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Morgan ups Hengan Int'l (01044) to HK$90
Morgan Stanley lifted its target price for Hengan
International (01044) to HK$90 from HK$87, and maintained its "overweight" rating.
  The research house said encouraging survey results enhance its conviction in Hengan's
growth potential, which is being activated by reforms. Sales weakness in December 2017 is
priced in. As Hengan moves along the learning curve, Morgan believes 2018 will be a year 
of delivering results. 
  Morgan said Hengan's product and brand are strongly positioned across city tier, income
level, and user age, based on its AlphaWise survey conducted in 2H 2017. It may be a 
positive surprise that Hengan's market share in Tier 1 cities is leading most
international brands.
  Morgan thinks Hengan's 21ppt year-to-date underperformance versus the Hang Seng Index
has factored in the sudden sales drop in December 2017, which stemmed mainly from: (1) 
weaker performance by some sales teams, and (2) some regions where Hengan still suffered 
from legacy channel inventory.

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