Citigroup Cuts Giant Biogene Target 17% to HK$37

Citi Slashes Giant Biogene Target 17% on Margin Concerns

Citigroup issued a research note on March 20, cutting its price target for skincare company Giant Biogene (02367) by 17% to HK$37, down from HK$44.6. The revision follows a weaker sales and profit margin outlook, prompting the bank to lower its earnings per share forecasts for 2026 and 2027 by 8% and 13%, respectively. The adjustment reflects persistent headwinds in specific sales channels and rising costs.

Despite the reduced target, Citi's analysis highlighted that Giant Biogene's 2025 net profit decline of 7% was consistent with both the bank's own forecast and the company's prior guidance. Stronger-than-expected performance in online direct-to-consumer channels like Tmall and Douyin helped offset significant weakness in the company's distributor business.

Giant Biogene Guides for 10% Revenue Growth in 2026

Giant Biogene's management has set a target of 10% revenue growth for 2026, with both its core brands, Comfy and Collagen, expected to contribute similarly. The company projects that net profit will remain flat or experience slight growth as it navigates a challenging environment. This guidance was viewed by Citigroup as more optimistic than the market's most pessimistic scenarios.

The company's performance has been mixed across its sales platforms. Sales on JD.com fell due to destocking in the third quarter of last year and heavy promotional activity during the 'Double Eleven' shopping festival. Growth in offline direct sales also slowed, and distributor sales declined. However, management noted that core products, including its collagen sticks, medical dressings, and focus creams, continue to be primary sales drivers.

Citi Maintains 'Buy' Rating on H2 Recovery Hopes

While acknowledging short-term challenges, Citigroup maintained its "Buy" rating on the stock, signaling confidence in a potential second-half recovery. The bank's positive thesis rests on what it describes as a "low-point" valuation, with the stock trading at a projected 18x price-to-earnings ratio for 2026. Analysts anticipate performance will be stronger in the second half of the year due to a lower comparison base.

Looking ahead, Citi projects a slight contraction in Giant Biogene's gross margin of less than one percentage point in 2026. This pressure is attributed to a shift in the product mix and an increase in raw material costs. The stable dividend, which includes ongoing special payouts, was also cited as a positive factor supporting the investment case.