Open source Securities: First coverage of SOFTCARE(02698) with a "buy" rating, excellent localization capabilities.

Open Source Securities released a research report stating that the global market has a high ceiling and long slope with thick snow. SOFTCARE (02698) is expected to achieve long-term stable growth, with the company's projected net profit attributable to shareholders for the years 2025-2027 being $112 million, $132 million, and $154 million, corresponding to EPS of $0.18, $0.21, and $0.25. The current stock price corresponds to a PE ratio of 22.3, 18.8, and 16.1 times. This is the first coverage, and a "buy" rating is given. The main points of Open Source Securities are as follows: Leading African hygiene products company, with rich experience in localizing in emerging markets, poised for long-term stable growth SOFTCARE is a leading company in the African hygiene products industry, mainly engaged in the research, production, and sale of baby diapers, sanitary napkins, and other hygiene products, with both categories holding the top market share in Africa. The African market benefits from a demographic dividend, coupled with a low penetration rate of diapers and sanitary napkins, providing ample room for industry growth. The company has a rich product portfolio, and with localized production capacity in 8 African countries, it has built cost barriers, along with an extensive distribution network to reach a wide consumer base. The firm believes that the company's strong localization capabilities are underestimated by the market, and it sees potential for the company to continue expanding its channels and product categories in Africa, while replicating its localization operations in other emerging potential regions worldwide. Products: Multi-brand layered matrix positioning, multiple SKUs covering all scenarios + localized products for building barriers In the baby care sector, SOFTCARE has positioned the Softcare, Maya, and other brands across four major brands and multiple differentiated product lines, with 263 SKUs as of April 2025; in the feminine care track, SOFTCARE has built the Softcare, Veesper, and Clincleer three major brand matrixes, with 44 SKUs to cater to various menstrual needs. Developing differentiated products to meet local African demand, the company has established itself as the leading seller of baby diapers and sanitary napkins in Africa, with sales market share and growth ahead of competitors. Production and channel capabilities: localized production capacity reduces costs + improves efficiency, leading the industry in deep distribution networks. Production end: Localized production capacity brings cost efficiency advantages. With 8 factories and 51 production lines in 8 African countries, with Ghana and Kenya as core bases, the company has the widest domestic factory layout in the hygiene products industry in Africa. In 2024, baby diaper and sanitary napkin production volume ranked first in Africa, with core category production capacity utilization rate rebounding, while planning to expand production to consolidate supply capabilities. Channel end: Extensive distribution to truly understand the African market and channels. After over 15 years of focusing on emerging markets, a sales network covering 30+ countries has been established, with 18 branch offices reaching over 80% of the local population through more than 2800 wholesalers and distributors. Compared to international brands, it is harder to penetrate the offline channels, but SOFTCARE leads the industry in understanding the African offline channel, with strong channel stickiness and early mover advantage, forming competitive barriers. Risk warning: Intensified market competition, exchange rate fluctuations, unexpected expansion of production capacity, etc. risks.