Sales drop from proactive channel adjustment – Giant Biogene, a retailer of beauty and health products in China, reported 1H26 revenue of RMB2.92bn, down 6.3% YoY. Operating profit fell 24.9% YoY to RMB1.09bn, and attributable profit declined 20.5% YoY to RMB940mn. The underperformance was primarily attributable to a series of strategic initiatives, including reducing reliance on high‑cost KOL livestreaming in favor of self‑operated channels, alongside increased spending on brand building and new product launches. GPM contracted by 220bps to 79.5% YoY, reflecting a product mix shift toward lower‑margin functional skincare and higher packaging costs. To strengthen its marketing presence, the company increased sales and distribution expenses by 19.7% YoY, which now accounts for 43.4% of total revenue. Consequently, OPM narrowed to 37.2% from 46.4% in the comparable prior period. No interim dividend was declared for the period.

KOMFYMED drags amid KOL livestreaming reduction – The core brand KOMFYMED, which contributes 80.4% of total revenue, recorded RMB2.35bn, down 7.7% YoY. It is believed that the decline was due to the reduction in KOL livestreaming activities rather than weakening consumer demand. In contrast, COLLGENE (17.1% of revenue) remained relatively stable at RMB499mn, roughly flat YoY. Encouragingly, during the “618 Shopping Festival”, KOMFYMED’s GMV on online channels grew over 25% YoY, while COLLGENE’s GMV rose over 30% YoY, underscoring the brands’ strong appeal during promotional periods.

First medical aesthetics to contribute from 2H – On 9 June, the company officially launched its first Class III medical device product, the "753 Collagen Injection", which is China's first recombinant Type I collagen injectable. With two additional injectable products approved in January and June 2026, the medical aesthetics segment is well positioned to begin contributing meaningful revenue from the second half of 2026 onward.

Our views: 1H26 performance was affected by a phased restructuring of the sales channel, as the company deliberately reduced its exposure to KOL livestreaming to control related costs and protect margin. Importantly, underlying product demand remains intact, and the decline was not demand‑driven. Mgt continues to target a growth recovery for the full year, with increased focus on innovative raw materials and Class III medical devices as part of its longer‑term strategy. The stock currently trades at 13.8x FY26E P/E. (Amelia Deng)