Giant Biogene is listed as a Top Pick, with the target price raised to HK$43.00

Overview

This report covers Giant Biogene Holding Co Ltd (2367.HK). Morgan Stanley believes that although the company has experienced significant business volatility over the past 12 months, its unique positioning across efficacy skincare, medical devices, and medical aesthetics remains unchanged. The company is simultaneously advancing along two main lines: first, repairing its commercialization model by reducing reliance on KOLs and influencer livestream traffic and increasing self-operated e-commerce and brand livestreaming; second, expanding its product pipeline through ingredient R&D, new skincare products, and medical aesthetic injectable products to extend its growth cycle.

Core views

The core view is that 2026 may be a cyclical low point for margins and earnings, but through brand investment, channel mix optimization, and product portfolio expansion, the company is expected to resume healthier revenue and earnings growth in 2027-2028. The report forecasts revenue growth of 10%, 17%, and 16% for 2026-2028, respectively, and expects Comfy and Collgene to recover to growth rates in the low teens. The medical aesthetics business, Ultra Glow Stick, a recovery in Collagen Stick, and new rare ginsenoside products are seen as subsequent upside drivers.

Analysis framework

The analytical framework combines operating adjustments, product pipeline, margin structure, and valuation scenarios. On the operating side, the focus is on self-operated e-commerce, brand livestreaming, the declining share of KOLs, offline stores, and the OTC channel; on the product side, the focus is on evaluating Bi-phase Ultra Glow Stick, Collagen Stick, Collgene skincare new products, recombinant collagen fillers, and skin rejuvenation products; on the financial side, the report updates forecasts for revenue, gross margin, expense ratio, net profit, and EPS; on the valuation side, it uses 2026e P/E and provides bull and bear case scenarios.

Methodology notes

• Valuation methods2026e P/E valuation

  Target price valuation

  The base case uses 21x 2026e P/E to derive the HK$43.00 target price, implying about 1.4x PEG on 2026-2028e EPS CAGR.

• scenario_analysisbull/base/bear case

  Risk-reward scenario analysis

  The bull case assumes 2026e EPS is 6% higher than the base case and applies 27x 2026e P/E, corresponding to HK$59.00; the bear case assumes 2026e EPS is 9% lower and applies 13x 2026e P/E, corresponding to HK$24.00.

• earnings_forecastMorgan Stanley Research estimates

  Earnings forecast revision

  The report raises its 2026 and 2027 earnings forecasts due to stronger self-operated e-commerce and livestreaming sales, increased brand investment, and timely launches of new skincare and medical aesthetic injectable products.

• operating_analysisgo-to-market and brand mix review

  Commercialization model repair

  The report evaluates the company's transition from KOL-driven traffic to self-operated e-commerce, brand livestreaming, social media seeding, and cooperation with authoritative media, in order to improve revenue resilience and reduce dependence on purely sales-oriented spending.

Asset mapping & comparison

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

• 2367.HK

  The company's stock

  Strengths

  It has recombinant collagen technology, a positioning that combines efficacy skincare and medical aesthetics, relatively high gross margins, a relatively high dividend payout ratio, and room for growth recovery driven by self-operated channels and new product pipelines.

  Weaknesses

  Business volatility has been significant over the past 12 months, and higher brand investment in 2026 is expected to pressure the expense ratio, with net margin forecast to contract to 31.3%.

  Comparison

  The report believes the current valuation is about 14-15x 2026e P/E, while the base target price uses 21x 2026e P/E; the consensus rating distribution is 87% Overweight, 13% Equal-weight, and 0% Underweight.

  Risks

  Operating margin contraction faster than expected, delays in new product approvals, loss of momentum in recombinant collagen products, intensified industry competition, and macro weakness.

• Comfy

  Core brand and growth vehicle for the skincare business

  Strengths

  New brand ambassadors, cooperation with CCTV, and increased communication around factories and technology help strengthen brand awareness; early feedback on Ultra Glow Stick has been positive.

