CICC initiated coverage on SOFTCARE (02698) with an "Outperform" rating and a target price of HK$40.00, implying a 24% upside potential based on 24x 2026 P/E. The firm forecasts the company's 2025/2026 EPS at $0.19/$0.22, with a 2024-2026 CAGR of 21.1%. At current levels, the stock trades at 23x/19x 2025/2026 P/E, which CICC believes undervalues SOFTCARE's deep localization advantages in Africa, long-term growth potential in emerging markets, and category expansion prospects.
Key highlights from CICC's report: 1. **Market Leadership in Africa**: SOFTCARE is a leading hygiene products player in Africa, benefiting from its localized strategy tailored to emerging markets. The firm is optimistic about its growth potential from category expansion and regional penetration. 2. **Growth Catalysts**: Potential drivers include breakthroughs in China-Africa and Latin American markets, new product launches, and M&A activities. 3. **Emerging Market Potential**: With the world's highest birth rates and young demographics, Africa, Latin America, and Central Asia are expected to see hygiene product (diapers, training pants, sanitary pads) CAGRs of 7.9%, 3.0%, and 4.8% respectively from 2025-2029 (Frost & Sullivan). SOFTCARE leads in Africa with 20.3% and 15.6% market shares in diapers and sanitary pads (2024), with room to widen its lead. 4. **Localization Strengths**: The company has built a resilient moat through localized manufacturing (cost efficiency), tailored branding (multi-tier product offerings), extensive offline distribution (80% population coverage in core markets), and localized management (90% local workforce). 5. **Expansion Roadmap**: - **Regional Growth**: While consolidating its African stronghold, SOFTCARE plans to replicate its success in Latin America and Central Asia. - **Category Diversification**: Beyond diapers, its sanitary pad segment is growing rapidly, with potential extensions into training pants, wipes, and synergistic FMCG categories.
**Risks**: Intensifying competition, slower-than-expected market expansion, and FX/raw material volatility.