UBS: First Coverage of SOFTCARE (02698) with a "Buy" Rating, Target Price at HKD 41

UBS released a research report stating that they are initiating coverage of SOFTCARE (02698) with a "Buy" rating and a target price of HK$41. The company is uniquely positioned to capture the long-term structural growth in consumption of hygiene products in Africa, benefiting from favorable population demographics, low category penetration rates, and decades of economic and consumption growth runway. As a regional leader, it has a sustainable competitive advantage based on scale, localized manufacturing, distribution, and execution capabilities. UBS believes that SOFTCARE can sustain a 15% compound annual growth rate in sales from 2026 to 2028 while maintaining a resilient profit margin structure. With the potential for favorable forex dynamics and the additional optionality of expansion into Latin America, the 18 times price-to-earnings ratio corresponds to a 15% compound annual growth rate in earnings per share from 2026 to 2028, offering an attractive risk-return profile with long-term profit growth potential. UBS also forecasts that the profit margin structure of SOFTCARE will remain stable from 2026 to 2028, benefiting from its localized manufacturing footprint and scale advantages driving cost efficiency. Potential tailwinds from forex dynamics also support average selling prices. Additionally, stable raw material prices outlook reduces input cost volatility. Looking ahead, UBS is optimistic about the profit margin upside potential from penetration into Latin America, where retail ASP is higher than in Africa. With geographic diversification of its operations, SOFTCARE is poised to achieve a structurally higher profitability.