revenue | Approx. RMB 250 Million | Approx. RMB 326 Million | ▼ 23.4% | [International Business Development](index=25&type=section&id=International%20Business%20Development) The group's overseas channels, including Malaysia's Royal Group, generated approximately RMB 1.951 billion in revenue, accounting for 8.2% of total sales, with Malaysia's Royal Group business steadily recovering - Overseas channels generated approximately **RMB 1.951 billion** in full-year revenue, accounting for **8.2%** of the group's overall sales[74](index=74&type=chunk)[75](index=75&type=chunk) - Malaysia's Royal Group business revenue increased by approximately **6.3%** to **RMB 438 million**[76](index=76&type=chunk)[77](index=77&type=chunk) [Channel Strategies and Financials](index=26&type=section&id=Channel%20Strategies%20and%20Financials) The group achieved significant channel expansion, with e-commerce and new retail sales surging over 17.7% to exceed 30% of total sales, while maintaining robust financial health with improved debt ratio and net cash position - E-commerce and new retail channel sales revenue grew over **17.7%** to approximately **RMB 7.16 billion**, increasing their proportion of the group's overall sales to **30.1%**[79](index=79&type=chunk)[81](index=81&type=chunk) - Selling and administrative expenses as a percentage of total revenue slightly decreased from **21.6%** to **21.3%**[84](index=84&type=chunk)[88](index=88&type=chunk) - Operating exchange losses significantly narrowed from approximately **RMB 913 million** to approximately **RMB 180 million** due to a substantial decrease in RMB dividend amounts receivable from domestic subsidiaries[85](index=85&type=chunk)[89](index=89&type=chunk) Financial Position Indicators | Indicator | December 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Cash and Bank Balances, etc. | Approx. RMB 19.628 Billion | Approx. RMB 21.563 Billion | | Bank and Other Borrowings | Approx. RMB 14.238 Billion | Approx. RMB 17.030 Billion | | Debt Ratio | Approx. 69.8% | Approx. 87.2% | | Net Debt Ratio | Approx. -26.4% (Net Cash) | Approx. -23.2% (Net Cash) | [Human Resources and Corporate Social Responsibility](index=29&type=section&id=Human%20Resources%20and%20Corporate%20Social%20Responsibility) As of year-end 2023, the group employed approximately 23,000 staff, continuously improving HR systems, and demonstrated strong commitment to ESG, achieving a BBB MSCI ESG rating and multiple awards for quality, low-carbon practices, and talent development - As of December 31, 2023, the group employed approximately **23,000** staff[99](index=99&type=chunk)[100](index=100&type=chunk) - The group established an ESG Committee at the board level in June 2023, and its MSCI ESG rating improved from BB to **BBB**[102](index=102&type=chunk)[103](index=103&type=chunk)[106](index=106&type=chunk) - In environmental protection, the group promoted distributed photovoltaic power generation projects, with greenhouse gas emission intensity at **0.66 tons of CO2 equivalent per RMB 10,000 sales**, and the papermaking segment's unit product energy consumption and water consumption per ton of paper are significantly better than national standards[111](index=111&type=chunk)[113](index=113&type=chunk) [Outlook](index=34&type=section&id=Outlook) For 2024, despite external uncertainties, the group anticipates stable pulp prices and will adhere to a "stable price" strategy, deepening its core strategies of "focus on core business," "brand leadership," and "long-termism" through product premiumization, channel expansion, and organizational optimization, while planning capacity expansion in several provinces - Pulp prices are expected to remain stable in **2024**, which will benefit the group's operations[130](index=130&type=chunk)[132](index=132&type=chunk) - The group will continue to implement three core strategies: "focus on core business" (tissue, sanitary napkins, diapers), "brand leadership" (product premiumization), and "long-termism" (channel expansion and organizational optimization)[134](index=134&type=chunk)[137](index=137&type=chunk) - Plans include capacity expansion and technological upgrades in Neikeng (Fujian), Xiaogan (Hubei), Hunan, and Yunfu (Guangdong), with some new capacity expected to commence production in **2024**[139](index=139&type=chunk)[141](index=141&type=chunk) [Directors and Senior Management Profiles](index=37&type=section&id=Directors%20and%20Senior%20Management%20Profiles) This section provides detailed background information on the company's executive directors, independent non-executive directors, and senior management, including