Hengan management: price competition remains intense, full-year sales target maintained at low-single-digit growth

Overview

This report summarizes management commentary after Goldman Sachs’ 2026 APAC Consumer & Leisure Corporate Day with Hengan. The meeting on July 2-3 covered key operating updates on household tissue, sanitary napkins, diapers, costs, FX, and government subsidies. The core takeaway is that pricing competition remains intense, especially with only limited improvement in household tissue and sanitary napkin, yet the company continues to prioritize margins, brand equity, and premium positioning over volume defense through price cuts.

Core views

Hengan’s near-term operating environment is challenging: household tissue sales were down mid- to high-single-digit year-on-year in 5M26, sanitary napkins were broadly flat, and diapers continued to decline at high-single-digit year-on-year rates. Management believes competition intensified in 2Q26, but it will not follow price reductions and instead relies on brand positioning, product differentiation, wet wipe growth, and more effective advertising to support FY26 low-single-digit sales growth. On the cost side, pulp prices are stable and expected to remain moderate in 2H26, but oil-related raw materials are expected to create slight gross margin pressure in 3Q26.

Analysis framework

The report is based on Goldman Sachs Corporate Day management interaction minutes and is organized by business segment to review sales trends, competitive dynamics, margin changes, and expense trends, with additional coverage of FX loss and declining government subsidies as P&L impacts. Because Hengan is Not Covered, the report does not provide an official rating, target price, or earnings-revision guidance.

Methodology notes

• Company transcriptManagement Takeaways

  Distill business trends, competitive intensity, cost pressure, and strategic orientation through management dialogue.

  This report primarily reflects statements from Hengan management at Goldman Sachs’ APAC Consumer & Leisure Corporate Day, focusing on segment sales growth, gross margin, advertising spend, and raw material pressure.

• Factor descriptionGS Factor Profile

  Goldman Sachs compares a stock’s attributes against peers and the market using growth, financial returns, valuation multiples, and composite percentiles.

  The appendix notes that this framework uses normalized percentiles from sales, EBITDA, EPS, ROE, ROCE, CROCI, P/E, P/B, and EV/EBITDA, but the main report does not provide Hengan-specific factor scores.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Hengan International / 1044.HK

  Core company in the report; a listed consumer goods company in Hong Kong

  Strengths

  Sanitary napkin business still has leading brand equity and relatively good product quality; wet wipes continue high-single-digit growth; management emphasizes margins, brand equity, and premium positioning.

  Weaknesses

  Household tissue sales were down in 5M26, with dry tissue significantly hurt by price competition; diapers continued to decline; declining subsidies and FX effects add earnings headwinds.

  Comparison

  Compared with peers that fight volume by cutting prices, Hengan has chosen not to match those cuts and instead follows a more margin- and brand-protection-oriented strategy.

  Risks

  Price competition in household tissue and sanitary napkins remains fierce, oil-linked raw materials lift costs, 3Q26 margins face pressure, FX losses may widen, and subsidies may decline.

Key data

• Household tissue 5M26 salesdown MSD%-HSD% y/yDry tissue is about 50% of household tissue revenue and has become the largest drag due to fierce price competition.
• Wet wipes 5M26 salesup HSD% y/yThe segment is still small but has strong profitability and supports the full-year household tissue target.
• Sanitary napkin 5M26 salesroughly flatIndustry competition remains fragmented and fierce, and management emphasizes premiumization and younger consumers.
• Diaper performancedown HSD% y/yPerformance remains weak; sanitary napkin and diaper segment gross margins are about 60%.
• FY26 sales targetBoth household tissue and sanitary napkins target low-single-digit growthManagement maintains the full-year target.
• 1H26 margin outlookHousehold tissue and sanitary napkin gross margins roughly stable y/yPulp prices are relatively stable, and are expected to stay moderate through 2H26 as domestic supply increases.
• 3Q26 margin pressureMay face slight pressureOil-linked raw material pressure has begun to emerge since June, but management believes the impact is manageable and does not plan to raise prices.
• FX impactApproximately RMB 100 million exchange loss in 5M26Previously a currency gain, this has turned into an additional earnings headwind.
• Government subsidyPossibly lower than 2025Management believes the declining trend may continue.

Impact & implications

For investors, Hengan’s key tension is the trade-off between volume and margin. The company’s refusal to follow price cuts helps protect brand value and margins, but can suppress household tissue volumes as price competition intensifies. If wet wipes, premium sanitary napkins, and ROI-oriented advertising can continue to improve product mix, the low-single-digit full-year growth case remains supported. Otherwise, the price war, FX losses, and subsidy decline may continue to cap earnings resilience.

Risks

• Price competition in household tissue and sanitary napkins continues to intensify, with sales growth below management’s low-single-digit full-year target.
• The company’s decision not to match price cuts may further sacrifice volumes and market share.
• Oil-linked raw material pressure may cause gross margins to decline in 3Q26 and beyond.
• About RMB 100 million FX loss and lower government subsidies pressure profitability.
• The continuing decline in diapers remains a drag on overall growth and portfolio balance.

What to watch

• Pulp price and oil-linked raw material cost trends in 2H26.
• Whether wet wipe momentum at high-single-digit growth can continue and expand revenue contribution.
• Whether premiumization and younger consumer strategy in sanitary napkins can translate into actual growth.
• Changes in market share under a no-pricing-and-no-follow-pricing strategy.
• Whether improvements in advertising ROI can offset competitive and cost pressures.
• The sustained impact of FX gains/losses and lower subsidies on profitability.