Mao Geping (01318.HK) fell 5.96% to HKD56 after Morgan Stanley cut its price target 28% to HKD72, citing potential shareholder stake reduction concerns and higher marketing expenses. The broker maintained its Overweight rating but lowered 2026-2027 sales and EPS forecasts.
Mao Geping (01318.HK) fell 5.96% to HKD56 on Wednesday after Morgan Stanley cut its price target 28% to HKD72 on concerns over potential shareholder stake reductions.
"Potential shareholder stake reductions may continue to pressure near-term valuation, though a strategic investment from an international beauty group could create a win-win outcome," Morgan Stanley analysts said in a research report.
The broker lowered its 2026 and 2027 sales forecasts by 2% to 3%, now expecting annual growth of 27% and 21%, respectively. It trimmed operating margin estimates to 28.8% and 27.8%, cutting EPS forecasts by 5% and 7%. Morgan Stanley reduced its target price-to-earnings multiple to 21 times from 28 times.
The stock has now lost roughly 44% from its 52-week high, testing support levels not seen since early 2025. The company's position as China's only sizable high-end beauty brand with over 20 years of operating history may attract interest from global beauty groups, Morgan Stanley said, noting a bull-case scenario of HKD113 if a strategic partner emerges.
The broker maintained its Overweight rating despite the cuts, citing Mao Geping's resilience during industry downturns and its diversified business spanning color cosmetics, skincare, high-end counters, online channels and makeup schools. Color cosmetics serve as a traffic-driving entry point while skincare is key to long-term value creation, the analysts said.
If a strategic partner helps enhance formulations, efficacy claims and hero product lines, skincare growth could become more sustainable while alleviating shareholder liquidity pressure, Morgan Stanley said. The broker does not base its core scenario on this assumption nor believes any transaction is imminent, but considers related discussions worthwhile given rising interest in Chinese brands among global beauty companies.
The downgrade puts Mao Geping at its lowest since early 2025, testing the HKD55 support level. Investors will watch for any disclosure of shareholder stake changes or strategic partnership announcements that could determine the stock's next direction.
This article is for informational purposes only and does not constitute investment advice.