age, position, responsibilities, industry experience, education, and other public company or social organization affiliations - The board comprises experienced founding shareholders and a new generation of management with professional backgrounds, while the core management team possesses decades of experience in consumer product manufacturing, distribution, finance, and corporate management[142](index=142&type=chunk)[144](index=144&type=chunk)[150](index=150&type=chunk) [Corporate Governance Report](index=47&type=section&id=Corporate%20Governance%20Report) This report outlines the company's corporate governance structure, board composition, and the functions of its various committees, emphasizing adherence to governance codes and internal control effectiveness [Board of Directors and Committees](index=48&type=section&id=Board%20of%20Directors%20and%20Committees) The report details the company's corporate governance structure, with a board of 8 executive and 4 independent non-executive directors, separate Chairman and CEO roles, and various committees predominantly composed of independent non-executive directors with defined mandates - The Board of Directors consists of **12** directors, including **8** executive directors and **4** independent non-executive directors, complying with listing rules[203](index=203&type=chunk)[205](index=205&type=chunk) - The company has established a Remuneration Committee, Audit Committee, Nomination Committee, Share Incentive Committee, and Environmental, Social and Governance (ESG) Committee to fulfill specialized oversight functions[244](index=244&type=chunk)[251](index=251&type=chunk)[262](index=262&type=chunk)[269](index=269&type=chunk)[273](index=273&type=chunk) - The company largely complied with the Corporate Governance Code in **2023**, except for one executive director's inadvertent trading during a blackout period[196](index=196&type=chunk)[241](index=241&type=chunk) [Accountability and Risk Management](index=61&type=section&id=Accountability%20and%20Risk%20Management) This section emphasizes the board's responsibility for the truth and fairness of financial reporting and outlines the company's risk management and internal control systems, which are reviewed annually by the Audit Committee and deemed sound and effective - The Board of Directors confirms its oversight responsibility for preparing true and fair financial statements[282](index=282&type=chunk)[283](index=283&type=chunk) - The group has established a risk management framework with tiered responsibilities across business units, management, and the Board, ensuring effective risk control[294](index=294&type=chunk)[296](index=296&type=chunk) - The Board has reviewed the internal control system for **2023** and considers it effective and sufficient[290](index=290&type=chunk)[293](index=293&type=chunk) [Shareholder Communication and Rights](index=64&type=section&id=Shareholder%20Communication%20and%20Rights) The company has adopted a shareholder communication policy, ensuring equal and timely access to information through various channels, and outlines procedures for shareholders to convene meetings and propose resolutions, alongside whistleblowing and anti-corruption policies - The company has established a shareholder communication policy to ensure equal and timely access to company information for shareholders[316](index=316&type=chunk) - Shareholders holding not less than **10%** of the voting shares may request to convene an extraordinary general meeting[304](index=304&type=chunk)[308](index=308&type=chunk) - The company has adopted whistleblowing and anti-corruption policies, establishing dedicated channels for related matters[321](index=321&type=chunk)[325](index=325&type=chunk) [Report of the Directors](index=69&type=section&id=Report%20of%20the%20Directors) This report details the group's principal activities, business review by segment and region, financial performance, dividend distribution, share schemes, and major customer and supplier relationships [Principal Activities and Business Review](index=69&type=section&id=Principal%20Activities%20and%20Business%20Review) This section outlines the group's primary business of manufacturing, distributing, and selling personal hygiene products in China, with the Chinese market contributing over 90% of revenue, and provides a breakdown of business by product segment and region 2023 Revenue and Operating Profit Contribution by Business Segment (RMB Thousand) | Business Segment | Revenue | Operating Profit Contribution | | :--- | :--- | :--- | | Sanitary Napkin Products | 6,178,438 | 2,317,022 | | Disposable Diaper Products | 1,254,070 | 194,302 | | Tissue Products | 13,748,172 | 243,739 | | Other | 2,587,256 | 129,601 | | **Total** | **23,767,936** | **2,884,664** | [Results and Dividend](index=71&type=section&id=Results%20and%20Dividend) During the reporting period, the Board declared an interim dividend of RMB 0.70 per share and proposed a final dividend of RMB 0.70 per share, totaling RMB 1.40 per share for the full year, consistent with the previous year 2023 Dividend Distribution | Dividend Type | Amount Per Share (RMB) | Total Amount (RMB Thousand) | | :--- | :--- | :--- | | Interim Dividend (Paid) | 0.70 | 813,485 | | Final Dividend (Proposed) | 0.70 | 813,485 | | **Full-Year Total** | **1.40** | **1,626,970** | [Share Schemes](index=79&type=section&id=Share%20Schemes) This section details the company's share option scheme and share award scheme, noting 51,606,000 unexercised share options as of year-end 2023 and the adoption of a new share award scheme in September 2023, with shares subsequently purchased by the trustee in the secondary market - As of December 31, 2023, a total of **51,606,000** share options remained unexercised under the share option scheme[378](index=378&type=chunk) - The company adopted a new share award scheme on September 11, 2023, with a limit of **5%** of the company's issued share capital, and as of January 19, 2024, the trustee had cumulatively purchased **17,800,000** company shares[385](index=385&type=chunk)[391](index=391&type=chunk)[398](index=398&type=chunk) [Major Customers and Suppliers](index=92&type=section&id=Major%20Customers%20and%20Suppliers) The group maintains a diversified customer and supplier base, with sales to the top five customers accounting for less than 30% of total revenue in 2023, and the largest supplier representing 12.9% of total purchases - Sales to the top five customers accounted for less than **30%** of total revenue[430](index=430&type=chunk) - The largest supplier accounted for **12.9%** of total purchases, and the top five suppliers collectively accounted for **33.1%**[430](index=430&type=chunk) [Independent Auditor's Report](index=95&type=section&id=Independent%20Auditor's%20Report) PricewaterhouseCoopers issued an unmodified opinion on the group's 2023 consolidated financial statements, affirming their true and fair representation of the group's financial position and performance, with "revenue recognition - goods sales" identified as a key audit matter - The auditor issued an unmodified opinion on the financial statements, deeming them to truly and fairly reflect the group's financial position[451](index=451&type=chunk) - "Revenue recognition - goods sales" was identified as a key audit matter due to the high volume of transactions, diverse product range, and broad customer base, which the auditor addressed through assessing internal controls, examining major customer agreements, and sample testing[452](index=452&type=chunk)[453](index=453&type=chunk)[454](index=454&type=chunk) [Consolidated Financial Statements](index=103&type=section&id=Consolidated%20Financial%20Statements) This section presents the group's consolidated financial statements, including the profit or loss, balance sheet, and cash flow statements, providing a comprehensive overview of its financial performance and position [Consolidated Statement of Profit or Loss](index=103&type=section&id=Consolidated%20Statement%20of%20Profit%20or%20Loss) For 2023, the group achieved revenue of RMB 23.768 billion, a 5.1% increase; gross profit of RMB 8.011 billion, up 4.2%; operating profit surged 38.6% to RMB 3.978 billion; and annual profit reached RMB 2.807 billion, a 44.0% increase 2023 Consolidated Statement of Profit or Loss Summary (RMB Thousand) | Item | 2023 | 2022 | | :--- | :--- | :--- | | Revenue | 23,767,936 | 22,615,878 | | Gross Profit | 8,010,688 | 7,689,499 | | Operating Profit | 3,977,931 | 2,869,154 | | Profit Before Income Tax | 3,605,404 | 2,833,286 | | Profit for the Year | 2,807,404 | 1,949,300 | [Consolidated Balance Sheet](index=105&type=section&id=Consolidated%20Balance%20Sheet) As of year-end 2023, the group's total assets were RMB 40.216 billion, total liabilities significantly decreased to RMB 19.586 billion, and total equity increased to RMB 20.630 billion, indicating an optimized balance sheet structure and more robust financial health Consolidated Balance Sheet Summary (RMB Thousand) | Item | December 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | **Assets** | | | | Non-current Assets | 13,405,939 | 14,228,720 | | Current Assets | 26,809,962 | 28,108,522 | | **Total