Key takeaway

In 2025, the company reported revenue of 25.06 billion yuan (+3.4% year-over-year) and net profit attributable to shareholders of 1.31 billion yuan (-6.1% year-over-year). On a quarterly basis, the company posted revenue of 7.74 billion yuan (+8.7% yearover- year) and net profit attributable to shareholders of 360 million yuan (-3.2% year-over-year) in Q4 2025. By business segment, the company's traditional core business revenue in 2025 was 8.84 billion yuan (-5.2%), with offline revenue accounting for approximately 7.17 billion yuan (-7.1%) and e-commerce revenue reaching 1.20 billion yuan (+5.2%). In 2025, the company's new business generated revenue of 16.63 billion yuan, an increase of 8.6% year-on-year. This includes Colipu (office supplies direct sales), which recorded revenue of 15.05 billion yuan, up 8.8% yearon- year. The company plans to spin off Colipu for a separate listing on the Hong Kong Exchange. The large-format retail business achieved revenue of 1.59 billion yuan, growing 7.2% yearon- year. As of the end of 2025, M&G Shop operated over 860 stores, with a net increase of more than 100 stores during the year. Looking ahead to 2026, the company expects to achieve annual revenue of 27.8 billion yuan (+11%).

Event

The company released its 2025 annual report. In 2025, the company achieved revenue of 25.06 billion yuan (+3.4%), net profit attributable to shareholders of 1.31 billion yuan (-6.1%), non- GAAP net profit attributable to shareholders of 1.12 billion yuan (- 8.9%), and net cash flow from operating activities of 2.28 billion yuan (-0.3%). The basic EPS was 1.43 yuan (-5.6%), and the weighted ROE was 14.6% (-2.1 percentage points). In 2025, the company plans to distribute a cash dividend of RMB 1.0 per share, totaling RMB 916 million, with a cash dividend payout ratio of 69.9% (+4.3 percentage points).

On a quarterly basis, the company reported revenue of RMB 7.74 billion (+8.7%), net profit attributable to shareholders of RMB 360 million (-3.2%), and adjusted net profit attributable to shareholders of RMB 320 million (+5.3%) in Q4 2025.

Quick Take

Traditional core business faced pressure in 2025, while new businesses drove revenue growth. Colipu plans to spin off for a Hong Kong listing. In 2025, the company's traditional core business (offline and ecommerce sales of M&G and its affiliated stationery brands) generated revenue of 8.84 billion yuan, down 5.2% year-on-year. The company's new business segments (including office supply direct sales and large-format retail stores) achieved revenue of 16.63 billion yuan, up 8.6% year-on-year. Within this, office supply direct sales contributed 15.05 billion yuan (an 8.8% increase), while large-format retail stores generated 1.59 billion yuan (a 7.2% increase). The company plans to spin off its subsidiary, Colipu Group, for listing on the Main Board of the Hong Kong Exchange. Currently, M&G holds a 77.78% stake in Colipu Group. Following this spin-off and listing, Colipu Group will be able to independently expand its presence in the general enterprise supplies sector, continuously enhancing its supply chain capabilities, customer service capabilities, and digitalized lean management system to better meet the needs of large clients. Meanwhile, M&G can focus more on the transformation and upgrading of its traditional core business, further strengthening its competitive edge in this area. This move will also enhance the independence of the listed company, eliminate internal resource redundancy, and enable more specialized and efficient development.

1) The traditional core business is under pressure offline, while e-commerce remains stable with narrowing losses. Looking at the traditional core business by channel: ① For the traditional offline main business, we estimate the 2025 revenue to be approximately 7.17 billion yuan (-7.1%), with Q4 2025 revenue at approximately 1.73 billion yuan (-3.9%). ② In terms of e-commerce business, M&G Technology generated revenue of 1.20 billion yuan (+5.2%) in 2025, with Q4 revenue reaching 240 million yuan (-9.8%). The company reported a net loss of 7.13 million yuan in 2025, showing significant improvement from the 26.30 million yuan loss in 2024. The company's online business maintained healthy and steady growth, balancing revenue and profit while improving operational quality.

2) Office direct sales saw an increase in volume but a decrease in price, achieving double-digit revenue growth in the second half of the year. In 2025, Colipu (office supply direct sales) generated revenue of 15.05 billion yuan (+8.8%), with a gross profit margin of 6.51% (-0.43 percentage points), net profit of 335 million yuan (+4.0%), and a net profit margin of 2.22%. In terms of volume and price breakdown, Colipu's sales volume in 2025 is projected to be 747 million units (+44.2%), with an average price of 20.14 yuan (-24.6%). In a single quarter, Colipu's Q4 revenue reached 5.36 billion yuan, up 14.6%, with a gross profit margin of 6.01%, down 0.58 percentage point.

3) The target for opening large retail stores was met, with a slight increase in loss es. In 2025, large retail stores (including M&G Life Store and M&G Shop) generated revenue of 1.59 billion yuan, up 7.2% year-on-year, with a net loss of 79 million yuan. This represents an increase from the 16 million yuan loss recorded in 2024, primarily due to the disposal of long-tail products. In a single quarter, the revenue of large-format retail stores in Q4 2025 was RMB 390 million, up 8.1% year-on-year. As of the end of 2025, M&G Shop had over 860 stores (combined with M&G Life Store, the total is expected to exceed 900), with a net increase of more than 100 stores, achieving the annual target for net new store openings.

