Citigroup has released a research report indicating that GIANT BIOGENE's (02367) net profit for 2025 declined by 7%, aligning with the company's guidance from December of last year for a mid-to-high single-digit drop and matching the bank's expectations. During the period, revenue remained flat, also in line with forecasts, with stronger performance in online direct sales offsetting weakness in the distribution business. The group's management has set a target for 10% revenue growth in 2026. Considering margin compression, the net profit goal is either growth or stability, which the bank views as better than the market's pessimistic outlook. Due to lower-than-anticipated sales and margin prospects, Citi has reduced its profit forecasts for Giant Biogene for this year and next by 8% and 13%, respectively. The target price has been lowered from HK$44.6 to HK$37, based on a forecasted 2026 price-to-earnings ratio of 18 times, suggesting the valuation is at a trough. A recovery is anticipated in the second half of this year, and a "Buy" rating is maintained. The report noted that some of Giant Biogene's business segments performed better than expected in the second half of last year, including smaller-than-expected sales declines on Tmall and Douyin, well-controlled advertising and promotional expenses, and stable dividends with ongoing special payouts. Negative factors included a sales drop in the JD.com channel due to inventory reduction in the third quarter and increased promotional activity during the Double Eleven shopping festival, slower growth in offline direct sales, and a decline in distributor sales. Giant Biogene's management aims for 10% revenue growth in 2026, with both the Comfy and Collagen brands expected to see similar growth. Due to base effects, performance in the second half is projected to outperform the first half. Existing core products, including collagen sticks, medical dressings, and focus creams, continue to be key sales drivers. Citi expects a slight contraction in gross margin for 2026 (less than 1 percentage point) due to changes in product mix and rising raw material costs.