Assets** | **40,215,901** | **42,337,242** | | **Equity and Liabilities** | | | | **Total Equity** | **20,629,851** | **19,775,737** | | Non-current Liabilities | 525,764 | 2,167,403 | | Current Liabilities | 19,060,286 | 20,394,102 | | **Total Liabilities** | **19,586,050** | **22,561,505** | [Consolidated Cash Flow Statement](index=109&type=section&id=Consolidated%20Cash%20Flow%20Statement) In 2023, the group generated strong net cash flow of RMB 3.875 billion from operating activities, with investing activities shifting to a net inflow of RMB 3.584 billion primarily due to changes in time deposits, while financing activities resulted in a net outflow of RMB 5.549 billion mainly for debt repayment and dividend payments, leading to a net increase of RMB 1.910 billion in cash and cash equivalents at year-end Consolidated Cash Flow Statement Summary (RMB Thousand) | Item | 2023 | 2022 | | :--- | :--- | :--- | | Net Cash Generated from Operating Activities | 3,875,375 | 3,809,862 | | Net Cash Generated From/(Used In) Investing Activities | 3,583,922 | (6,065,909) | | Net Cash Used In Financing Activities | (5,549,268) | (4,137,416) | | Net Increase/(Decrease) in Cash and Cash Equivalents | 1,910,029 | (6,393,463) | | Cash and Cash Equivalents at Year-End | 8,021,756 | 6,088,603 |

Investment Rating - The report maintains an "Overweight" rating for the company [5][8] Core Views - The company's 2023 performance met expectations, with significant growth in high-end products and improved profitability due to reduced raw material costs and narrowed exchange losses [3] - The company's revenue in 2023 was RMB 23.768 billion, up 5.1% YoY, with net profit attributable to shareholders reaching RMB 2.801 billion, up 45.5% YoY [3] - The report is optimistic about the company's future profitability improvement through cost control and product upgrades [3] Financial Performance - In H2 2023, the company's revenue was RMB 11.563 billion, up 1.3% YoY, with net profit attributable to shareholders reaching RMB 1.575 billion, up 142.6% YoY [3] - The company's gross profit margin for tissue products in H2 2023 was 26.1%, up 7.6 percentage points YoY and 8.4 percentage points QoQ [3] - The gross profit margin for sanitary napkins in H2 2023 was 66%, down 2.4 percentage points YoY but up 4.2 percentage points QoQ [3] - The gross profit margin for diapers in H2 2023 was 40%, up 1.2 percentage points YoY and 4 percentage points QoQ [3] Business Segments - Tissue products: H2 2023 revenue was RMB 6.578 billion, up 2.7% YoY, with high-end products like the Cloud Touch series growing 26.6% YoY [3] - Sanitary napkins: H2 2023 revenue was RMB 2.959 billion, down 2.3% YoY, but high-end products like panty-style sanitary napkins grew 73.4% YoY [3] - Diapers: H2 2023 revenue was RMB 589 million, up 3.5% YoY, with high-end diaper Q·MO growing approximately 21.8% YoY [3] Future Outlook - The report forecasts net profit attributable to shareholders for 2024-2026 to be RMB 2.923 billion, RMB 3.012 billion, and RMB 3.203 billion, respectively [3] - The company's e-commerce and new retail channels generated RMB 3.66 billion in revenue in H2 2023, up 7.6% YoY [3] - The company is expected to maintain stable pricing strategies and more precise cost control in 2024, with continued product upgrades driving profitability [3] Valuation - The target price is adjusted to HKD 31.08, based on a 12x PE ratio for 2025, in line with industry peers [8] - The company's current PE ratio is 11.07x for 2023, expected to decrease to 8.68x by 2026 [4]

Core Viewpoint - Macquarie has downgraded the net profit forecasts for Hengan International (01044) for the fiscal years 2024 and 2025 by 12% and 9% respectively, reflecting the anticipated need for higher advertising and promotional expenses in a competitive market [1] Business Performance - Hengan's sales in the second half of last year increased by 1.3% year-on-year, which was below Macquarie's expectations [1] - Sales of tissue and diapers grew by 2.7% and 3.5% respectively, a slowdown compared to the first half of the year where growth was 22.7% and 5% [1] - Sanitary napkin sales declined by 2.3% year-on-year, contrasting with a 3% increase in the first half, attributed to intensified price competition due to falling wood pulp prices [1] Retail Channel Insights - Sales from new retail channels increased by 7%, contributing 31% to total sales, compared to 29.5% in the same period of 2022 [1] - The tissue business gained further market share last year, while the sanitary napkin segment has shown good growth momentum since the beginning of 2024 [1] - The tissue segment is facing intense competition, leading the company to potentially enhance promotions to stimulate growth [1]

