Investment Rating - The report assigns a "Buy" rating to the company with a target price of 40 HKD for 2026, based on a 21x PE ratio [1][6]. Core Insights - The company reported a revenue of 567 million USD for 2025, representing a year-on-year growth of 24.9%, and a net profit of 114 million USD, which is a 27.4% increase compared to the previous year [1][2]. - The company is expanding its market presence, particularly in Africa, and is extending its reach into other regions, contributing to its overall growth [2]. - The gross margin improved to 35.9%, up 0.7 percentage points year-on-year, driven by favorable currency exchange rates and strategic market penetration [3]. Financial Performance Summary - Revenue for 2025 was 567 million USD, with a growth rate of 24.9% [4]. - Net profit for 2025 was 121 million USD, reflecting a growth rate of 27.4% [4]. - The gross margin for 2025 was 35.9%, with a net profit margin of 21.4% [4][3]. - EPS for 2026 is projected to be 0.25 USD, with subsequent years showing growth to 0.32 USD by 2028 [4][3]. Business Segment Analysis - The baby care segment generated 446 million USD in revenue, accounting for 79% of total revenue, with a growth of 23.1% [2]. - The female care segment saw a revenue increase of 27.9% to 99 million USD, representing 17% of total revenue [2]. - The home care segment experienced a significant growth of 53.8%, reaching 22 million USD, contributing 4% to total revenue [2]. Regional Performance - East Africa contributed 256 million USD, with a growth of 23.9%, making up 45.1% of total revenue [2]. - West Africa generated 231 million USD, growing by 18.4%, contributing 40.7% [2]. - Central Africa saw a 34.5% increase in revenue to 58 million USD, contributing 10.2% [2]. - Latin America, while smaller in contribution, grew by 134% to 22 million USD, with significant growth in Peru [2].

Investment Rating - The report assigns a "Buy" rating to the company with a target price of 40 HKD for 2026, based on a 21x PE ratio [1][6]. Core Insights - The company reported a revenue of 567 million USD for 2025, reflecting a year-on-year growth of 24.9%, and a net profit of 114 million USD, which is a 27.4% increase compared to the previous year [1][2]. - The company is expanding its market presence, particularly in Africa, while also venturing into other regions, contributing to its overall growth [2]. - The gross margin improved to 35.9%, up by 0.7 percentage points, driven by favorable currency exchange rates and strategic market penetration [3]. Financial Performance Summary - Revenue for 2025 was 567 million USD, with a projected growth rate of 16.1% for 2026 and 14.6% for 2027 [4]. - Net profit for 2025 was 121 million USD, with expected growth rates of 22.2% for 2026 and 14.7% for 2027 [4]. - The gross margin is expected to stabilize around 35.9% for 2026 and 36.1% for 2027, while the net profit margin is projected to increase to 22.5% [4][12]. Business Segment Analysis - The baby care segment, which includes diapers, generated 446 million USD in revenue, accounting for 79% of total revenue, with a growth of 23.1% [2]. - The female care segment, primarily consisting of sanitary products, saw a revenue increase of 27.9% to 99 million USD, representing 17% of total revenue [2]. - The home care segment, focusing on wet wipes, experienced a significant growth of 53.8%, reaching 22 million USD, contributing 4% to total revenue [2]. Regional Performance - East Africa contributed 45.1% of total revenue with a 23.9% year-on-year growth, while West Africa accounted for 40.7% with an 18.4% increase [2]. - Central Africa's revenue grew by 34.5%, contributing 10.2% to total revenue, and Latin America saw a remarkable growth of 134% to 22 million USD, driven by channel upgrades in Peru [2].

