Damo: Lowering the target price of Giant Biotech (02367) to HK$42, increasing marketing to boost sales recovery

The Zhitong Finance App learned that Morgan Stanley released a research report saying that Giant Biotech (02367) recently lowered its sales guidance for 2025 from a 25% increase to a flat or slight decline. Damo lowered Giazi Biotech's revenue forecast for 2025 to 2027 by 20%, 32% and 35%, respectively. Net profit for 2025 and 2026 is expected to fall 8% year on year, but rebounded 20% in 2027; the target price was lowered from HK$78 to HK$42, and the rating was “increased”.

According to the report, although the company originally expected sales growth of 20 to 30% in the fourth quarter of this year and the Double 11 period, it was unable to achieve the target due to industry headwinds. Faced with fierce price competition for products of the same type and declining return on investment in live streaming delivery, the company prioritized price stability and profitability, leading to a decline in sales and a weakening of the leverage effect of fixed operating expenses. Looking ahead, the bank expects the company to take different actions to drive sales recovery. First, the bank believes that increasing investment in marketing will help offset the impact of earlier disputes, rebuild brand momentum, and support new product launches. However, the company's profit margin is high, and it is expected that increasing marketing expenses will not greatly affect the company's profit.

Additionally, Damo anticipates that Juzi Biotech's sales will reduce reliance on live streaming delivery and Double 11 and 618 promotions. However, the company's cosmetic injectable products will be launched in 2026. The bank expects that the initial contribution of the product will not be significant, but it also confirms that the company's accumulated R&D results are still in the early stages of commercialization.