霸王集团 汇丰研究报告 英文(3)

霸王集团 汇丰研究报告 英文

Personal Products abc23 November 2010

Update on business

Shampoo

In a conference call, Bawang stated that group sales in the July-October period were down 31% and that profits for the full year would be down substantially. Based on this, we estimate that sales for Bawang products alone could be down as much as 43%.

Below we show the guidance from Bawang on sales performance prior to today’s profit warning.

Bawang-brand shampoo sales updates post Dioxane incident on July 14 2H July Down about 60% y-o-y

1H August Up 25% from 2H July. Down about 50% y-o-y

2H August Up single digit from 1H August. Down about 50% y-o-y September Up single digit m-o-m. Down 40-50% y-o-y October

Up single digit m-o-m. Down about 40% y-o-y

Source: Company data

The company also stated that it has raised advertising activities in recent months and that sales have past a worst level, but further (numerical) details were not provided.

In our note of 12 November, we stated that our channel checks already suggested that sales performance in smaller cities across China were weak. The reason for this was that supermarkets were showing better sales performance than Bawang’s guidance, indicating that areas where we did not check must have performed below guidance.

Other points from management in the call were as follows:

New products. Bawang will continue to launch its new “Dr Gao” series of natural ingredient based

household cleaning products, scheduled for late 2010. We think it might be pushed back to 2011. The price point of this product is low-to-mid end and will initially be sold through smaller shops, not supermarkets. It will also continue the scheduled roll-out of the skin care products in 2010 and 2011. The

contribution of this skin care product is relatively small. Herbal tea: By 31 October, Bawang has coverage in more than 50 cities in South China and >100

distributors. Company sees network coverage roll out as “satisfactory”. Royal Wind sales recovery deteriorated. Sales were down 5% y-o-y initially. Due to the continued

media coverage on the Dioxane incident, sales declined further in recent months. Cash and working capital. Current cash position is over RMB1.5bn (vs RMB1.7bn at end-1H10).

According to management, inventory days have increased by 2 days in 2H10 because of inventory in new products and not an increase in Bawang products. For similar reasons, accounts receivable days have increased. Accounts payable days decreased by a few days, as the company is seeking more favourable terms with suppliers.

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