DFZQ has released a research report stating that SOFTCARE (02698) leverages the channel advantages of its parent group, Senda, to build a deeply penetrating distribution network in the fragmented African market. This network primarily focuses on wholesale, complemented by distribution and retail. The company is well-positioned to replicate this successful model in other emerging markets. The brokerage forecasts EPS for 2026-2028 at USD 0.23, 0.27, and 0.32 respectively. Applying a 2026 P/E multiple of 20x based on comparable company valuations, it sets a target price of HK$36.05 (USD 1 ≈ HKD 7.8363) and initiates coverage with a "Buy" rating. DFZQ's key points are as follows:
Over a decade of dedicated focus has established the company as a leader in Africa's hygiene products market. 1) Originally a business division within Senda, the company launched its infant diaper brand Softcare in Africa in 2009, began independent operations in 2022, and accelerated its global expansion from 2024. 2) With infant care (diapers + training pants) as its core, the company has expanded into feminine care (sanitary napkins) and home care (wipes). In 2025, revenue contributions from these three segments were 78.6%, 17.5%, and 3.9% respectively. 3) The founders possess deep expertise in African market operations. East Africa and West Africa were core regions in 2025, contributing 45.1% and 40.7% of revenue respectively, while contributions from Latin America and Central Asia are steadily increasing. 4) From 2022 to 2025, the company's revenue grew from USD 320 million to USD 600 million, representing a CAGR of 21.1%. Adjusted net profit surged from USD 18 million to USD 122 million, a CAGR of 88.1%. Gross margin improved from 23% to 35.9%, and net margin rose from 5.7% to 21.6%, demonstrating continuous enhancement in profitability.
The hygiene products industry in emerging markets offers broad opportunities, with leading companies poised to further increase market share. 1) According to the company's prospectus, driven by demographic dividends, consumption upgrades, and rising penetration and usage frequency, Africa's hygiene products market size is expected to grow from USD 3.8 billion in 2024 to USD 5.6 billion in 2029, with a CAGR of 7.9%, outperforming the 0.5-2% growth in mature markets. 2) The market sizes for infant diapers, training pants, and sanitary napkins in Africa are projected to reach USD 3.63 billion, USD 560 million, and USD 1.41 billion respectively by 2029, with CAGRs of 7%, 7.6%, and 10.7% from 2024 to 2029. 3) The current competitive landscape for hygiene products remains relatively fragmented. The company has adopted an omnichannel coverage strategy to achieve market leadership. In 2024, based on sales volume for infant diapers in Africa, the company held a 20.3% market share, ranking first, with the top five players holding 61.2%. Based on sales volume for sanitary napkins, its market share was 15.6%, also ranking first, with the top five holding 39.8%.
A multi-category brand portfolio, value-for-money proposition (local manufacturing + global sourcing), and deep channel penetration form the core competitive advantages. 1) The company has established a well-structured, comprehensive brand matrix and strengthens brand promotion to capture consumer mindshare. Its core brand, Softcare, ranks high in regional search indices. 2) The company enhances its local manufacturing and global sourcing capabilities. By the end of 2025, it operated 9 factories (8 in Africa, 1 in Latin America) with 66 production lines. It plans to invest HKD 738 million to expand capacity, which the brokerage estimates will increase total designed capacity by 81% compared to 2025. Coupled with a local employee rate of nearly 90% and synergies in logistics, the company's main products are priced approximately 50% lower than leading international brands. 3) Leveraging Senda Group's channel strengths, the company has built a deeply下沉 distribution network for the fragmented African market, primarily wholesale-based and integrated with distribution and retail. It has the potential to replicate this successful experience in more emerging markets.
Risk factors include: risks associated with the complexity of cross-border operations and management, intensifying market competition, supply chain disruptions and raw material price volatility, and foreign exchange fluctuations and conversion losses.
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