Hengan to See Sales Growth in 2023, but Margin Still Suppressed; FVE Unchanged at HKD 40

We updated our 2022 and 2023 estimates for no-moat-rated Hengan following a discussion with the company. We think Hengan could deliver faster top-line growth in 2023 than we previously anticipated thanks to share gain in the tissue business. But the company’s margin outlook could still be dragged by elevated input cost and lackluster growth of the sanitary napkin segment. Although we raise this year’s net income projection moderately, reacceleration of sanitary napkin profit growth is still absent, in our view. Our fair value estimate, unchanged at HKD 40 per share, implies 12 times 2023 P/E (versus the five-year average of 13 times).