Sealand Securities has initiated coverage and assigned a "Buy" rating to SOFTCARE (02698). The company, with Africa as its core market, benefits from rising industry penetration rates and its own growing market share. Building on its core baby diaper category, the feminine hygiene pad segment is expanding rapidly, alongside ventures into emerging markets like Central Asia. Operating in a high-growth sector with a solid leading position, the company is seeing simultaneous improvements in scale and gross profit margin through product mix optimization and market expansion. The main views of Sealand Securities are as follows.
The company has built competitive barriers and sustainability through its deep cultivation of the African market, establishing itself as a hygiene products leader rooted in Africa with a global reach. SOFTCARE is a multinational hygiene products company focused on fast-growing emerging markets including Africa, Latin America, and Central Asia, founded in 2009. It is primarily engaged in the development, manufacturing, and sales of baby diapers, baby training pants, sanitary napkins, and wet wipes. After over 15 years of development, it has become a market leader in multiple African countries, with 18 sales branches established across 12 nations and an extensive network of over 2,800 channel partners.
The hygiene products market in Africa and other emerging markets offers high-growth potential, with demand burgeoning. According to Frost & Sullivan data, the market size for baby diapers, baby training pants, and sanitary napkins in Africa is projected to grow from $3.8 billion in 2024 to $5.6 billion in 2029, representing a compound annual growth rate (CAGR) of 7.9% from 2025 to 2029. Market expansion is driven by increasing penetration rates and a youthful demographic structure. In Central Asia, the market size for these products grew from $400 million in 2020 to $500 million in 2024, with a CAGR of 4.5%, and this growth is expected to continue, providing the company with new growth areas. Factors such as population growth, urbanization, consumption upgrades, and improved product awareness collectively propel the industry's sustained growth.
The company's competitive position and growth potential within the hygiene products industry in Africa and emerging markets are strong, built on a deep localization moat comprising sales, brand, and manufacturing. Since 2018, the company has established local production facilities in Africa, making it the hygiene products enterprise with the most extensive factory footprint on the continent, ensuring a stable and responsive supply chain. It boasts a wide and robust sales network, covering over 80% of the population in key African countries, with solid relationships with wholesalers and distributors creating high channel barriers. SOFTCARE has developed a comprehensive brand matrix, led by its core brand Softcare and extended to sub-brands like Maya and Cuettie, catering to different consumer segments with high brand recognition. According to Frost & Sullivan, in 2024, the company held market shares by volume of 20.3% in baby diapers and 15.6% in sanitary napkins in Africa, ranking first in both categories.
Risk factors include intensified market competition, volatility in the international political environment, business expansion falling short of expectations, fluctuations in raw material prices, exchange rate volatility, potential declines in gross profit margins for various business segments in future years, and valuation differences between Hong Kong/US stocks and A-shares.