Gold Rush in Africa sells baby diapers with an annual income of 3 billion yuan, Le Comfort goes to Hong Kong for IPO

Photo source: Visual China

Blue Whale News, February 8 (Reporter Xu Xiaochun)Against the backdrop of Africa’s largest number of newborns growing in the world, Shen Yanchang and his wife earn 3 billion yuan a year by selling baby diapers in Africa and other regions.

Shen Yanchang and his wife and their Senda Group have been targeting emerging markets such as Africa since 2000. Around 2016, in addition to sanitary products, Shen Yanchang joined hands with Keda Manufacturing to build a ceramic factory in Africa to dig gold. The investment amount of both parties exceeded billions of yuan. Two years later, Shen Yanchang joined the board of directors of Keda Manufacturing. In recent years, Africa’s newborns have grown rapidly. Le Comfort has also quickly seized the African baby diaper market through localized strategies such as building factories overseas. Now, Shen Yanchang himself is also standing at the gate of the capital market.

Africa sells diapers in 3 billion yuan annually

Le Comfort is mainly engaged in the development, manufacturing and sales of baby and female hygiene products such as baby diapers, baby pull-up pants, sanitary napkins and wet wipes. Le Comfort has long placed its main markets in Africa, Latin America, Central Asia and other places. In the first three quarters of 2024, more than 98.2% of Le Comfort’s revenue comes from Africa.

In 2023, Le Comfort sold a total of 3.714 billion baby diapers, achieving sales revenue of approximately US$324 million, accounting for 78.7% of the company’s current operating income. In addition, sanitary napkins, baby pull-up pants, wet wipes and other categories contributed 15%, 3.2%, and 3.1% of Le Comfort’s operating income respectively, and the proportion was not high.

Since its establishment in 2009, Le Comfort has targeted the African market and sold hygiene products. After years of channel accumulation, the Frost Sullivan report quoted in the Le Comfort prospectus shows that based on sales in 2023, Le Comfort ranks first in the baby diaper market and sanitary napkin market in Africa, with market shares respectively. It is approximately 20% and 14%. In addition, Le Comfort has a relatively high market share in many Central African countries and regions such as Ghana, Kenya, Cameroon, and Tanzania.

In 2018, Le Comfort began the localized production of baby diapers, baby pull-ups, sanitary napkins and wet wipes in Ghana, and later built a global supply chain system with international manufacturing as the core. As of September 30, 2024, Le Comfort has deployed eight production plants and 44 production lines in Africa, with a total annual designed production capacity of 5.578 billion baby diapers, 352 million baby pull-ups, 2.569 billion sanitary napkins and 6.227 billion wipes.

For this listing in Hong Kong, the funds raised by Le Comfort will continue to be used to expand overall production capacity and upgrade existing production lines. In addition, it will also include expansion activities such as marketing and promotion activities in Africa, Latin America and Central Asia, and strategic acquisitions of hygiene products industry businesses.

Currently, Le Comfort’s portfolio includes Softcare and core brands of baby and female hygiene products such as Veesper, Maya, Cuettie and Clincleer. Among them, most of Le Comfort’s revenue comes from the Softcare brand. Softcare is positioned as a mid-to-high-end brand. From the early single baby diapers and sanitary napkin products, in recent years, it has evolved into baby pull-up pants, wet wipes and other categories.

From 2019 to 2023, Africa’s compound growth rate of newborns ranks first among states in the world. In this rapidly growing emerging market, Le Comfort has made more benefits. In 2022, 2023 and the first three quarters of 2024, Le Comfort achieved operating income of approximately US$320 million, US$411 million and US$334 million respectively.

From this point of view, Le Comfort’s annual revenue is equivalent to about 3 billion yuan, which ranks among the middle and upper reaches among domestic A-share maternal and infant products concept companies.

Entering the African market very early and building local factories have brought great cost advantages to Le Comfy. Among the top five market participants in the African baby diaper market in 2023, Le Comfy’s single baby diapers have the lowest selling price, only US$0.087/piece. The highest unit price is P & G’s baby diaper products, which sell for approximately US$0.12/piece.

Even under the low-price sales model, the gross profit margin of Le Comfort, which is operated by its own brand, has continued to increase in recent years, reaching 23%, 34.9% and 35.4% in 2022, 2023 and the first three quarters of 2024 respectively. The net interest rate for the same period is approximately 5.7%, 15.7% and 21.6%. In this regard, Le Comfort believes that it is mainly due to the decline in upstream raw material prices and the reduction in exchange losses.

