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].

Investment Rating - The report maintains an "Accumulate" rating for Budweiser APAC (1876.HK) with a current price of HKD 8.33 [1] Core Views - The report highlights a continued trend of strong performance in the eastern regions while the western regions face challenges, with a dividend payout ratio exceeding expectations [1][8] - Budweiser APAC's 2024 revenue is reported at USD 6.246 billion, reflecting a year-on-year decline of 8.9%, while normalized EBITDA is USD 1.813 billion, down 14.8% year-on-year [5][11] - The company is focusing on high-end and super high-end product strategies, expanding its distribution cities from 220 in 2023 to 235 in 2024 [7][8] Summary by Sections Revenue Performance - For the full year 2024, Budweiser APAC achieved revenue of USD 6.246 billion, with a year-on-year decline of 8.9% and normalized EBITDA of USD 1.813 billion, down 14.8% [5][11] - In Q4 2024, the company reported revenue of USD 1.142 billion, with a year-on-year decline of 11% [5] Regional Performance - Eastern region showed strong growth in Q4 2024 with revenue up 7.8% and volume up 8.5%, while the western region faced a 17% decline in volume [6][7] - The Chinese market continued to struggle in Q4 2024, with a volume decline of 18.9% due to inventory reduction and unfavorable channel mix [7] Management Changes and Dividend Policy - A new CEO, Cheng Yanjun, will take office on April 1, 2025, indicating a commitment to improving the Chinese business [8] - The board proposed a dividend of USD 750 million for the 2024 fiscal year, a 7% increase year-on-year, with a payout ratio of 103% [8] Profit Forecast and Valuation - The profit forecasts for 2025 and 2026 have been revised down to USD 795 million and USD 861 million, respectively, reflecting a 12% and 14% reduction [8][11] - The current stock price corresponds to a PE ratio of 18x for 2025, 16x for 2026, and 15x for 2027, indicating a favorable outlook in the high-end market segment [8][11]