On August 28 at 4:30 pm in Hong Kong, the mid-year results meeting for COSMO LADY (02298) saw a packed room where the atmosphere was as electric as the humid Victoria Harbour outside the windows. Investors, analysts, and media from Shenzhen and Hong Kong, alongside shareholders joining via livestream, gathered to dissect the seemingly counterintuitive numbers: shrinking revenue, rising profits, and an expanding gross margin. Just four hours prior, the company had released its 2026 interim report, revealing revenue of RMB 1.267 billion, an 11.8% year-on-year decline; net profit attributable to shareholders of RMB 61.214 million, up 5.9%; and a gross margin of 51.4%, a year-on-year improvement of roughly five percentage points.

27.3 Billion and 7 Billion: The Battle to Reshape Online Channels What truly captured the attention of the audience were the e-commerce figures. Zhang Shengfeng, Executive Director and Vice President, presented a series of metrics: first-half 2026 online GMV reached RMB 2.73 billion, a 72% year-on-year increase, with a three-year compound annual growth rate of 141%, supported by 432 online stores. Breaking it down by platform, Tmall saw a 99% surge, Douyin grew by 96%, Vipshop by 50%, and JD.com by 56%, indicating rapid expansion across all major battlegrounds. The spillover effect on brand strength was equally compelling: the 618 shopping festival alone contributed RMB 570 million in GMV, with livestreaming generating around RMB 190 million, while brand asset reach expanded from 39 million to 75 million consumers. On Vipshop, the Oudi Fen brand ranked in the top three; on Douyin and Vipshop, COSMO LADY broke into the top six (climbing six positions), and on JD.com, it secured a top-five spot in the lingerie category. Livestreamers like top creator Chen Sanfei and his sister (45.55 million followers) and Dong Xiansheng (37.61 million followers) have become potent tools for customer acquisition.

"During the first half of last year, GMV was RMB 1.6 billion, rising to RMB 2.7 billion in the second half—a ratio of about 1.6 times," said Zheng Yaonan, Chairman and CEO, as he plotted a clear upward curve. "This year's first half hit RMB 2.73 billion, so our second-half target is approximately RMB 4.3 billion, maintaining that same 1.6x ratio." He expressed "strong confidence" in achieving the full-year GMV target of RMB 7 billion. Looking further ahead, the company has set its sights on RMB 10 billion to 13 billion by 2027 and 2028. This trajectory holds significance beyond mere sales figures. Zheng emphasized that successfully achieving these goals would see COSMO LADY "return to the top three in national online lingerie sales." The foundation of this ambition lies in a structural advantage competitors find hard to replicate: COSMO LADY possesses its own core supply chain and offline store network—a moat that pure e-commerce brands lack, and a key reason why online partners are "shifting from other brands" to work with them.

Of course, skepticism surfaced. One analyst on-site queried whether heavy reliance on online channels could lead to unchecked expense ratios. Management's response was that online service fee income can convert into segment profit after deducting personnel, subsidies, and marketing costs, and that current profit contributions from online and offline channels are now roughly balanced. As long as sell-through rates remain controlled, the growth curve is deemed healthy.

Inventory, Supply Chain, and a Bet on 'Quality Competition' If e-commerce serves as the growth engine, then inventory is the proverbial sword of Damocles hanging over traditional retail. COSMO LADY's answer offered some relief. By the end of the first half, total inventory stood at RMB 741 million, with older stock from 2024 and earlier declining by approximately RMB 81 million year-on-year, reducing its share from 35% to 21%. New products from 2026 accounted for 60% of inventory—"if you include 2025 goods, the total is around 80%," noted CFO and Board Secretary Cai Weixuan. More intriguing than the inventory numbers is a strategic pivot. Facing an industry mired in low-price competition, Zheng has made a clear judgment: "If we follow the low-price route, there's no way forward." His solution is a dual-engine approach of "product innovation plus brand investment"—featuring items like Canadian goose down thermal wear, New Zealand milk cotton children's collections, functional yarns, and collaborations with intangible cultural heritage like Suzhou embroidery and Sichuan brocade. This strategy aims to lift average selling prices. For instance, the milk cotton children's line, with prices raised from RMB 39–59 to RMB 119–130, did not see the feared drop in demand; instead, it drove an upgrade across the product mix.

