Hengan International Group (1044) H1 2024 earnings summary

Executive summary

• Revenue for 1H2024 declined 3.0% year-over-year to RMB11.84 billion, outperforming the broader market decline amid fierce competition and aggressive price promotions in the personal care sector.

• Gross profit rose 3.9% to RMB3.94 billion, with gross margin improving to 33.3% from 31.0% due to lower raw material costs and product premiumization.

• Operating profit increased 11.4% to RMB1.90 billion, and profit attributable to shareholders grew 15.0% to RMB1.41 billion, driven by improved margins and reduced foreign exchange losses.

• E-commerce and new retail sales rose 6.5% year-over-year, now accounting for 31.8%–32% of total sales.

• Interim dividend maintained at RMB0.70 per share.

Financial highlights

• Revenue: RMB11.84 billion (down 3.0% year-over-year); core business revenue fell 2.2%.

• Gross profit: RMB3.94 billion (up 3.9% year-over-year); gross margin: 33.3%.

• Operating profit: RMB1.90 billion (up 11.4% year-over-year).

• Net profit attributable to shareholders: RMB1.41 billion (up 15.0% year-over-year); basic EPS up 17.0% to RMB1.234.

• Net cash position with cash and bank balances, long-term deposits, and restricted deposits totaling RMB26.08 billion; net cash inflow from operations was RMB1.6 billion.

Outlook and guidance

• Revenue and segment performance expected to improve in 2H2024, supported by premium product sales, omni-channel expansion, and stable growth in traditional channels.

• Gross margin may face pressure from rising wood pulp prices, but premium product growth and cost controls are expected to offset this.

• Expanding tissue paper production capacity in Hubei and Guangdong, with new lines operational in 2024.

• Continued focus on product premiumization, omni-channel expansion, and technological upgrades.

• Ongoing investment in R&D, brand strength, and digital transformation to drive sustainable growth.