According to a research report by Bocom Intl, considering that the industry valuation is currently at a level one standard deviation below the 3-year average, the target price of Hengan International (01044) has been lowered to HKD 27.01, with a rating downgrade to 'Neutral'. Due to increasing competition and short-term uncertainty in revenue growth, the bank has lowered its earnings per share expectations.

The report states that the company's revenue growth in the second half of the year will still be under pressure due to competition and continued investment in promotional expenses. With the continuous decline in raw material costs and the positive feedback from high-end products, it is expected that the gross margin will continue to improve in the second half of the year. In the first half of 2024, Hengan's sales decreased by 3% compared to the previous year, with a gross margin expansion of 2.2 percentage points to 33.3% due to increased contribution from high-end products and lower raw material costs. The net profit margin was 11.9%. The interim dividend is 0.7 RMB per share, with a dividend payout ratio of 56.7%.