Investment Rating - The report assigns a "Buy" rating to the company with a current price of HKD 29.82 and a fair value of HKD 39.24 [4]. Core Insights - The company, Leshu Shi, is a leading player in the sanitary products market in emerging markets, particularly in Africa, with a market share of 20% in baby diapers and 16% in sanitary napkins as of 2024 [8]. - The company has established a strong operational presence with eight factories and 18 sales branches across over 30 countries, indicating robust market penetration [8]. - The African sanitary products industry is expected to grow steadily, driven by population growth and economic development, with a compound annual growth rate (CAGR) of 6.8% from 2020 to 2024 [8]. - Leshu Shi has built high barriers to entry through local production and deep channel management, positioning itself as a leader in the market [8]. - The company aims to expand into Latin America and diversify its product offerings, leveraging its existing distribution channels [8]. - Profit forecasts indicate a net profit of USD 1.41 million in 2026, growing to USD 1.86 million by 2028, reflecting a strong growth trajectory [8]. Financial Summary - The company’s revenue is projected to grow from USD 454 million in 2024 to USD 875 million by 2028, with growth rates of 10.5% in 2024 and 24.9% in 2025 [2]. - EBITDA is expected to increase from USD 124 million in 2024 to USD 226 million in 2028, indicating improving profitability [2]. - Non-GAAP net profit is forecasted to rise from USD 98 million in 2024 to USD 186 million in 2028, with a growth rate of 24.4% in 2025 [2]. - The company’s Non-GAAP EPS is projected to increase from HKD 0.20 in 2025 to HKD 0.30 in 2028 [2]. - The Non-GAAP PE ratio is expected to decrease from 20.9 in 2025 to 12.7 in 2028, suggesting an attractive valuation [2]. Market and Industry Analysis - The report highlights the favorable macroeconomic factors in Africa, including a growing eligible population and rising GDP, which support the demand for sanitary products [8]. - The industry is characterized by a concentrated market structure, with Leshu Shi holding a leading position in both baby diapers and sanitary napkins [8]. - The company’s strategy includes enhancing its distribution network and product offerings to capture a larger market share [8].

Company and Industry Summary Company Overview - **Company Name**: 乐舒适 (Leshu Shi) - **Market Position**: Leading player in the African hygiene products market, with a market share of over 35% in baby diapers in Sub-Saharan Africa and 20.3% in the overall African market for diapers, leading over Procter & Gamble and other international brands [2][3] Core Products and Business Layout - **Core Product Categories**: - Baby diapers (approximately 70% of revenue) - Sanitary napkins (approximately 20% of revenue) - Other products including training pants and wet wipes (approximately 10% of revenue) [3] - **Geographical Revenue Contribution**: Over 97% of revenue comes from Africa, with East Africa (46%) and West Africa (40%) being the primary markets [3] Competitive Advantages - **Local Manufacturing**: 100% local manufacturing provides a cost advantage of 20%-30% compared to international brands due to government support policies [2][3] - **Distribution Network**: Strong penetration into rural areas through a deep distribution network, achieving nearly 90% brand recognition [2][3] - **Management and Branding**: High local employment (over 90% of employees) and effective brand management strategies enhance market adaptability [3] Market Dynamics - **Market Size and Growth Potential**: The African hygiene products market is approximately $4 billion, with a projected CAGR of 7% over the next five years. The low penetration rates (20% for diapers and 30% for sanitary napkins) indicate significant growth potential [4] - **Demographic Drivers**: Over 40 million newborns in 2024 and a young population (over 50% under 20 years old) contribute to market growth [4] Competitive Landscape - **Market Share**: Leshu Shi leads the diaper market with a 20.3% share, followed by Procter & Gamble (17.4%) and another brand (9%). In the sanitary napkin market, it holds a 15.6% share, ahead of Procter & Gamble (10%) and Kimberly-Clark (6.8%) [4] - **Opportunities**: Many international brands lack a focused strategy for the African market, providing Leshu Shi with opportunities to deepen market penetration and product development [4] Growth Strategy and Performance Expectations - **Revenue Growth Forecast**: Expected CAGR of 15%-20% over the next three years, driven by existing market growth and new market expansion [5] - **New Market Focus**: Latin America is a strategic target, with plans to increase revenue share from 3% to 15% by 2028, leveraging new production capacity in Peru by the end of 2025 [5] - **Product Category Expansion**: Potential for asset injection from the parent company, Sen Da Group, which has a significant presence in other consumer goods [5] Currency Risk Management - **Currency Exposure**: The company faces currency risk due to local currency sales and costs primarily in USD and RMB. Strategies include timely currency exchange and price adjustments to mitigate local currency depreciation impacts [6][7] Investment Perspective - **Valuation**: Current stock price corresponds to a PE ratio of approximately 15-16 times for 2026, considered undervalued compared to a reasonable range of 20-25 times [8] - **Long-term Investment Value**: - Benefit from demographic trends and low market penetration in Africa - Proven local operational capabilities create competitive barriers - Potential for category expansion through the parent company's consumer goods business - Anticipated liquidity premium from entering the Hong Kong Stock Connect [8][9]

