Giant Biogene (2367.HK): Improved Half-on-Half in 1H26; Guidance Intact; PO Cut to HK$35.9; Buy Reiterated

Giant Biogene posted 1H26 revenue of RMB2.9bn, down 6.3% year-on-year on a high base but up 21.3% half-on-half, with net profit of RMB940mn (-20.5% YoY, +28.2% HoH). Gross margin declined from 81.7% in 1H25 to 79.5%, while the selling expense ratio rose to 43.4% (from 34.0%) on promotion of new products including the Ultra-Translucent Stick and 753 Collagen Injection and on building self-operated channels. Management maintained 2026 guidance of roughly 10% revenue growth and positive net profit growth. The Ultra-Translucent Stick reached RMB100mn cumulative GMV within 100 days of launch, keeping the RMB200mn full-year target intact; the first medical-aesthetics injection launched in June, with a second planned for October/November 2026. Third-party live-streaming fell to about 30% of online sales. BofA kept 2026E revenue unchanged but cut 2027/28E revenue by 1.0%/2.2% and 2026-28E net profit by 1.0%/1.9%/2.9% on intensifying competition. The DCF-based price objective drops from HK$39.6 to HK$35.9 (WACC 12.6%, terminal growth 3.5%), and Buy is reiterated given on-schedule launches and steady new-product ramp. Key risks: product safety/reputation, clinical delays, shifting preferences, competition, regulation.