Goldman Sachs Reiterates Buy: Forest Cabin Beats Expectations on 618, Full Year High-Growth Guidance Unchanged

Overview

After communicating with management of Shanghai Forest Cabin Cosmetics at the 2026 Asia-Pacific Consumer Leisure Enterprise Day, Goldman Sachs maintained its "Buy" rating. The core view of the report believes that through product iteration and upgrade, improved internal production efficiency, and refined full-channel operations, the company can effectively support its high growth guidance of 30%-50% for 2026 revenue and profit. Despite pressure from rising packaging costs, stable raw material costs and increased self-production ratios help maintain margins. Additionally, the company plans to enhance shareholder returns, considering significantly increasing the dividend proportion and exploring buybacks, with a long-term goal of reaching 10 billion RMB in revenue by 2030.

Core views

Performance and Guidance: The company's 618 promotion performance met expectations, with overall online GMV achieving YoY growth of over 100%. Among them, the Douyin channel became the biggest highlight, with GMV surging YoY by over 200%; Tmall self-operated GMV also recorded growth of over 30%. Based on this, management reiterated the guidance for 2026 full-year revenue and net profit YoY growth of 30%-50%, and set a long-term goal of reaching 10 billion RMB in revenue by 2030, where the core brand "Forest Cabin" contributes 70%-80%, and internally incubated and M&A businesses contribute 20%-30%. Product Strategy: The company is optimizing its product portfolio through structural upgrades and multi-brand layout. Regarding core hero products, Essential Oil, Essence Water, and Camellia Oil will be upgraded sequentially in the second half of 2026, expected that Essential Oil long-term sales share will reach 30%, and Essence Cream share will reach 15%-20%. As for new products, the Whitening Essential Oil launched in May surpassed 40 million RMB in sales in June, showing strong early explosion power, aiming to attract young consumer groups and expand whitening and sunscreen categories (long-term target share 5%-10%). Meanwhile, the company launched "Hua Shi Zhuang" targeting mature consumers, tested "Xiao Qing Xuan" for teenagers, and entered the CS channel through the "Shao Hua" series, to cover wider age groups and price bands. Channels and Profitability: Offline channels (600+ stores) remain the most profitable segment, with a net margin of 20%-30%, average transaction value around 1000-1200 RMB, far higher than online's 500-600 RMB. In 2026, same-store sales growth for mature stores is planned at 10%-20%, new store growth at 10%-20%. Online adopts an all-platform strategy, with Douyin, shelf e-commerce, and other platforms sales share approximately 40%/30%/30%. In Douyin live streaming, the company is gradually adjusting the ratio of self-streaming vs KOL live streaming from current 50%/50% to 60%/40%, to enhance execution efficiency and cost control. Although online net margins (Tmall low 20% range, Douyin 15%-20%) are lower than offline, all channels maintain healthy profitability. In the medium to long term, the company targets overall net margins to remain in the 15%-20% range. Shareholder Returns: Management is considering increasing the dividend payout ratio from 27% in 2025 to over 50%, expected to be updated in the mid-year results announcement in late August. In addition, share buyback funds are in place, and the company is also exploring introducing more suitable capital to enhance trading liquidity.

Analysis framework

The report adopts a typical top-down and bottom-up combined analysis framework. First, verify short-term prosperity by tracking real-time data of key sales nodes (such as the 618 promotion); second, deeply dissect the company's product lifecycle management (such as the upgrade rhythm of hero products, expansion of new categories) and channel structure changes (online/offline ratio, self-stream/KOL ratio), to assess the quality and sustainability of growth; third, judge the resilience of profit margins by analyzing cost structure (raw material self-production, economies of scale); finally, combine valuation models (PE multiples) and shareholder return policies (dividends, buybacks) to give investment ratings. This analysis method emphasizes deriving macro financial results from micro operational details, paying special attention to the brand power monetization ability and channel efficiency of consumer goods companies.

Methodology notes

• Valuation MethodPE/PEG valuation

  PE valuation based on forecasted EPS

  The report uses the 2027 expected PE (22x) as the valuation anchor, combined with industry benchmarks and A-H share discounts for discounting. This is a common relative valuation method for growing consumer goods companies, reflecting the market's pricing of its future growth potential.

• Industry/Industrial Analysis FrameworkQuantity-Price Breakdown

  Decompose revenue growth into quantity growth and price/structure improvement

  The report analyzes contributions from different channels (Douyin vs. Tmall) and different product lines (Essential Oil vs. Whitening Series) in detail. By breaking down "Quantity" (GMV growth rate, number of stores) and "Price/Structure" (average transaction value, product mix upgrade) to understand revenue drivers.

• Company Fundamentals and Financial FrameworkOperating/Financial Leverage Analysis

  Analyze the impact of fixed and variable costs on profit

  The report mentions offsetting rising packaging costs by converting Essence Water bead production to self-production and locking in raw material prices through early purchases, reflecting the company's ability to manage operating leverage, i.e., releasing profit elasticity by controlling unit costs during revenue growth.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Shanghai Forest Cabin Cosmetics (2657.HK)

  Direct beneficiary target, report gives Buy rating

  Strengths

  Strong hero product iteration capability, Douyin channel explosive growth, offline high profitability, stable raw material cost control

  Weaknesses

  Online margin lower than offline, still high reliance on essential oil category

  Comparison

  Compared to peers, it has differentiated advantages in Douyin channel self-stream operation efficiency and offline high-end positioning

  Risks

  Anti-aging product penetration below expectations, essential oil adoption slowdown, online share increase leading to margin dilution

Key data

• 2026 Revenue/Profit Growth Guidance30%-50%YoY growth, management reiterated
• 618 Online GMV Growth100%+YoY growth
• Douyin Channel 618 GMV Growth200%+YoY growth
• Whitening Essential Oil June Sales40 Million RMBFirst full month of sales after May launch
• 2030 Revenue Target10 Billion RMBLong-term strategic goal
• Offline Channel Net Margin20%-30%Higher than online channels
• Target Dividend Payout Ratio50%+Considering increase from 27% in 2025
• Target PriceHKD 104Based on 2027E 22x PE

Impact & implications

The report believes that Shanghai Forest Cabin Cosmetics is in a stage where both brand momentum and operational efficiency are rising simultaneously. Continuous upgrades in product end and new category expansion help break the single reliance on essential oils and build a healthier product matrix; the rapid growth of Douyin channels and high-quality profitability of offline stores provide dual growth engines for the company. If the company can successfully achieve an increase in dividend ratio and share buybacks, it will further enhance investor confidence and support valuation recovery. For the industry, the company demonstrates the path for domestic high-end cosmetic brands to break through through refined operations and independent research and development.

Risks

• Slower than expected penetration of anti-aging product market in China
• Lower than expected acceptance of essential oil products in China
• Margin dilution due to increased online channel share
• Intensified market competition or promotional intensity exceeding expectations
• Over-concentration risk in the essential oil category

What to watch

• Formal update on dividend payout ratio increase in the mid-year results announcement in late August
• Market feedback on Camellia Oil and Essence Water upgrade products in September
• Launch and sales performance of Master Class Cream in October
• ROI changes after adjustment of Douyin self-stream vs KOL live streaming ratio
• Early expansion progress of new brands "Hua Shi Zhuang" and "Xiao Qing Xuan"