CICC has maintained an "Outperform" rating on GIANT BIOGENE (02367). Based on updated profit forecasts and changes in sector valuation benchmarks, the target price was lowered by 13% to HK$49, implying 24x and 22x P/E ratios for 2026 and 2027, respectively, and representing a 59% potential upside. Due to external headwinds and intensified competition, the net profit forecasts for 2026 and 2027 were reduced by 10% each to 1.92 billion yuan and 2.15 billion yuan. The current share price corresponds to 15x and 14x P/E for 2026 and 2027.
The company's 2025 results were in line with expectations. Revenue reached 5.52 billion yuan, down 0.4% year-on-year, while net profit attributable to shareholders was 1.92 billion yuan, a decrease of 7.2%. Adjusted net profit was 1.96 billion yuan, down 8.9% year-on-year. The company also declared a final dividend of 0.54 yuan per share and a special dividend of 0.67 yuan per share, resulting in a total payout ratio of 67%.
By brand, revenue from Curfem slightly declined by 1.6% to 4.47 billion yuan in 2025, primarily due to external impacts and heightened price competition in the industry. In contrast, revenue from Curigin grew steadily by 9.2% to 920 million yuan. By product category, sales of functional skincare products increased by 0.8%, while medical dressings fell by 4.8%. The short-term pressure on dressings was mainly due to the company strengthening channel sales controls to maintain its product pricing system. By channel, direct sales revenue was flat year-on-year, while distributor sales declined by 1.5%. The company continued to deepen its offline presence, covering approximately 1,700 public hospitals, 3,000 private hospitals and clinics, 6,000 CS/KA stores, and over 130,000 chain pharmacy stores by the end of 2025.
Changes in product mix led to a slight decrease in gross margin, which fell by 1.8 percentage points to 80.3%. The sales expense ratio increased by 1.0 percentage point to 37.3%, driven by higher brand investment. The management and R&D expense ratios changed by +0.3 and -0.3 percentage points to 3.1% and 1.6%, respectively. Consequently, the net profit margin attributable to shareholders decreased by 2.5 percentage points to 34.7%, while the adjusted net profit margin dropped by 3.3 percentage points to 35.5%.
The company's cosmetics product portfolio continues to expand, with multiple new products under the Curfem collagen repair and Focus series planned for launch. Curigin is also set to introduce significant new products and undergo brand and product line restructuring. Furthermore, two approved Class III recombinant collagen medical device products are progressing well commercially, supported by a robust pipeline of aesthetic medicine products. The outlook remains positive for a recovery in the core cosmetics business and incremental contributions from the aesthetic medicine segment, suggesting potential operational improvements. Investors are advised to monitor opportunities for positioning.
Risks include ongoing intensification of industry competition and potential delays in product registration approvals.
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