CICC has released a research report maintaining its profit forecasts for MAO GEPING (01318) for 2025-2026 and introducing a 2027 net profit forecast of RMB 1.76 billion. The current share price implies 26x and 21x P/E ratios for 2026 and 2027, respectively. The firm reiterates its Outperform industry rating and HK$127 target price, corresponding to 38x and 31x P/E for 2026/2027, suggesting a 47% upside potential. CICC's key viewpoints are outlined below.
Recent company developments include an announcement of a strategic partnership with L Catterton, the world's largest consumer-focused investment firm and part of the LVMH group. The collaboration aims to foster strategic cooperation in global market expansion, acquisitions and strategic investments, capital structure optimization, and talent introduction and governance. Concurrently, the firm organized a Hong Kong investor open day for the company, noting its robust pipeline of new products, continued expansion into high-end retail counters, and initial success in overseas markets. CICC is optimistic about the company's medium to long-term growth prospects as it evolves into a global high-end cosmetics group.
The strategic partnership with L Catterton is expected to propel the company's groupification and global development. L Catterton will leverage its global investment footprint and strategic partner network to assist and empower the company's brands in expanding into overseas high-end retail channels. Furthermore, the two parties plan to jointly establish an equity investment fund focused on the global high-end beauty sector and will also collaborate on further optimizing the capital structure and enhancing talent acquisition and governance. CICC believes this partnership holds significant potential to accelerate the company's transformation into a global group and unlock long-term growth opportunities.
The company has pre-announced a management share reduction plan, providing clarity and helping to stabilize market sentiment. The controlling shareholder and management, due to personal financial needs, intend to reduce their combined holdings by no more than 3.51% of the total issued shares over the next six months, primarily through block trades. The proceeds are intended for investments in the cosmetics-related industry chain and personal lifestyle improvements. CICC views the clear communication of the maximum reduction amount as beneficial for stabilizing market expectations following the share unlock and interprets it as a sign of management's confidence in the company's long-term development.
The company's new product momentum is positive, with continued successful entry into high-end counter locations and initial signs of success in its overseas expansion. It boasts a substantial pipeline of new products; the skincare series "Liuguang Fuhuo" began pre-sales in late December and officially launched on January 1st, while the new shade 808 of the Air-Cushion Lip Gloss has received favorable market feedback. Brand building efforts are being consistently strengthened through initiatives like the "Belt and Road" documentary series and a themed fashion show in Shanghai's Yu Garden, alongside a limited-edition shadow puppet gift set inspired by "Galloping Horse Treading on a Flying Swallow" and "Classic of Mountains and Seas" that has been selling well. Offline, the company continues to deepen its coverage in high-end retail spaces, entering Hong Kong's Harbour City and Hangzhou's MixC in Q4 2024. The initial operational data from its first store in Hong Kong's Harbour City in December showed impressive growth, indicating promising early results from its international foray. CICC remains bullish on the company's vast growth prospects as it advances towards becoming a global high-end cosmetics group.
Risks include intensified industry competition and potential underperformance in new product cultivation.
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