In 1H26, Marubi Biotech recorded total operating revenue of RMB1.7bn, -5.76% YoY; attributable NP of RMB155mn, -10.86% YoY; and attributable net margin of 9.35%, -0.54pp YoY. In 2Q26, revenue came in at RMB782mn, -14.84% YoY; attributable NP reached RMB54mn, +38.32% YoY; and attributable net margin was 6.96%, +2.68pp YoY. Investment income from the disposal of long-term equity investments and trading financial assets was approximately RMB63mn, while ex-nonrecurring NP declined to RMB13mn, -59.88% YoY. In 1H26, the company adopted a strategy of prioritizing quality over volume. It adjusted its business mix, moderated the spend on influencer livestreaming, and strengthened its in-house operating capabilities. The core MARUBI brand delivered relatively resilient growth, while Passional Lover (PL) was more affected by the adjustments. Looking ahead to full-year 2026, we expect the company to remain in a transition period. However, 2H26 revenue growth could turn positive as the company actively explores offline channels, Marubi expands into niche categories such as eye oils, and PL optimizes its products and content marketing around its core foundation and cushion franchises. The company has an ample product pipeline and continues to step up medical-aesthetics R&D. The successful launch of PDRN- and ECM-based ingredients and medical-aesthetics products could contribute to revenue and earnings growth. Maintain OVERWEIGHT.
Given the revenue decline in 1H26, we lower our 2026-28E revenue forecasts to RMB3.7bn/RMB4.3bn/RMB4.8bn (-13.70%/-17.34%/-19.52% vs our previous forecasts). We also raise our selling expense ratio forecasts as the company continues to invest in brand building. Accordingly, we lower our 2026-28E attributable NP forecasts to RMB306mn/RMB386mn/RMB474mn (-13.41%/-19.32%/-15.79% vs our previous forecasts). Comparable companies trade at 19x 2027E PE. While the company remains in a transition period in 2026, its leading position in eye care remains intact, and the business-mix adjustment should improve profitability. Its rich pipeline should continue to support product upgrades, while the successful commercialization of high-potential ingredients such as PDRN and ECM could unlock meaningful opportunities. We assign the company 33x 2027E PE and lower our target price to RMB31.72 (previously RMB33.44, based on 38x 2026E PE).