By product: Core writing instruments and student tools experienced a price increase and volume decrease, with improved gross margins, primarily due to product mix optimization, lean production, and cost reduction and efficiency improvements.

1) Writing instruments: Revenue in 2025 is projected to be 2.42 billion yuan (-0.2%), with a gross margin of 44.92% (+1.99 pct). Breaking down volume and price, sales in 2025 are projected at 1.828 billion units (-3.6%), with an average price of 1.33 yuan (+3.5%). On a quarterly basis, Q4 revenue reached 430 million yuan, up 6.3% year-over-year, with a gross margin of 48.64%, an increase of 1.52pcts.

2) Student stationery: Revenue in 2025 reached 3.25 billion yuan (-6.5%), with a gross margin of 35.87% (+1.93 pcts). Breaking down volume and price, the sales volume in 2025 is projected to be 4.648 billion units ( -9.8%), with an average price of 0.70 yuan (+3.7%). On a quarterly basis, 25Q4 revenue was RMB 670 million (-6.4%), with a gross margin of 37.04% (+1.13 pcts).

3) Office supplies: Revenue in 2025 reached 3.30 billion yuan (-7.6%), with a gross margin of 27.71% (+0.03 pct). Breaking down volume and price, the sales volume in 2025 is projected to be 1.923 billion units (down 3.2%), with an average price of 1.72 yuan (down 4.5%). On a quarterly basis, Q4 revenue was RMB 1 billion ( -9.2%), with a gross margin of 30.37% (-0.95 pct).

4) Other stationery: Revenue in 2025 reached 980 million yuan (+13.8%), with a gross margin of 43.99% ( -0.05 pct). Breaking down volume and price, sales in 2025 are projected at 27 million units (+15.7%), with an average price of 35.94 yuan (-1.7%). On a quarterly basis, Q4 revenue reached 250 million yuan (+29.0%), with a gross margin of 43.89% (+1.93 pcts).

The decline in gross margin was primarily due to the impact of product mix, while expense control remained stable. 1) Profitability: In 2025, the company's gross margin was 18.36% (down 0.54 pct), net margin was 5.43% (down 0.57 pct), and income tax rate was 20.34% (up 0.21 pct). On a quarterly basis, the company's gross margin in Q4 2025 was 15.54% (-1.24 percentage points year-over-year, -4.36 percentage points quarterover- quarter); net margin was 5.02% (-0.42 percentage point YoY, -1.18 percentage points QoQ); and the income tax rate was 18.87% (-3.01 percentage points YoY, -0.84 percentage point QoQ). 2) On the expense side, in 2025, the company's sales, general and administrative, R&D, and financial expense ratios are projected to be 7.42% (+0.25 pct), 3.86% (-0.20 pct), 0.76% (-0.02 pct), and -0.02% (+0.14 pct), respectively. On a quarterly basis, the selling, general and administrative, R&D, and financing expense ratios for Q4 2025 were 5.80% (-0.50 pct), 3.06% (-0.58 pct), 0.58% (-0.08 pct), and 0.08% (+0.26 pct), respectively.

Looking ahead to 2026, the company stated in its annual report that it plans to achieve operating revenue of 27.8 billion yuan, an 11% year-over-year increase. 1) Traditional business: Optimize the product structure, develop and cultivate high-quality, high-functionality, and high-value-added products, and enhance IP empowerment. Focus on channel optimization; for online platforms, develop and implement differentiated operational strategies based on various digital channels and product features, fully leverage online growth potential, and actively expand domestic market share. 2) M&G Shop: Continued optimization of the product portfolio and category strategy upgrades, expanding the product matrix in both directions, increasing investment in IP-based products and the share of private-label brands, further expanding the number of channels, and strengthening talent pipeline development. 3) For Colipu, the company will continue to optimize its supply chain system, enhance customer service capabilities, and actively expand its client base, while improving profitability by increasing the sales ratio of self-operated and proprietary products. In addition to endogenous growth, Colipu will also pursue a spin-off listing on the Hong Kong Exchange, learn from foreign models, and explore mergers and acquisitions in industry sub-sectors.

Earnings forecast: The company's operating revenue for 2026-2028 is projected to be RMB 27.88 billion, RMB 30.74 billion, and RMB 33.55 billion, representing year-on-year growth of 11.2%, 10.3%, and 9.1%, respectively. Net profit attributable to shareholders is estimated at RMB 1.44 billion, RMB 1.58 billion, and RMB 1.72 billion, with year-on-year growth of 10.2%, 9.6%, and 8.7%, respectively. The corresponding P/E multiples are 16.2x, 14.8x, and 13.6x. We maintain "Buy" rating.

Risks: 1) Risk of slower-than-expected retail recovery: The company's traditional core business and large retail store operations primarily rely on offline sales channels, with business performance significantly impacted by store traffic. Amid challenging consumer conditions, declining foot traffic, weakened channel confidence, and sluggish retail recovery may directly affect the company's revenue and financial performance. 2) Risk of declining birth rates and student numbers affecting stationery demand: China's birth rate has dropped significantly in recent years. If the number of newborns and students declines sharply, it may affect the consumer base of M&G's traditional business and impact the performance of its student stationery segment. 3) Risk of diversion by competing products: The popularity of competing products such as trading cards may reduce students' stationery budgets, potentially putting pressure on the company's sales performance.