Core Viewpoint - The company, LeShuShi, is a leading multinational hygiene products company in Africa, focusing on the baby diaper and sanitary napkin markets, with significant growth potential driven by demographic and economic trends in emerging markets [1][4]. Group 1: Market Position and Growth Potential - LeShuShi ranks first in the African baby diaper market and sanitary napkin market, with market shares of 20.3% and 15.6% respectively, based on 2024 sales projections [1]. - The African market is expected to see substantial growth, with a projected compound annual growth rate (CAGR) of approximately 7.0% for the baby diaper market and 13.2% for sanitary napkins from 2025 to 2029 [1][4]. Group 2: Brand and Product Strategy - LeShuShi has established a strong brand presence with a diverse brand matrix, including Softcare, Maya, Veesper, Cuettie, and Clincleer, catering to different consumer segments [2]. - The company has a robust manufacturing capability supported by local factories and a global supply chain, enabling the production of high-quality, cost-effective products [2]. Group 3: Distribution and Sales Network - The company has developed an extensive sales network across emerging markets, with 18 sales branches in 12 countries and over 2,800 wholesalers, distributors, supermarkets, and other retailers [2]. - As of April 30, 2025, revenue distribution shows West Africa contributing 39.5%, East Africa 46.5%, Central Africa 10.6%, Latin America 3.3%, and Central Asia 0.1% [3]. Group 4: Product Line Expansion - LeShuShi is expanding its product lines both vertically and horizontally, introducing products at various price points and expanding into new hygiene categories [3]. - The company has launched several brands over the years, including mid-range and high-end options, and plans to introduce more products to meet consumer demand [3]. Group 5: Financial Projections - Revenue projections for LeShuShi indicate a growth trajectory with expected revenues of $530 million, $620 million, and $720 million for the years 2025, 2026, and 2027, representing year-on-year growth rates of 17%, 16%, and 16% respectively [4]. - The company's estimated valuation for 2026 is 20.7 times earnings, compared to a sector average of 23 times [4].

Core Viewpoint - The report from China Merchants Securities gives a "strong buy" rating for Leshushi (02698), highlighting its sustained high growth and profitability driven by localized production and distribution in emerging markets, particularly Africa [1] Group 1: Company Overview - The company is a leading cross-border hygiene product brand focused on emerging markets, primarily selling baby diapers and sanitary napkins, with the highest sales in Africa [1] - The founders maintain concentrated control, and the core management team has experience in emerging markets and fast-moving consumer goods, with a combined ownership of approximately 27.79% [1] Group 2: Financial Performance - The company is expected to achieve a revenue CAGR of 19% and a net profit CAGR of 130% from 2022 to 2024, with projected revenues of $320 million, $411 million, and $454 million for those years, respectively [2] - The adjusted net profit is forecasted to grow significantly, with year-on-year increases of 251.71% and 51.00% in 2023 and 2024, respectively [2] - The gross margin is projected to improve from 23.0% in 2022 to 35.2% in 2024, driven by lower raw material costs and a higher proportion of higher-margin products [3] Group 3: Market Dynamics - The company is positioned to benefit from the expansion of emerging markets, driven by high birth rates and low penetration rates in hygiene products, particularly in Africa, where the market is expected to grow at a CAGR of approximately 8% from 2025 to 2028 [4] - The company has established a competitive advantage through deep localization in operations, with a network of 51 local production lines across eight countries, covering 80% of the local population [4]

Summary of the Conference Call for LeShuShi Company Overview - LeShuShi's main products include baby diapers (approximately 75% of revenue), sanitary napkins (17-18%), training pants (about 5%), and wet wipes (around 3%) [2][4] Industry Insights - The African market has a young population structure and high birth rates, leading to a continuous increase in demand for hygiene products. The average annual growth rate of the relevant industry in East, Central, and West Africa over the past five years has been about 8%, and this growth rate is expected to be maintained over the next five years [2][5] Competitive Position - In the diaper sector, LeShuShi is very close to the market leader Procter & Gamble (P&G). In the sanitary napkin sector, LeShuShi ranks second, with sales slightly higher than P&G, although there is still a gap in market share. LeShuShi has a competitive advantage in diaper products, with superior product quality compared to competitors, which may threaten P&G's market position in the long term [2][6] Future Development Plans - LeShuShi plans to deepen its presence in East, Central, and West Africa while expanding into the Latin American market alongside its parent company, SenDa Group. A production line is being established in Peru, expected to be operational by 2026, with plans to gradually enter surrounding countries and potentially use trade methods to enter emerging markets in Central Asia [2][7] Financial Projections - Revenue and profit growth for LeShuShi is expected to remain between 15% and 20% over the next few years. Projected profits are approximately $110 million in 2026, increasing to about $130 million in 2027, and reaching $150 million by the end of 2027. Corresponding price-to-earnings ratios for the next two years are expected to be 19 times and 17 times, respectively [2][8] Operational Barriers - LeShuShi's operational barriers are primarily related to overseas management, including production line layout, labor management, and supply chain management. The company effectively manages local employees and ensures a smooth supply of raw materials while mitigating risks from exchange rate fluctuations and foreign exchange controls. These capabilities are supported by the experience and resources accumulated by its parent company, SenDa Group [3][9][10]