On another front, "Chuncun Juwu" is shaping up as a second growth curve. It contributed roughly 7% of first-half revenue, a year-on-year increase of about 45%. Zheng attributes its success to scenario-based innovation: creating spaces with aromatherapy, children's reading areas, and pet apparel to give mothers a "hands-free" shopping experience. Member contribution reached 83.8%, with a repurchase rate of 32.9%. "Shopping malls are very willing to give us prime locations on the first and second floors, rather than relegating us to the traditional lingerie section," he noted, pointing out that shifts in channel positioning often speak louder than single-store data. The improvement in gross margin serves as a direct validation of this transformation. Despite rising costs for cotton and petroleum-derived materials, COSMO LADY's main business gross margin rose against the trend, supported by an increased share of high-margin service fees and supply chain collaboration in absorbing cost pressures. On the expense side, sales and marketing expenses fell 2.2% to RMB 512 million, while general and administrative expenses declined about 5.6% to over RMB 75 million—"administrative expenses have been on a downward trend for the past two to three years," reflecting genuine progress in refined management.

Valuation Puzzle: Has the Market Got It Wrong, or Is It a Matter of Time? The conversation inevitably turned to the capital markets. On the A-share market, Aimer Co., Ltd. (603511.SH) reported first-half revenue of RMB 1.575 billion (-1.42%) with net profit attributable to shareholders of RMB 129 million (+21.54%), and a gross margin of 67.41%. Huijie Co., Ltd. (002763.SZ) saw revenue of RMB 1.527 billion (-2.64%), net profit of RMB 138 million (+15.06%), and a gross margin of 69.42%. On the Hong Kong market, Embry Holdings (01388.HK) boasted a high gross margin of 71.8% yet recorded a loss of HKD 48.72 million, while Best Pacific International Holdings (02199.HK) had a gross margin of 22.53% and a net margin of only 3.67%. In this landscape, COSMO LADY's 51.4% gross margin isn't the highest, but it holds a unique distinction: it's the only pure brand retailer to have achieved a roughly 5-percentage-point rise in gross margin alongside positive net profit growth. A-share peers have higher margins but are seeing revenue decline, relying on cost control to sustain profits; Embry has the highest margin yet still struggles with losses. The valuation metrics are striking: COSMO LADY's share price was HKD 0.29 (at the August 28 close), giving it a market cap of HKD 664 million. With net assets per share at RMB 0.97, the price-to-book ratio is below 0.3 times; based on annualized first-half net profit, the P/E ratio is approximately 5 times. The company holds RMB 485 million in cash and equivalents, putting it in a net cash position. "Our stock is undervalued," a management representative rarely stated directly at the meeting, noting that directors and executives have repurchased over 10 million shares in the past six months.

As the meeting concluded and night fell over Hong Kong, the lights remaining in the venue reflected the core narrative of COSMO LADY's 2026 interim results: proactively trimming "inflated" revenue from logistics and industrial parks to refocus on the core intimate apparel business; leveraging e-commerce partnerships to achieve gains in both market share and gross margin; and betting on quality competition amid industry-wide price wars, directing costs toward front-end brand and product development. The validation of this logic rests on two key factors: whether the second-half GMV target of RMB 4.3 billion materializes as planned, and whether gross margin can sustain above 50% for the full year of 2026. If both succeed, COSMO LADY, trading at 0.28 times book value, may indeed be at the starting point of a valuation recovery—not because it will grow larger, but because the market will eventually realize it has become leaner, more profitable, and more deserving of trust. Conversely, if the marginal costs of online growth spiral out of control or the clearance of old inventory stumbles again, today's low valuation would simply be a fair price for its underlying challenges. The answer lies in the next two half-year periods.