Core Viewpoint - Haitong International initiates coverage on Leshushi (02698) with an "Outperform" rating and a target price of HKD 40.5, reflecting a strong growth outlook driven by its leading position in the African hygiene products market [2] Group 1: Company Overview - Leshushi is a multinational hygiene products company focused on emerging markets such as Africa, Latin America, and Central Asia, specializing in the development, manufacturing, and sales of baby diapers, baby pull-ups, sanitary napkins, and wet wipes [3] - According to Frost & Sullivan data, Leshushi ranks first in Africa's baby diaper and sanitary napkin markets by sales volume, with market shares of 20.3% and 15.6% respectively, and ranks second by revenue with market shares of 17.2% and 11.9% [3] Group 2: Growth Drivers - The combination of population growth and urbanization in Africa, along with low penetration rates of baby and female hygiene products, drives significant industry growth potential, with Leshushi showing strong growth momentum in both baby diapers and sanitary napkins [4] Group 3: Competitive Advantages - Leshushi employs a differentiated brand strategy, having developed a strong brand matrix since launching its core brand Softcare in Ghana in 2009, now encompassing over 340 SKUs across four core categories [5] - The company has established local production capabilities in eight African countries, with eight factories and 51 production lines, making it the largest local manufacturer of hygiene products in Africa, which enhances cost efficiency and consumer engagement [5] - Leshushi has a deep multi-channel sales network that reaches over 80% of the local population in key operating countries, with a presence in over 30 countries and 18 sales branches serving more than 2,800 customers [5] Group 4: Future Growth Strategy - Leshushi plans to replicate its successful "African model" in Latin America and other emerging markets to create a sustainable second growth curve [6] - The company aims to expand its product categories through channel reuse and acquisitions, transitioning from a leading hygiene products company to a leading fast-moving consumer goods group [6]

Core Viewpoint - Haitong International forecasts that Leshushi (02698) will achieve revenues of $5.5 billion, $6.5 billion, and $7.6 billion for the years 2025-2027, representing year-on-year growth of 21%, 17%, and 17% respectively. Adjusted net profits are expected to be $1.1 billion, $1.3 billion, and $1.5 billion for the same years, with year-on-year growth of 14%, 17%, and 17% respectively. Given Leshushi's leading position in the African hygiene products market and the structural opportunities from Africa's demographic dividend and increasing penetration rates, a 25x PE ratio for 2026 is suggested, corresponding to a reasonable market value of HKD 25.1 billion and a target price of HKD 40.5 [1][2]. Company Overview - Leshushi is a multinational hygiene products company focused on emerging markets such as Africa, Latin America, and Central Asia, primarily engaged in the development, manufacturing, and sales of baby diapers, pull-ups, sanitary napkins, and wet wipes. According to Frost & Sullivan data, the company ranks first in Africa's baby diaper and sanitary napkin markets by sales volume for 2024, with market shares of 20.3% and 15.6% respectively. By revenue, it ranks second in both markets, with shares of 17.2% and 11.9% respectively [2]. Growth Drivers - The combination of Africa's population growth and accelerated urbanization, along with the low penetration rates of baby and female hygiene products, drives significant industry growth potential. Leshushi demonstrates leading growth momentum in both the baby diaper and sanitary napkin markets, supported by a product matrix that covers premium, mid-range, and mass-market segments [3]. Core Competencies - Differentiated brand strategy with a strong brand matrix: Since launching its core brand Softcare in Ghana in 2009, the company has expanded to include brands such as Maya, Veesper, Cuettie, and Clincleer, creating a comprehensive brand matrix covering four core categories. As of April 2025, the company has over 340 SKUs across these categories [4]. - Localized production and supply chain management: The company initiated local production in Ghana in 2018 and has established eight factories and 51 production lines across eight African countries by April 2025, making it the hygiene products company with the most local factories in Africa. The "locally produced, locally sold" model significantly shortens the sales chain, reduces costs, and enhances consumer engagement [4]. - Extensive multi-channel sales network: As of April 2025, the sales network has expanded to over 30 countries in Africa, Latin America, and Central Asia, with 18 sales branches in 12 countries serving over 2,800 customers. The network covers all administrative regions in key operating countries, reaching over 80% of the local population [4]. Future Growth Strategy - Regional expansion: Leshushi aims to replicate its successful "African model" in Latin America and other emerging markets with similar demographics and consumption patterns, creating a sustainable second growth curve [5]. - Category expansion: The company plans to leverage existing channel networks and consumer insights to expand into health care and hygiene-related products, while also considering strategic acquisitions to rapidly gain brand assets and market entry [5].

Investment Rating - The report initiates coverage with an OUTPERFORM rating for Softcare, indicating a positive outlook compared to the market [1][2]. Core Insights - Softcare is positioned as a leading player in the hygiene products sector within emerging markets, focusing on localized deployment to build a competitive moat [1][4]. - The company has a strong market presence in Africa, with leading market shares in baby diapers (20.3%) and sanitary napkins (15.6%) based on 2024 sales volume [4][9]. - The growth drivers include demographic advantages and low penetration rates in the hygiene products market, which present significant growth potential [4][29]. Financial Performance - Revenue projections for Softcare show a steady increase, with expected revenues of $551 million in 2025, representing a 21% year-over-year growth [7]. - Net profit is projected to reach $112 million in 2025, reflecting a 14% increase from the previous year [7]. - The company maintains a gross profit margin (GPM) of approximately 34.2% for 2025, indicating stable profitability [7][24]. Market Dynamics - The African market for baby and female hygiene products is characterized by a young population and increasing urbanization, which are expected to drive demand [28][29]. - The penetration rates for baby diapers and sanitary napkins in Africa are significantly lower than in developed markets, suggesting ample room for growth [29][31]. - The report highlights that the African hygiene products market is projected to grow at a compound annual growth rate (CAGR) of 7.9% from 2025 to 2029, outpacing other regions [33]. Competitive Advantages - Softcare has developed a diversified brand strategy with over 340 SKUs across four core categories, enhancing its market reach [5]. - The company has established a localized production model with eight factories across eight African countries, which reduces costs and improves supply chain efficiency [5][6]. - A multi-channel sales network has been developed, reaching over 80% of the local population in key markets [5]. Future Growth Strategy - Softcare plans to replicate its successful African model in Latin America and other emerging markets, aiming to create a sustainable second growth curve [6]. - The company is focused on expanding its product categories through both organic growth and strategic acquisitions [6]. Valuation - The report assigns a target price of HK$40.50, based on a price-to-earnings (P/E) ratio of 25x for 2026, reflecting the company's strong market position and growth potential [7].