CICC has maintained its earnings forecasts for SOFTCARE (02698). The current share price implies forward price-to-earnings ratios of 16x for 2026 and 14x for 2027. The firm has reaffirmed its Outperform rating and HK$40.00 target price, which corresponds to 23x and 20x P/E for 2026 and 2027, respectively, suggesting a potential upside of approximately 39% from the current price level.
The bank anticipates that revenue in the first half of 2026 could sustain the rapid growth momentum observed since the second half of 2025, driven by accelerated cultivation of new markets in Latin America and parts of Africa, leading to continued market share gains. Furthermore, the company's strategies of maintaining inventory and locking in prices are expected to mitigate the impact of external disruptions such as raw material and shipping cost fluctuations, resulting in a limited effect on profits for H1 2026.
Looking ahead to the full year, although the impact of raw material costs may gradually become apparent in the second half, the bank believes the company's manufacturing cost advantages and market pricing power will allow it to capture further market share through flexible pricing strategies, supporting sustained earnings growth for the year. CICC's key views are outlined below.
New Market Expansion Progressing Well, H1 2026 Revenue Poised for Strong Growth
Regarding H1 2026 revenue, the bank expects Eastern and Western African markets to maintain robust growth momentum, while the Central African market is likely to achieve rapid growth through channel expansion. The Latin American market is projected to see growth exceeding 50% following the commencement of production at the Peru facility. Additionally, based on XE data, the currencies of the company's key operating countries have remained relatively stable against the US dollar year-to-date. The bank estimates the net currency impact on revenue for the January-May 2026 period to be -0.5%, significantly lower than the same period last year. Therefore, revenue in H1 2026 is expected to continue its rapid growth trend from a low base.
Impact of Raw Material Price Increases May Emerge in H2, But Expected to be Manageable
Prices for chemical-related raw materials have been volatile at elevated levels recently, with quotes for some items (e.g., SAP) retreating, while costs for materials like fluff pulp remain at historical lows. The bank notes that the company currently holds sufficient inventory, limiting the impact of raw material price increases in the first half. Even if the effect becomes more pronounced in the second half, considering the company's strong pricing power in its main markets, it is anticipated to pass on cost pressures through price adjustments. Overall cost pressure for the full year is expected to be modest, supporting relatively stable profitability.
Controlling Shareholder Increases Stake, Highlighting Confidence in Growth Potential
The company has recently issued multiple announcements indicating that its controlling shareholder, Ms. Yang Yanjuan, has increased her stake by a total of 7.262 million shares, representing approximately 1.17% of the total share capital, demonstrating confidence in the company's development prospects. The bank believes the company possesses a robust supply chain management system, advanced local manufacturing capabilities in Africa, and a solid channel network. Historical performance has repeatedly shown its ability to gain market share during industry downturns. Meanwhile, the successful ramp-up of Latin American production capacity and rapid channel expansion are expected to contribute to earnings growth.
Key Risks to Consider
Potential risks include fluctuations in raw material prices, changes in foreign exchange rates and international trade policies, and intensifying industry competition.
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