Guotai Haitong: Initiates Coverage on SOFTCARE (02698) with a "buy" Rating - Leading Manufacturer of Health Products in Africa

Guotai Haitong issued a research report, covering SOFTCARE (02698) for the first time, giving it a "buy" rating. Considering the company's rapid growth in overseas markets, as a leading company, it is expected to fully benefit from the growth dividend. At the same time, production capacity is expected to gradually increase, and the outlook for the emerging market hygiene products industry is strong. The company is positioned as a leader in the industry, and the outlook for the company's performance is positive. Guotai Haitong's main points are as follows: African hygiene product leader, listed on the Hong Kong Stock Exchange The company is the leader in African hygiene products, with its main products being baby diapers, sanitary pads, baby pull-up pants, wet wipes, etc. By 2024, baby diapers and sanitary pads will account for 75% and 17% of the company's revenue, respectively. The company started operating as an internal business division of the Senyda Group in 2009, and has achieved a leading position in Africa through brand matrix building and local production capacity layout. It officially listed on the Hong Kong Stock Exchange on November 10, 2025. High prosperity in emerging markets, SOFTCARE positioned as industry leader The CAGR of the African hygiene products market is expected to reach 7.9% from 2024 to 2029, ranking first in the world. The African baby diaper and sanitary pad market is highly concentrated, with CR5 sales percentages of 61.0% and 41.3% respectively. SOFTCARE ranks second, with market shares of 17.2% and 11.9% respectively. In terms of sales volume, SOFTCARE holds the largest market share, with 20.3% and 15.6% respectively. Competitive advantages Comprehensive brand coverage, grasping channels and production vital. 1) Brand: The company's brand matrix covers all price segments, and according to surveys, the brand awareness and repurchase rate of Softcare/Maya/Cuettie in the baby diaper and pull-up pants fields are 89.0% and 95.7%, respectively. In the sanitary pad field, Softcare/Veesper/Clincleer have brand awareness of 95.4% and a repurchase rate of 92.0%. 2) Channels: The company has been deeply cultivating the African market for over 15 years, with sales networks covering more than 30 countries and reaching over 80% of the local population in these countries. 3) Production capacity: As of 2024, the company ranks first in the African baby diaper and sanitary pad markets in terms of production volume, achieving 100% local supply. Future outlook 1) Revenue: In terms of demand, the development potential of the emerging market hygiene industry is significant, and as an industry leader, the company is expected to further increase its market share. In terms of supply, there is still room for improvement in production capacity utilization, with funds raised being used for capacity expansion. 2) Profit: The company's gross profit margin is expected to increase year-on-year in 2023 and 2024. Looking ahead, brand upgrades and structural optimization are expected to continue to improve profitability, offsetting any adverse fluctuations in raw materials. Risk warning Intensified market competition, risk of exchange rate fluctuations.