Buy Vinda (3331 HK): New Incentives, Leverage & Margins - Target HK$25.2 (Up 80%+)

Sell Hengan (1044 HK): Relationships, Churn & Margin Pressure. Target HK$38 (Down 50%)

Asia Ex-J Consumer/ Transport analyst

Valerie Law, CFA

Equity Bottom-Up

Leading producers of tissue and personal care products <a href="https://www.smartkarma.com/entities/hengan-intl-group-co-ltd" target="_blank" data-smartkarma-citation="entities:29:1" rel="noopener">Hengan Intl Group (1044 HK)</a> and <a href="https://www.smartkarma.com/entities/vinda-international-holdings-limited" target="_blank" data-smartkarma-citation="entities:475:1" rel="noopener">Vinda International Holdings (3331 HK)</a> have benefitted from fallen pulp prices last year. In this piece, we attempt to answer the following questions: 1. Can they ride on the tailwind and continue to deliver good profits in FY2020? 2. Why did their share prices run up recently? 3. Will Hengan be able to get past corporate governance concerns highlighted by a short-seller?

Leading producers of tissue and personal care products Hengan Intl Group (1044 HK) and Vinda International Holdings (3331 HK) have benefitted from fallen pulp prices last year. In this piece, we attempt to answer the following questions: 1. Can they ride on the tailwind and continue to deliver good profits in FY2020? 2. Why did their share prices run up recently? 3. Will Hengan be able to get past corporate governance concerns highlighted by a short-seller?  

Prefer Vinda Even If Hengan Surprises Near-Term; CG Issues Need More Light