Investment Rating - The report maintains a "Buy" rating for the company with a target price adjusted to HKD 33.85, indicating a potential upside of 30.2% from the current price of HKD 26.00 [1][2][8]. Core Insights - The company's performance in 2023 met expectations, with a notable recovery in profit margins driven by a high-end product mix and easing cost pressures. Sales increased by 5.1% year-on-year to RMB 23.768 billion, while net profit rose by 45.5% to RMB 2.801 billion [1][2]. - The report highlights that the sales growth rate slowed in the second half of 2023 due to intensified competition and promotional expense management, dropping from 9% in the first half to 1.3% in the second half. However, the gross margin improved significantly to 36.5% in the second half, up from 32.8% in the same period of 2022 [1][2][6]. - The high-end product lines, particularly in tissue and sanitary products, received positive feedback, contributing to the overall sales growth. The wet wipes segment saw a 10.5% increase, while the "Cloud Soft" series achieved a remarkable 26.6% growth [1][2][7]. Financial Performance Summary - For 2023, the company reported a revenue of RMB 23.768 billion, a 5.1% increase from 2022, with core business sales (tissues, sanitary napkins, diapers) growing by 8.0% to RMB 21.18 billion. The net profit for the year was RMB 2.801 billion, reflecting a 45.5% year-on-year increase [3][6]. - The gross margin for the year was stable, with a significant improvement in the second half, where the gross margin reached 36.5%, up 5.5 percentage points from the previous year [1][6]. - The company plans to increase marketing expenditures in the first half of 2024 to support sales growth, particularly in the tissue segment, which is expected to achieve low single-digit growth [2][3]. Future Outlook - The report anticipates low single-digit growth for core business in 2024, driven by the high-end product mix. Despite favorable raw material cost trends, increased market competition may pressure average selling prices [2][3]. - The company is expected to maintain a stable dividend payout, with a total dividend of RMB 1.4 per share for 2023, maintaining a payout ratio of 58% [1][3].

Financial Performance - Revenue for the year ended December 31, 2023, was RMB 23,767,936 thousand, representing a 5.1% increase from RMB 22,615,878 thousand in 2022[3] - Operating profit increased by 38.6% to RMB 3,977,931 thousand compared to RMB 2,869,154 thousand in the previous year[3] - Profit attributable to equity holders of the company rose by 45.5% to RMB 2,800,533 thousand from RMB 1,925,249 thousand in 2022[3] - Basic and diluted earnings per share increased by 45.8% to RMB 2.415 from RMB 1.657 in the previous year[3] - Group operating profit for 2023 was RMB 3,977,931 thousand, compared to RMB 2,869,154 thousand in 2022, reflecting a significant increase of approximately 38.7%[21] - Net profit attributable to equity holders of the company for 2023 was RMB 2,800,533 thousand, up from RMB 1,925,249 thousand in 2022, indicating a growth of around 45.5%[21] - The group reported a profit before tax of RMB 3,605,404 thousand for 2023, compared to RMB 2,833,286 thousand in 2022, marking an increase of approximately 27.2%[21] - The overall gross profit for 2023 rose by approximately 4.2% to about RMB 8,010,688,000, compared to RMB 7,689,499,000 in 2022[47] - The overall gross margin for 2023 was approximately 33.7%, with a significant improvement to 36.5% in the second half of the year[47] Assets and Liabilities - Total assets decreased to RMB 40,215,901 thousand from RMB 42,337,242 thousand in 2022[9] - Total liabilities decreased to RMB 19,586,050 thousand from RMB 22,561,505 thousand in the previous year[11] - The total assets of the group as of December 31, 2023, amounted to RMB 40,215,901 thousand, with total liabilities of RMB 19,586,050 thousand[23] - The company maintained a current ratio of 1.4, consistent with the previous year[3] - The company has a deferred tax asset of RMB 532,204,000 as of December 31, 2022[27] Dividends and Shareholder Returns - The company proposed a final dividend of RMB 0.70 per share, consistent with the previous year[3] - The company has committed to a final dividend of RMB 0.70 per share for the fiscal year ending December 31, 2023, pending approval at the 2024 Annual General Meeting[101] - The company maintained a stable dividend payout of RMB 1.40 per share for the year, consistent with the previous year[48] Revenue Breakdown - The revenue