CICC: First Comfort (02698) “Outperform the Industry” rating target price of HK$40
The Zhitong Finance App learned that CICC released a research report saying that for the first time, CICC (02698) gave it an outperforming industry rating. The target price was HK$40.00, corresponding to 24 times P/E in 2026, with 24% room for growth. The bank expects the company's 2025/2026 EPS to be $0.19/0.22, respectively, and the 2024-2026 CAGR will be 21.1%. The current stock price corresponds to 2025/2026 23/19 times P/E. The bank believes that the market has underestimated the company's barrier advantages of deep localization in Africa, medium- to long-term growth dividends in emerging markets, and extended category development prospects.
CICC's main views are as follows:
Le Comfort is the leader in hygiene products in Africa. With a deep localization layout suitable for the local market, it enjoys the growth dividends of emerging markets. The bank is optimistic about the broad growth space brought by its subsequent category expansion and regional expansion. Potential catalysts: breakthroughs in the Central African and Latin American markets; new category layout; investment and mergers and acquisitions.
Emerging markets have broad consumption space for hygiene products, so enjoy the dividends of growth comfortably
Benefiting from the world's highest birth rate and younger population structure, the 2025-29E hygiene products industry (diapers, pull-ups, sanitary napkins) in the African, Latin American and Central Asian markets will reach 7.9%, 3.0%, and 4.8% respectively, ranking first in the world (Sullivan). In terms of the pattern, Le Comfort surpassed many international groups and local companies in the leading position. In 2024, its sales share in the African diaper and sanitary napkin market was 20.3%/15.6%, respectively, and its leading edge is expected to increase further.
Four-dimensional resonance of manufacturing, brand, channel, and management, and deep localization to build a moat
Le Comfort has built a deeply localized business model: on the manufacturing side, strong localized production capacity brings cost advantages such as tariffs, labor, transportation, etc.; on the brand side, creating differentiated products that meet local needs, and the graded brand layout covers the full price consumer base; on the channel side, targeting the scattered and mainly offline channel characteristics of Africa, long-term efforts have settled into a deep and widely distributed distribution network, with a core market population coverage of over 80%; on the management side, 90% of employees are localized, and the global management framework is mature.
There are broad prospects for category and regional expansion, pointing to leading consumers in emerging markets
1) Regional expansion: While enjoying the dividends of local consumer demand in the core market in Africa, the company plans to further stabilize and increase its market share, and at the same time reuse its development experience to continue to expand emerging markets such as Latin America and Central Asia to further open up growth space; 2) Category expansion: Based on the core category of diapers, the second curve of the company's sanitary napkins is growing rapidly, and it is expected that it will continue to expand pull-ups, wipes and other consumer categories with synergetic effects in the future.
Risk warning: competition intensifies; market development falls short of expectations; exchange rates and raw material prices fluctuate.