1H26 Results in Line; Second-Half Improvement and Peak-Season Catalysts Expected
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1H26 Results in Line; Second-Half Improvement and Peak-Season Catalysts Expected
Giant Biogene's 1H26 revenue and net profit were broadly in line with expectations. Margins faced short-term pressure, but new products, medical aesthetics, and channel optimization support sequential improvement in the second half.
- 1H26 revenue was RMB2.9 billion, down 6% YoY and up 21% HoH, 2% above analysts' expectations.
- Gross margin was 79.5%, down 2.2 percentage points YoY, mainly due to product mix changes and initial dilution from new products; the company expects gross margin to improve both YoY and HoH in 2H.
- Net profit was RMB940 million, slightly above analysts' expectation of RMB927 million, as weaker gross margin and expense ratios were offset by higher interest income and a lower tax burden.
- The company maintained its 2026 guidance for 10% revenue growth and flat profit, implying revenue and profit growth of more than 30% in 2H26.
- The first medical aesthetics product is priced at RMB6,800, and the second facial efficacy-enhancing product is planned for launch in October-November 2026.
Report interpretation
Overview
Morgan Stanley believes Giant Biogene's 1H26 results were in line with expectations. Despite YoY revenue decline and pressure on gross margin and SG&A expense ratios, operating metrics have recovered sequentially from their lows in the second half. The company remains confident in second-half growth, margin improvement, and channel optimization, with additional share-price catalysts potentially emerging during the beauty peak season.
Core views
On revenue, new products and the medical aesthetics business are expected to drive a return to growth in the second half. On profit, scale effects from new products and a higher contribution from high-margin medical aesthetics are expected to improve gross margin, while selling and distribution expenses are expected to decline sequentially. Online channel mix has been optimized, with KOL livestreaming declining to around 30% of online sales and Comfy below 30%; while offline operations remain under YoY pressure, they are expected to grow sequentially in the second half.
Analysis framework
The report compares actual 1H26 results with analysts' and market expectations, and assesses the visibility of second-half growth and profit improvement based on product lines, online and offline channels, expense ratios, and management's full-year guidance.
Methodology notes
2026E P/E
The base case applies a 2026E P/E multiple of 21x as the target valuation.
Earnings Growth Relative to Valuation
The target valuation corresponds to a 1.4x PEG based on the expected 2026-2028 EPS CAGR.
Whether Results Met Expectations
Performance is assessed through deviations of revenue, gross margin, expense ratios, and net profit from analysts' expectations.
Asset mapping & comparison
Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).
- 2367.HKCovered Company
- Strengths
- Growing acceptance of recombinant collagen skincare products, stronger recognition of core brands, expansion through new medical aesthetics products, and optimization of online channel mix.
- Weaknesses
- 1H26 revenue declined YoY, gross margin fell due to new products and product mix, and SG&A expense ratio increased.
- Comparison
- Analysts believe actual revenue was 2% above their expectations, while net profit of RMB940 million exceeded their RMB927 million forecast.
- Risks
- Operating margin contraction exceeds expectations, delays in approvals for new medical aesthetics products, weakening momentum for recombinant collagen products, and intensifying industry competition.
Key data
- 1H26 RevenueRMB2.9 billion-6% YoY, +21% HoH, 2% above analysts' expectations.
- 1H26 Gross Margin79.5%Down 2.2 percentage points YoY, affected by product mix changes and initial dilution from new products.
- 1H26 Net ProfitRMB940 millionAbove analysts' expectation of RMB927 million.
- Selling and Distribution ExpensesBelow RMB2.5 billion for the full yearThe company guided for an expense ratio of 41%-42%; analysts expect RMB2.48 billion and 41%.
- 2026 Operating Guidance10% revenue growth and flat profitImplies revenue and profit growth of more than 30% in 2H26.
- Target PriceHK$43.00Based on a 2026E P/E multiple of 21x.
Impact & implications
Short-term margin pressure has not fully subsided, but the company's maintained full-year guidance, implied high second-half growth targets, and progress in new medical aesthetics products provide conditions for a valuation recovery. If new products scale up, medical aesthetics sales contribution, and offline recovery materialize as planned, the market's valuation of its biotechnology advantages and growth outlook may improve.
Risks
- Operating margin contraction exceeds expectations.
- Delays in approval or launch progress for new medical aesthetics products.
- Weakening sales momentum for recombinant collagen products.
- Intensifying industry competition amid macroeconomic weakness.
- Weak offline foot traffic or continued price controls affecting the recovery of offline sales.
What to watch
- Whether 2H26 revenue and profit can achieve growth of more than 30%.
- The contribution of new-product ramp-up and high-margin medical aesthetics business to gross-margin improvement.
- Whether selling and distribution expenses decline sequentially as guided, and whether the full-year expense ratio can remain at 41%-42%.
- Sales recovery of core products including Comfy, Collagen Stick, Focus Cream, and Collgene.
- Whether the second medical aesthetics product can launch as planned in October-November 2026.
- Channel efficiency and brand-owned livestreaming performance following the reduction in the share of online KOL livestreaming.