  Weaknesses

  Historically, it has relied relatively heavily on sales-oriented spending and KOL traffic, and the conversion efficiency of brand investment still needs to be validated.

  Comparison

  The revenue contribution of Collagen Stick has declined from a peak of about 40% in 2023-2024 to about 30%, and the company aims for the top five products to contribute about 60% of sales, making the product mix more diversified.

  Risks

  New products fail to sustain scale-up, the efficiency of promotions and platform traffic declines, or consumer acceptance is lower than expected.

• Collgene / medical aesthetics

  Platform for expansion in medical aesthetics and anti-aging positioning

  Strengths

  The medical aesthetics category aligns with Collgene's anti-aging and skin rejuvenation positioning; the first recombinant collagen lyophilized fiber filler has already been launched, and a subsequent skin rejuvenation product is expected to launch in 2H26.

  Weaknesses

  The business is still at an early stage, and sales ramp-up, channel execution, and the approval timeline still need to be validated.

  Comparison

  The report forecasts medical aesthetics revenue of Rmb80mn in 2026 and Rmb650mn in 2028, and believes it could deliver a gross margin of 85-90%.

  Risks

  Delays in approval of new medical aesthetics products, insufficient acceptance from doctors and channels, unstable pricing, or intensified competition.

Key data

• Target priceHK$43.00Raised from HK$42.00, mainly due to higher EPS forecasts.
• Current share priceHK$29.66As of the close on April 20, 2026.
• Upside potential45%Corresponding to the upside from the target price relative to the current share price.
• 2026e P/E14.4xThe report states the stock is trading at around 14-15x 2026e P/E.
• 2026 revenue forecastRmb6,083mnRevenue is expected to grow 10%, 17%, and 16% in 2026-2028, respectively.
• 2026 net profit forecastRmb1,904mnNet margin in 2026 is expected to be 31.3%, with net profit roughly flat year-on-year.
• 2026 A&P expense ratio37.8%Expected to rise by 3.5 percentage points, with more spending on brand building, partially offset by a lower KOL mix.
• Medical aesthetics business revenueRmb80mn in 2026 to Rmb650mn in 2028The medical aesthetics business is viewed as the second long-term growth driver.
• Medical aesthetics business gross margin85-90%Based on industry peers, the report believes this business can improve the overall margin structure.
• Dividend yield4-5%The payout ratio over the past three years was 60-70%, higher than cosmetics peers.

Impact & implications

If the company can successfully reduce its reliance on KOLs, strengthen self-operated channels and brand equity, and scale up new medical aesthetics and skincare products, the margin pressure in 2026 may be viewed as transitional investment, and the market may reassess its biotechnology capabilities, anti-aging positioning, and high-margin product portfolio. Conversely, if new product margins come in below expectations, momentum in recombinant collagen products weakens, or competition intensifies, valuation recovery may be limited.

Risks

• Operating margin contracts faster than expected.
• Approval of new medical aesthetics products is delayed.
• Sales momentum of recombinant collagen skincare products weakens.
• New product margins are below expectations.
• Industry competition intensifies alongside weak macro consumption.
• Brand investment increases but fails to bring sufficient sales recovery.
• Short-term sales volatility during the adjustment of KOL and livestreaming channels.

What to watch

• Whether the year-on-year decline in sales and earnings in 1H26 is in line with expectations.
• Whether sales and earnings achieve about 30% year-on-year growth in 2H26.
• Progress in raising the share of self-operated e-commerce and brand livestreaming while reducing the share of KOL sales.
• The actual contribution of a higher A&P expense ratio to brand awareness and sales recovery.
• Whether Bi-phase Ultra Glow Stick can achieve its 2026 sales target of Rmb200mn.
• Whether Collagen Stick resumes growth, and whether the sales contribution of the top five products approaches the 60% target.
• Approval, launch, and channel sell-through of the first recombinant collagen filler in medical aesthetics and the new skin rejuvenation product in 2H26.
• Whether net margin can stabilize in 2027-2028 and whether the high-margin medical aesthetics business can improve the overall margin profile.