breakdown includes RMB 6,178,438 thousand from sanitary napkin products, RMB 1,254,070 thousand from diaper products, and RMB 13,748,172 thousand from tissue products[21] - Sales revenue from the sanitary napkin business increased by approximately 0.4% to about RMB 6,178,438,000 (2022: RMB 6,156,060,000), accounting for about 26.0% of the group's total revenue (2022: 27.2%) [51] - Sales revenue from the tissue paper business surged by approximately 12.2% to about RMB 13,748,172,000 (2022: RMB 12,248,011,000), representing about 57.8% of the group's total revenue (2022: 54.2%) [58] - The three core business segments (tissue, sanitary napkins, and diapers) achieved a revenue growth of approximately 8.0% year-on-year[45] Operational Efficiency - The inventory turnover period improved to 42 days from 43 days in the previous year[3] - Accounts receivable and notes receivable decreased from RMB 2,993,134,000 in 2022 to RMB 2,718,998,000 in 2023, with a net amount of RMB 2,553,357,000 after impairment provisions[40] - Accounts payable and notes payable decreased from RMB 2,920,685,000 in 2022 to RMB 2,750,069,000 in 2023[42] - Sales and administrative expenses increased by approximately 3.7% to about RMB 5,068,887,000, while the expense ratio slightly decreased to about 21.3% of total revenue[74] Market and Sales Strategy - E-commerce and new retail sales accounted for approximately 30.1% of total sales, up from 26.9% in 2022, representing a year-on-year growth of about 17.7%[46] - The company plans to continue focusing on high-end product development and optimizing its product mix to meet consumer demand for high-quality diversified products[46] - The company plans to continue expanding the proportion of new retail channels in total sales and develop higher quality products [57] - The company aims to enhance its sales channels, focusing on e-commerce and new retail strategies, while also strengthening partnerships with maternal and infant stores, nursing homes, and hospitals[68] Sustainability and Corporate Responsibility - The company is committed to sustainable development and aims to enhance its competitive edge while expanding its market presence both domestically and internationally[100] - The company has been recognized as a "Green Factory" by the Ministry of Industry and Information Technology, marking its third national-level green factory[87] - The greenhouse gas emission intensity for 2023 was 0.66 tons of CO2 equivalent per 10,000 yuan in sales, significantly lower than the industry standard[86] - The company has implemented a comprehensive safety management strategy and conducted regular safety training, resulting in a workplace injury rate of 0[90] - The company has been actively involved in social responsibility initiatives, including donations of RMB 2 million worth of supplies to earthquake-affected areas in Syria and Turkey[93] Governance and Compliance - The audit committee is chaired by an independent non-executive director, with three other independent non-executive directors as members, ensuring compliance with the highest standards of corporate governance[105] - The company confirmed full compliance with the Listing Rules, except for a minor breach by a director who inadvertently purchased 100,000 shares during a trading blackout period[109] - The board of directors includes eight executive directors and four independent non-executive directors, reflecting a diverse governance structure[112] - The company has maintained high standards of corporate governance, which aids in managing business risks and enhancing transparency[108] Employee and Human Resources - The group employed approximately 23,000 employees as of December 31, 2023, with a focus on improving human resource efficiency and employee compensation[79] - The total training hours for employees exceeded 240,000 hours in 2023, with 173 individuals promoted to management positions[89] - The company employed approximately 23,000 people by the end of 2023, with a female employee ratio of 56%[89] Future Outlook - The company plans to expand production capacity and upgrade technology, including establishing a new base for upgraded sanitary napkins, diapers, and wet wipes in Fujian, with some new capacity expected to be operational in 2024[100] - The company is closely monitoring geopolitical tensions and global monetary policy tightening, which may impact economic growth and consumer confidence, but remains optimistic about China's economic fundamentals[95] - The company aims to enhance its brand image and attract younger consumers through various promotional activities and partnerships [54]