Investment Rating - The report upgrades MGP to Buy from Neutral, highlighting its sustainable growth and resilient margins in the premium beauty market [10] - Giant Biogene is rated Buy, with expectations of a gradual recovery in sales and strong long-term growth potential [16] - Shanghai Jahwa is also rated Buy, indicating a turnaround in its skincare business and solid growth prospects [22] Core Insights - The China cosmetics industry is expected to see sustained momentum driven by higher-quality channels and a focus on new product cycles [3] - The government's anti-involution measures are likely to increase traffic acquisition costs, impacting sales on platforms like Douyin [3] - There is a shift towards reliability and brand trust in consumer preferences, prompting companies to innovate and upgrade their product offerings [4] Summary by Sections Key Trends - Higher-quality channels are expected to maintain momentum, particularly on Tmall, supported by government measures [3] - The product landscape is shifting towards proven efficacy and brand trust, with companies innovating to create new value propositions [4] Company-Specific Insights - MGP is positioned for sustainable growth with a projected 34%/38% sales/NI CAGR from 2021-2025, and 23%/22% from 2025-2027 [10][11] - Giant Biogene anticipates a sales decline in the short term but expects recovery driven by its leading brand position and product pipeline [16] - Shanghai Jahwa is experiencing strong growth in its key brands, with a projected CAGR of 2%/34% for its personal care/cosmetics segment from 2025-2027 [22] Valuation Methodology - MGP's target price is set at HK$105 based on a 28x 2027E P/E, reflecting its high growth profile [12] - Giant Biogene's target price is HK$46, based on a 22x 2027E P/E, indicating a recovery in its sales profile [17] - Shanghai Jahwa's target price is RMB 28, based on a 30x 2027E P/E, reflecting its improving sales and net profit profile [23]

Summary of Giant Biogene Holding Co Ltd (2367.HK) Conference Call Company Overview - **Company**: Giant Biogene Holding Co Ltd (2367.HK) - **Industry**: Consumer (Biotech and Skincare) - **Market Cap**: US$6,931.1 million - **Current Stock Price**: HK$53.95 - **Price Target**: HK$78.00, representing a 45% upside from the current price [7][21] Key Financial Highlights - **1H Results**: - Sales increased by 23% - Net Profit (NP) rose by 20% - Operating Profit (OP) was approximately 5% above market expectations [2][3] - **Sales Growth Forecast**: - 2025: 25% increase - 2026: 27% increase - 2027: 27% increase [12][15] - **Net Profit Growth Forecast**: - 2025: 18% - 2026: 24% - 2027: 27% [15] Marketing and Sales Strategy - **Marketing Efficiency**: Improvement noted in 1H results, with a decline in Advertising & Promotion (A&P) expenses for the first time on a semiannual basis [4] - **Sales Channels**: - Online sales grew by 25% - Offline sales increased by 18% - JD Health saw a significant growth of 134% [3] - **KOL Livestreaming Impact**: Temporary disruption due to unfavorable publicity, but recovery is expected [4] Strategic Direction - **In-house Livestreaming**: Shift towards strengthening in-house livestreaming and diversifying influencer partnerships [4] - **Product Innovation**: Emphasis on R&D and product innovation as a competitive advantage [5] Valuation and Price Target Changes - **Price Target Increase**: From HK$74 to HK$78 based on higher EPS estimates [16] - **Valuation Metrics**: - Target P/E remains at 30x for 2025 estimates - Bull-case scenario suggests a target of HK$91.00 with a P/E of 33x [21][29] - Bear-case scenario suggests a target of HK$45.00 with a P/E of 19x [17][31] Risks and Opportunities - **Opportunities**: - Potential growth in aesthetics products not yet priced in - Expected strong sales growth driven by core brands and new product approvals [25][35] - **Risks**: - Competition in the industry may impact margins - Delays in the approval of new aesthetic products could hinder growth [36] Conclusion - **Investment Thesis**: The company is positioned well within the biotech market with a strong growth outlook, driven by innovative products and effective marketing strategies. The current stock price presents an attractive entry point for long-term investors, with significant upside potential as the market begins to recognize the value of its aesthetic product offerings [25][21]