Giant Biogene: E-commerce Recovery Plus New Medical Aesthetic Products Maintains Neutral Rating

Overview

This research note is meeting minutes from UBS regarding Giant Biogene's Collgene 753 new product launch event. The core conclusion is that the company's fundamentals show mixed short- and long-term characteristics: Long-term, the commercialization of injectable medical aesthetic products opens a second growth curve, and the e-commerce channel showed significant recovery in May. Short-term, however, profitability faces阶段性 pressure due to an increasing proportion of low-margin new products and rising upstream raw material costs. Based on this, UBS maintains its neutral rating and HK$34 target price for the company.

Core views

E-commerce business shows a positive inflection point. Despite negative revenue growth in Q1 against a high base and weaker seasonality in April leading to a downward revision of H1 revenue expectations, management expresses confidence in achieving double-digit YoY growth for online GMV in May-June. The 618 promotion sales rhythm is more balanced than previous years, reducing reliance on top-tier KOLs; the collagen stick performed as expected, and the newly launched light-sensing water-oil stick is gaining traction via self-seeding seeding, with expected volume surge during Double 11. The company reiterates its full-year revenue growth guidance of 10% and flat net profit. Medical aesthetic pipeline accelerates commercialization to build long-term barriers. The Collgene 753 collagen injectable has been officially commercialized. It features the industry's longest 753-amino-acid natural homologous sequence, offering clinical advantages of long-lasting efficacy and multi-target synergistic collagen synthesis. A compound solution is expected to be launched in Q3 of this year, with neck line and nasolabial fold fillers under regulatory review. Management maintains the 2026 medical aesthetic sales target of RMB 100 million and expects this segment to achieve gross margins exceeding 90% in its mature phase, providing a long-term profit buffer for the company. Short-term profitability faces structural pressure. Recent consolidated gross margins are expected to trend downwards, primarily driven by: (1) Product mix changes, where the new light-sensing stick has lower per-unit margins due to higher packaging costs; (2) Inflation in upstream raw material costs influenced by geopolitical factors. This pressure on the profit side is also the key reason why institutions currently maintain a neutral rating rather than upgrading it.

Analysis framework

UBS adopts a dual-track analysis approach combining 'High-Frequency Data Validation + Pipeline Value Assessment'. On one hand, by tracking high-frequency leading indicators such as May-June e-commerce GMV, the judgment on H1 revenue rhythm is revised to validate the elasticity of consumption recovery. On the other hand, the commercialization potential of the medical aesthetic pipeline is quantified across three dimensions: technical barriers (amino acid sequence length), approval progress, and sales targets. Finally, combined with a DCF model, short-term profit fluctuations and long-term growth potential are weighted to arrive at the comprehensive judgment of maintaining a neutral rating.

Methodology notes

• Valuation MethodDCF Cash Flow Discounting

  Discounted Cash Flow (DCF) Model

  The research note explicitly uses the DCF model to derive the target price, setting WACC at 8.9%. This method focuses on a company's ability to generate free cash flow throughout its lifecycle. It is suitable for companies like Giant Biogene undergoing business transformation, where short-term profits fluctuate but long-term pipeline realization is clear, avoiding misjudgment based solely on current P/E valuations.

• Industry/Industrial Analysis FrameworkVolume-price decomposition

  E-commerce GMV and Profit Margin Breakdown

  The report tracks revenue-side drivers (GMV growth) separately from the profit-side drivers (gross margin). GMV reflects market demand and brand momentum, while gross margin reflects product structure and cost pass-through capability. This decomposition helps investors identify temporary contradictions of 'revenue growth without profit growth' and understand why sales recovery did not immediately trigger a rating upgrade.

• Competition and Strategy FrameworkMoat / competitive advantage

  Technological Homologous Sequence as a Differentiation Barrier

  The report emphasizes that Collgene 753's 753-amino-acid natural homologous sequence constitutes a 'formidable technological moat'. In the recombinant collagen sector, sequence length and functional domain integrity directly determine product efficacy and compliance thresholds. This is the core asset distinguishing it from ordinary competitors and the underlying logic supporting the high gross margin expectation for the medical aesthetics business.

Asset mapping & comparison

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

• Giant Biogene Holding (2367.HK)

  Subject covered by the research report; benefits from e-commerce recovery and commercialization of new medical aesthetic products

  Strengths

  Possesses the industry's longest 753-amino-acid recombinant collagen sequence technological barrier; medical aesthetic pipeline approval pace is fast, with two Class III medical device products approved in 2026; e-commerce channel shows a positive inflection point in May

  Weaknesses

  Short-term gross margins eroded by new product packaging costs and raw material price hikes; H1 revenue expected to decline YoY; still in the磨合期 (fitting/moratorium period) with new KOLs and self-streaming channels

  Risks

  Slowing consumption recovery leading to weak demand for skincare and medical aesthetic products; intensified competition in the collagen-based product sector; new brand incubation below expectations; risk of core technical personnel loss or replacement by market alternatives; marketing and promotional spending to gain market share eroding profits; prolonged macroeconomic downturn affecting the cosmetics industry; changes in medical aesthetics regulatory policies and product registration/approval risks

Key data

• 12-Month Target PriceHK$34.00Based on DCF model with WACC 8.9%, unchanged
• 2026 Medical Aesthetic Sales TargetRMB 100 millionManagement guidance, corresponding to the rapid scaling phase of the medical aesthetics segment
• Mature Stage Medical Aesthetic Gross Margin90%+Management guidance, significantly higher than the skincare segment
• 2026E Revenue ForecastRMB 5.85 billionUBS forecast, approximately 6% YoY growth
• 2026E EBIT Margin36.6%Down from 39.6% in 2025, reflecting cost and mix pressures

Impact & implications

For Giant Biogene, the commercialization of Collgene 753 marks the critical implementation of the transition from a single skincare brand to a 'skincare + medical aesthetics' dual-engine drive model. If the medical aesthetics business achieves its RMB 100 million sales target as planned and gradually releases high gross margins, it will effectively offset the slowing growth and cost pressures of the skincare segment. For the industry, the approval of the 753 amino acid long-sequence product raises the technical threshold for recombinant collagen injectables, potentially accelerating the exit of smaller vendors. However, in the short term, investors need to tolerate the lag in margin repair while waiting for the scale effects of new products to manifest.

Risks

• Slowing consumption recovery leads to weakened demand for skincare and medical aesthetic products
• Intensified market competition for collagen-based products
• New brand incubation falls short of expectations
• Risk of core technical personnel loss or R&D being replaced by the market
• Increased promotional and marketing expenditures to capture market share erode profits
• Prolonged macroeconomic downturn impacts the cosmetics industry
• Changes in medical aesthetics industry regulatory policies and product registration/approval risks

What to watch

• Whether May-June e-commerce GMV confirms a double-digit YoY growth trend
• End-user sales velocity and doctor feedback following the launch of Collgene 753
• Approval and launch progress of the compound solution injectable product in Q3
• Whether gross margins can stabilize and rebound in the second half of the year as the product mix optimizes
• Quarterly achievement pace of the 2026 RMB 100 million medical aesthetics sales target