Investment Highlights - Company is initiating coverage on Leshushi (02698) with an "outperform" rating and a target price of HKD 40.00, corresponding to a 24x P/E for 2026 [1] - Leshushi is a leading player in the African hygiene products market, benefiting from a localized approach that capitalizes on growth opportunities in emerging markets [1] Market Potential - The hygiene product consumption space in emerging markets is vast, with Africa, Latin America, and Central Asia projected to have CAGRs of 7.9%, 3.0%, and 4.8% respectively from 2025 to 2029, the highest globally [2] - Leshushi is expected to hold market shares of 20.3% in diapers and 15.6% in sanitary napkins in Africa by 2024, with potential for further expansion [1][2] Business Model - Leshushi has established a deeply localized business model that includes strong local manufacturing capabilities, cost advantages, and a differentiated product offering tailored to local needs [2] - The company has developed a comprehensive distribution network that covers over 80% of the population in core markets, supported by a mature global management structure with 90% local employees [2] Growth Strategy - The company aims to expand its market share in Africa while leveraging its experience to enter Latin America and Central Asia, thus unlocking further growth potential [2] - In addition to its core diaper category, Leshushi is rapidly growing its sanitary napkin segment and plans to expand into other complementary product categories such as pull-ups and wet wipes [2] Financial Projections - Earnings per share (EPS) are projected to be USD 0.19 and USD 0.22 for 2025 and 2026 respectively, with a CAGR of 21.1% from 2024 to 2026 [2] - The current stock price corresponds to P/E ratios of 23x and 19x for 2025 and 2026, respectively, indicating a 24% upside potential based on the target price [2]

Core Viewpoint - CICC initiates coverage on Leshushi (02698) with an "outperform" rating and a target price of HKD 40.00, implying a 24% upside based on a 24x P/E for 2026, while the current stock price reflects 23x and 19x P/E for 2025 and 2026 respectively, indicating market undervaluation of the company's localized advantages and growth potential in emerging markets [1][2] Group 1 - Leshushi is a leading player in the African hygiene products market, benefiting from a deep localization strategy that aligns with local market needs, thus capitalizing on growth opportunities in emerging markets [2][3] - The company is projected to have a market share of 20.3% in the African diaper market and 15.6% in the sanitary napkin market by 2024, with expectations of further widening its competitive advantage [3][4] Group 2 - Leshushi's deep localization strategy encompasses four dimensions: manufacturing, branding, distribution, and management, which collectively create a strong competitive moat [4] - The company plans to expand its market share in Africa while leveraging its experience to enter Latin America and Central Asia, thus unlocking further growth potential [5] - In addition to its core diaper category, Leshushi is rapidly growing its sanitary napkin segment and aims to expand into other complementary product categories such as pull-ups and wet wipes [5]

Core Viewpoint - CICC initiates coverage on Leshushi (02698) with an "outperform" rating and a target price of HKD 40.00, implying a 24% upside based on a 24x P/E for 2026 [1] Group 1: Company Overview - Leshushi is a leading player in the African hygiene products market, benefiting from a localized business model that aligns with local market needs, thus enjoying growth in emerging markets [2] - The company is expected to achieve EPS of USD 0.19 and USD 0.22 for 2025 and 2026 respectively, with a CAGR of 21.1% from 2024 to 2026 [1] Group 2: Market Potential - The hygiene product market in Africa, Latin America, and Central Asia is projected to grow significantly, with CAGR estimates of 7.9%, 3.0%, and 4.8% respectively from 2025 to 2029, making it the fastest-growing globally [3] - Leshushi is expected to capture 20.3% and 15.6% of the diaper and sanitary napkin markets in Africa by 2024, with its leading position likely to strengthen [3] Group 3: Competitive Advantages - The company has established a robust localized operational model, which includes strong local manufacturing capabilities, tailored branding strategies, extensive distribution networks, and a predominantly local workforce [4] - Leshushi's distribution network covers over 80% of the population in core markets, enhancing its competitive edge [4] Group 4: Growth Strategies - The company plans to expand its market share in Africa while leveraging its experience to enter Latin America and Central Asia, thereby unlocking further growth opportunities [5] - In addition to diapers, Leshushi is rapidly growing its sanitary napkin segment and aims to expand into other complementary product categories such as pull-ups and wet wipes [5]