Recovery expected in 2026E

Recovery expected in 2026E Target PriceHK$38.70(Previous TPHK$53.89)Up/Downside26.0%Current PriceHK$30.70 Giant Biogene reported revenue of RMB5,519mn (-0.4% YoY) and attributable netprofit of RMB1,915mn (-7.2% YoY)in 2025.Theresultswere broadlyin line with ourexpectations, given theexternal headwindsand intensified competition that weighedon product salesin 2H25.During the period, gross margindeclined 1.8pptsYoY to80.3%,primarily due to changes in product mix.Looking ahead to 2026E, we expectsales growth to recover gradually,mainlydriven bystronger brand promotionforKOMFYMEDandCollgene,anexpandedproductportfolio,andthecommercialization of newly approved Class III injectables.Given the intensifiedcompetitionand expected higher marketing spending,we lower our 2025-28Erevenue/attributable net profitCAGR forecastsfrom 18%/ 17%to 11%/8%and thuslower our TP to HK$38.70(previous: HK$53.89).We maintain our BUY rating, as weexpectearningspressure to ease progressively through 2026E and injectables todrivemedium-to long-term growth.Since 9 Dec 2025, the Company has repurchasedshares worth a cumulative~HK$322mn,indicating mgmt’sconfidence in the long-term outlook. China Healthcare Jill WU, CFA(852) 3900 0842jillwu@cmbi.com.hk Cathy WANG(852) 3916 1729cathywang@cmbi.com.hk Miao ZHANG(852) 3761 8910zhangmiao@cmbi.com.hk 2H25 growth under pressure; 2026E recoveryto be driven by enrichedproduct portfolioand stronger brand promotion.In 2025, KOMFYMEDreportedrevenue of RMB4,470mn, down 1.6% YoY, while Collgenegrew9.2%YoYto RMB918mn.KOMFYMED's revenue dropped 22% YoYin 2H25due toshort-term external headwinds.Collgene’s growth was also affected by reducedcollaboration with top livestreamers on Tmall anda contraction in theofflinedistribution.To supporttherecovery in 2026E, the Company plans to launchseveral key products,such asKOMFYMED Focus Cream 2.0, new additions tothe Focus and Regularseries, aswell as new productsunder Collgene.We alsoexpect higher brand investment to help restore sales momentum. Shareholding Structure Offline direct sales continued to scale up.Offlinedirect sales increased 32%YoYto RMB225mn in 2025,with its revenue contribution rising to 4.1%(+1.1ppts).Thestrong growth was primarily driven bycontinuedexpansion ofKOMFYMED offline stores(32 stores by end-2025 vs. 18 by end-2024)andbroaderpenetration into professional skincare and mass-market channels.Notably,the Company also made progress in overseas expansion,withKOMFYMEDentering Watsons in Singapore andMalaysia, duty-free shopsinKorea, and online channelsin North America.Although offline direct sales stillaccount for a relatively small portion of total revenue,we expect continued storerollouts and channel expansion to support solid growth in offline direct sales.Class IIIinjectablesapproved; commercialization to begin in 2Q26E.Giant Biogene achieved significant regulatory milestones with NMPA approvalsfortwoClass IIIinjectablesin Oct 2025 and Jan 2026.We expectthe first producttobelaunchedin2Q26E, followed by the second in 2H26E.Giant Biogene is activelypreparingfor commercialization,including market research and distributorselection.Leveraging its nationwide sales network andestablishedcollaborationswith medicalinstitutions,we believe injectables could gradually become ameaningful medium-to long-term growth driver. Source: FactSet Maintain BUY.Welowerour2025-28Erevenue/ attributable net profitCAGRforecastsfrom 18%/ 17%to 11%/ 8%,to reflect intensifying competition.Wethereforelower our DCF-derived TP to HK$38.70 (WACC:10.6%,terminalgrowth:3.0%),implying19x2026E P/E.However, we expect earningsto bottomoutin 2H26E and the injectable productscoulddrive long-term earnings growth.Maintain BUY.Earnings Summary Disclosures& Disclaimers Analyst CertificationThe research analyst who is primary responsible forthe content of this research report, in whole or in part, certifies that with respect to the securities or issuer that the analyst covered in this report: (1) all of the views expressed accurately reflect his or her personal views about the subject securities or issuer; and (2)no part of his or her compensation was, is, or will be, directly or indirectly, related to the specific views expressed by that analyst in this report.Besides, the analyst confirms that neither the analyst nor his/her associates(as defined in the code of conduct issued by The Hong Kong Securities and Futures Commission) (1) have dealt in or traded in the stock(s) covered in this research report within 30 calendar days prior to thedate of issue of this report; (2) willdeal in ortrade in the stock(s) covered in this research report 3 business days after the date of issue of this report; (3) serve as anofficer of any of the HongKong listed companies covered in this report; and (4) have any financial interests in the Hong Kong listed companies covered in this report. CMBIGM RatingsBUY : Stock with potential return of over 15% over next 12 monthsHOLD: Stock with poten