Goldman Sachs maintains Buy on Shanghai M&G, but cuts target price to Rmb29

Overview

This report is Goldman Sachs' 4Q25 earnings review of Shanghai M&G (603899.SS). The company posted 9% YoY revenue growth in 4Q25, but it was 5% below GS estimates; net profit attributable to shareholders of the parent declined 3% YoY, 13% below GS estimates. Among the traditional core businesses, writing instruments performed better than expected, while student stationery and office stationery missed expectations; Colipu revenue grew 15% YoY but slowed from 17% in 3Q25; Jiumu revenue rose 10% YoY on store expansion, but store efficiency remained under pressure.

Core views

GS maintains its Buy rating, but lowered its 2026-27E earnings estimates by 4%-6% and cut the target price from Rmb31 to Rmb29 because Colipu's sales growth recovery will still take time, sales expectations for the traditional core businesses were reduced, and valuations for diversified retail peers were re-rated lower. Positives include a low 2026 base, leaner channel inventories, cleaner Jiumu inventory after cleanup, and the company's continued launch of emotional-value products; if these products succeed, they could drive sales and gross margin improvement.

Analysis framework

The report breaks down 4Q25 revenue by segment, gross margin, expense ratio, EBIT margin, net profit attributable to shareholders of the parent, and the 2026 outlook, and compares actual results with GS estimates. Valuation uses a 12-month target price framework based on 17x 2026E P/E, and the target price is adjusted for earnings estimate cuts, slower growth, and peer valuation de-rating.

Methodology notes

• Performance comparisonActual results vs. GS estimates

  Compare 4Q25 revenue, gross margin, expense ratio, EBIT margin, and net profit with GS estimates.

  Used to identify the sources of the earnings miss: revenue shortfall, gross margin shortfall, non-operating income, and minority interests affected net profit, while lower selling expenses partially offset operating profit pressure.

• Valuation methodsP/E-based target price method

  The target price is based on 17x 2026E P/E.

  GS shifted the valuation base from the 2025-26E average to 2026E, and cut the multiple from 19x to 17x due to slower growth prospects and lower valuations for diversified retail peers.

• Factor profileGS Factor Profile

  Assess the stock's relative position versus the market and peers based on growth, financial returns, valuation multiples, and composite indicators.

  The report says this framework uses GS forecast data to rank standardized metrics such as sales, EBITDA, EPS, ROE, ROCE, CROCI, and valuation multiples.

Asset mapping & comparison

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

• Shanghai M&G (603899.SS)

  Research subject

  Strengths

  4Q25 writing-instruments revenue rose 6% YoY and was slightly better than GS estimates; channel inventories are lighter; Jiumu inventory is cleaner after cleanup; continued launches of emotional-value products could support sales and gross margin.

  Weaknesses

  4Q25 revenue and net profit were both below GS estimates; student stationery, office stationery, and Colipu were relatively weak; Jiumu store efficiency is under pressure and its 2025 net loss widened.

  Comparison

  The target price multiple was cut from 19x to 17x, reflecting slower growth and lower valuations for diversified retail peers.

  Risks

  Product mix upgrades may take longer than expected; competition in stationery and office supplies may intensify.

• Colipu

  Core business segment

  Strengths

  4Q25 revenue grew 15% YoY, still maintaining double-digit growth.

  Weaknesses

  Revenue was 3% below GS estimates, slowed from 17% growth in 3Q25, and weighed on gross margin.

  Comparison

  The recovery is still underway but will take time, which is one of the main reasons GS lowered 2026-27E earnings estimates.

  Risks

  Sales growth and gross margin recovery may be slower than expected.

• Jiumu

  Driver of the retail superstore business

  Strengths

  4Q25 revenue rose 10% YoY, and the store count increased from 741 at end-2024 to 860 at end-2025.

  Weaknesses

  Store efficiency remains under pressure, and the 2025 net loss widened to Rmb85mn due to inventory cleanup.

  Comparison

  Store count was slightly below GS estimates of 870.

  Risks

  Post-expansion per-store output may improve less than expected, and inventory cleanup could weigh on profitability.

Key data

• 4Q25 total revenueRmb7,736mnUp 9% YoY, 5% below GS estimates.
• 4Q25 net profit attributable to shareholdersRmb362mnDown 3% YoY, 13% below GS estimates.
• 4Q25 gross margin15.5%0.9ppt below GS estimates of 16.4%, mainly due to office stationery and Colipu.
• 4Q25 EBIT margin5.8%Above GS estimates of 5.5%, helped by lower-than-expected selling expenses.
• 4Q25 Colipu revenueRmb5.4bnUp 15% YoY, 3% below GS estimates, and slower than 3Q25 growth.
• 4Q25 Jiumu revenueRmb383mnUp 10% YoY; the store count reached 860 by end-2025, slightly below GS estimates of 870.
• 2026 company revenue targetRmb27.8bnEquivalent to 11% YoY growth.
• Earnings estimate revisionDown 4%-6% for 2026-27EReflects slower Colipu recovery, lower sales in the traditional core business, and a lower gross margin assumption for Colipu.
• Target priceRmb29Cut from Rmb31, based on 17x 2026E P/E.
• Implied upside13%Based on the report's current price of Rmb25.64 and target price of Rmb29.

Impact & implications

In the near term, the 4Q25 miss and earnings estimate cuts reflect continued pressure on revenue momentum, Colipu gross margin, and the traditional core categories. Medium term, if demand stabilizes, inventories improve, and emotional-value products scale up as expected, the company may see growth recovery off a low 2026 base. On valuation, the target price cut reflects slower growth and peer valuation pressure, but the Buy rating suggests GS still sees the risk-reward as attractive.

Risks

• Product mix upgrades may take longer than expected.
• Competition in stationery and office supplies businesses may intensify.
• Colipu sales recovery and gross margin improvement may be slower than expected.
• Sales in the traditional core businesses may continue to weaken.
• Jiumu store efficiency improvement may fall short of expectations.
• Demand recovery remains uncertain.

What to watch

• Whether 2026 revenue can reach the company's target of Rmb27.8bn and 11% YoY growth.
• Whether Colipu revenue growth and gross margin can recover.
• Whether sales dispersion across the three traditional categories - writing instruments, student stationery, and office stationery - narrows.
• Progress in Jiumu store count, per-store efficiency, and loss reduction.
• Sales contribution and gross margin performance after the launch of emotional-value products.
• Whether the decline in the selling expense ratio is sustainable.