CICC has released a research report stating that, considering SOFTCARE's (02698) optimized product mix, it has raised its net profit forecasts for 2026/2027 by 4%/5% to US$141 million/US$162 million. The current share price corresponds to a 2026/2027 P/E ratio of 17x/15x. The firm maintains an Outperform rating and a target price of HK$40.0, which implies 2026/2027 P/E ratios of 23x/20x and suggests a 34% upside potential from the current share price. The main points from CICC are as follows:
The company's 2025 results exceeded expectations. SOFTCARE reported 2025 revenue of US$567 million, a year-on-year increase of 24.9%. Annual profit reached US$121 million, up 27.4% year-on-year, while adjusted net profit was US$122 million, rising 24.4% year-on-year. The better-than-expected performance was primarily driven by rapid expansion in Latin America and favorable currency movements.
In 2025, the company achieved growth in both volume and price, demonstrating the continued validation of its strategy to expand into new regions and product categories. Revenue increased by 24.9% year-on-year, a significant acceleration compared to the first four months of 2025. This was attributed to successful expansion into new regions, with some benefit from positive currency effects. By product category, revenue from Baby Care, Feminine Care, and Home Care segments was US$446 million, US$99 million, and US$22 million, respectively, representing year-on-year growth of 23.1%, 27.9%, and 53.8%. The rapid growth of new categories confirms successful product development. In terms of volume and price, sales volume increased by 17.9%, 19.4%, and 52.8% year-on-year across the categories, while average selling prices rose by 4%, 7%, and 1%, respectively. This dual growth indicates strong momentum and the benefits of product mix optimization. Geographically, revenue from East Africa, West Africa, Central Africa, and other regions grew by 23.9%, 18.4%, 34.5%, and 134.6% year-on-year, respectively, validating the logic of regional expansion, particularly in fast-growing new areas like Latin America. Additionally, the proportion of revenue from the more controlled distributor channel increased by 2.9 percentage points year-on-year, indicating ongoing optimization of the channel structure.
Profitability improved further in 2025. The gross profit margin increased by 0.6 percentage points year-on-year to 35.9%, mainly due to lower raw material costs, product mix upgrades, and favorable currency movements. Regarding expenses, the sales/management/financial expense ratios were 3.5%, 8.0%, and 0.7%, respectively, remaining flat, increasing by 1.8 percentage points, and increasing by 0.5 percentage points year-on-year. Combined with the impact of other income and exchange gains, the net profit margin for 2025 was 21.4%, up 0.4 percentage points year-on-year.
There is continued optimism regarding the growth potential of the African consumer goods market and the company's solid leading position, with ample room for both organic and inorganic growth. It is believed that the penetration rate for hygiene products in Africa is currently below 30%, leaving 2-3 times more room for growth compared to China and developed countries. Furthermore, population growth and rising consumption levels support a long-term, relatively high growth trajectory for the African hygiene products industry. In terms of competitive landscape, SOFTCARE possesses strong advantages in manufacturing, distribution, branding, and management, positioning it to benefit from industry growth while continuing to gain market share. Additionally, the company is expected to replicate its successful model into new product categories (such as training pants and wipes) and new regions (like Latin America and Central Asia), thereby expanding its growth potential. In the future, the company has the potential to evolve into a platform-based comprehensive consumer goods brand through both organic growth and acquisitions.
Risks include fluctuations in raw material prices, changes in exchange rates and international trade policies, and intensifying industry competition.
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