Shen Yanchang and his wife’s gold rush in Africa

Behind the Le Comfort Nuggets African market are Shen Yanchang, Yang Yanjuan and their Senda Group.

Data shows that Senda Group was established in 2000 and is headquartered in Guangzhou. It is a multinational comprehensive industrial group. Senda Group originally started as international trade. Shen Yanchang and his wife have long targeted emerging overseas markets such as Africa and South America. The current Senda Group includes overseas industrial manufacturing, international trade, industrial investment and other sectors, covering ceramic products, sanitary ware, hygiene products, household daily chemicals, personal care, hardware products and other product businesses.

Le Comfort originated from the international trade business of sanitary products launched by Senda Group in 2009.

In addition to Le Shushi’s hygiene products sector, another shovel that Shen Yanchang grasps for gold mining in Africa is the ceramic products business, which has been tied to the listed company Keda Manufacturing in the past ten years.

Originally, Keda Manufacturing’s business mainly included building materials machinery business modules such as building ceramics machinery, wall material machinery, and stone machinery, as well as clean coal gasification, flue gas treatment design, manufacturing and engineering businesses.

Starting in 2016, Keda Manufacturing began to extend the company’s overseas business to the downstream building ceramics field to meet the rapidly developing infrastructure needs of developing countries. Keda Manufacturing’s partner in Africa is Shen Yanchang’s Senda Group. In 2016, Keda Manufacturing and Guangzhou Senda jointly established multiple holding subsidiaries in many African countries. According to the joint venture arrangement, Shen Yanchang’s Guangzhou Senda and its wholly-owned subsidiaries are mainly responsible for the sales business of overseas companies. Keda Manufacturing and Guangzhou Senda generate certain related transactions during daily trade cooperation.

In 2018, Keda Manufacturing planned to acquire from Shen Yanchang the minority stake in the overseas investment company jointly established by both parties in the early stage. At the same time, Shen Yanchang joined the board of directors of Keda Manufacturing and became one of the non-independent directors of the listed company, in charge of the African ceramics business. Although the acquisition ultimately failed, Shen Yanchang still joined the board of directors of Keda Manufacturing as scheduled and has served as a non-independent director to this day.

After Senda Group cooperated with Keda in manufacturing, both parties frequently set up overseas factories in the early days. In December 2017, Keda Manufacturing and Guangdong Senda planned to invest and build two building ceramics production lines in Senegal, with a total project investment of US$37 million. At the beginning of 2019, the two parties jointly invested an additional US$20 million in investment projects in Senegal, and the total project investment was changed from US$37 million to US$57 million.

In 2019, the two parties planned to invest in building ceramics production in Zambia, with a total project investment of US$33 million. The following year, both parties invested an additional US$17 million in Zambian ceramics project. In 2019, Senda Group and Koda Manufacturing also planned the implementation of the second phase of the joint venture project in Ghana, with a total investment of US$23.5 million.

All of the above-mentioned projects building ceramic production lines in Africa and other places all have a 51% stake in Keda Manufacturing. Based on this calculation, in just three years, the total investment in Shen Yanchang’s Senda Group and Keda Manufacturing Project has reached US$131 million, equivalent to approximately RMB 950 million.

Early Keda Manufacturing mainly relied on Senda Group’s sales channels in Africa for market expansion. As of the end of the third quarter of 2024, Keda Manufacturing and Senda Group had jointly built and operated 19 building ceramic production lines and 2 sanitary ware production lines in 6 African countries. Production line and 1 glass production line, and multiple building materials projects are still under construction. In the first 10 months of 2024 alone, the actual contract amount signed by Keda Manufacturing and related parties such as Senda Group will exceed 1.1 billion yuan.

At the end of last year, in order to strengthen the independence of its business segment, Keda Manufacturing integrated its cooperative trademark resources with Senda Group. In November 2024, Keda Manufacturing acquired 182 trademarks related to the building materials business worldwide by Senda Group and its related parties for 200 million yuan.

After the transaction is completed, Senda Group and its related parties will no longer engage in building materials business and related brand operation activities in areas where Keda Manufacturing’s overseas building materials business has been operated or planned to operate, and related transactions between the two parties will gradually decrease. However, in the short term, according to Keda Manufacturing’s forecast, the amount of related party transactions between the two parties in 2025 will still be approximately 862 million yuan.