Shares of China’s leading sanitary towel and nappy producer Hengan International Group fell after they resumed trading on Thursday, even as the company denied allegations from a short seller of fabricating income. The stock dropped as much as 5.9 per cent before closing 3.7 per cent lower at HK$54.95. It fell 5.7 per cent before trading was halted on Wednesday after Bonitas Research alleged in a report the company had fabricated a total of 11 billion yuan (US$1.6 billion) of net income since 2005. The company “denies all of the allegations against” it in the Bonitas report, it said in a statement published on early Thursday. Bonitas claimed the stock was “worthless” because of the fraudulent financial reporting and the amount of debt incurred. Hengan International shares plunge in Hong Kong after short seller brands it ‘worthless’ Hengan International said the report contained statements that were “misleading, biased, selective, inaccurate and incomplete” as well as “groundless allegations and irresponsible speculations”. It said it could consider taking legal actions against Bonitas. The company, citing independent research in the statement, said it held a 27 per cent share of China’s sanitary napkin market, making it the largest player in the industry. Continuing the tit-for-tat, Bonitas in response to Hengan International’s rebuttal, said it stood by its allegations. “Hengan’s response was weak and evasive of our key points and failed to address any of the evidence presented in our report,” the short seller said in a statement on Thursday. Bonitas also accused the company of failing to explain the discrepancies in its sanitary napkin operating profit margins between what was reported by one of its subsidiaries and what was described by its chief financial officer. Hengan’s response was weak and evasive of our key points and failed to address any of the evidence presented in our report Bonitas Research Summer Wang, an equity analyst at Jefferies, wrote in a note sent out on Thursday that Hengan International’s declining stock price suggested good buying opportunities. “In our opinion, Hengan’s sanitary napkin profitability and cash dividend payout are real, transparent and widely respected,” Wang wrote. Still, Wang argued the company’s high gross margin questioned by Bonitas was “reasonable” for feminine products and the brand’s strong customer loyalty. Hengan International posted in September a 5-per cent rise in net profit to 1.9 billion yuan in the first six months ended on June 30 from the same period last year. Revenue for the period jumped 16 per cent to 10.1 billion yuan. Hengan International is the third Hong Kong-listed company targeted by Bonitas, which was founded in March by short-selling veteran Matthew Wiechert. Shares of Chinese sportswear maker Hosa International have been suspended from trading after Bonitas accused it of inflating profits in July, and Chinese online lender Chong Sing Holdings FinTech Group has dropped over 60 per cent since the short seller alleged it carried out sham transactions in September.