CICC: Maintains outperform rating on SOFTCARE (02698) with a target price of HKD 40.00.

China International Capital Corporation released a research report stating that it maintains the profit forecast of SOFTCARE (02698) unchanged. The current stock price corresponds to a price-earnings ratio of 16/14 for 26/27 years. It maintains an outperform industry rating and a target price of HK$40.00 unchanged, corresponding to a price-earnings ratio of 23/20 for 26/27 years, with a 39% upside potential compared to the current stock price. The bank predicts that with the accelerated cultivation of new markets in Latin America and Africa, revenue in 1H26 is expected to continue its fast growth trend since 2H25, with the continuous increase in market share. At the same time, the company's inventory and pricing strategies to cope with external disruptions such as raw materials and shipping have limited impact on profits in 1H26. Looking ahead for the whole year, although the impact of raw materials may gradually manifest in the second half of the year, the bank believes that with the company's manufacturing cost advantage and market pricing power, the company can further capture market share with flexible pricing strategies, and the annual performance is expected to continue to grow. The main views of China International Capital Corporation are as follows: Smooth expansion into new regions, revenue in 1H26 is expected to continue rapid growth Looking ahead to revenue in 1H26, the bank expects the East African and West African markets to maintain rapid growth momentum, the Central African market to achieve rapid growth under channel expansion, and the Latin American market to achieve over 50% growth with the start of production capacity in Peru. In addition, according to XE data, the exchange rate of the company's main operating countries' currencies against the US dollar has remained relatively stable since the beginning of the year, and the bank calculates that the comprehensive impact of the exchange rate on the company's revenue from January to May 26 is -0.5%, much lower than the same period last year. Therefore, with a low base, revenue in 1H26 is expected to continue its fast growth trend. The impact of rising raw material prices may gradually manifest in the second half of the year, but the expected magnitude is controllable Recently, prices of chemical-related raw materials have been fluctuating at high levels, with some varieties (such as SAP) seeing a slight decrease in prices, while raw material costs such as wood pulp are at historical lows. The bank believes that the company's current inventory is sufficient, and the impact of rising raw material prices in the first half of the year is relatively small. Even if the impact of rising raw material prices gradually manifests in the second half of the year, considering the company's strong pricing power in the main markets, it is expected that cost pressures can be transferred through price increases, leading to relatively stable profit levels with minimal cost pressures throughout the year. Controlling shareholders increase their stake in the company, bullish on the company's potential to become a leading emerging market personal care group In recent announcements, the controlling shareholder Ms. Yang Yanjuan has increased her stake in the company by a total of 7.262 million shares, accounting for 1.17% of the total share capital, demonstrating confidence in the company's development. The bank believes that the company has a complete supply chain management system, advanced local manufacturing capabilities in Africa, a stable distribution system, and historical evidence of gaining market share against industry trends; with the successful start of production capacity in Latin America and rapid expansion of distribution channels, performance growth is expected. Risk warning: fluctuations in raw material prices, changes in exchange rates and international trade policies, increased industry competition.