SKSHU(SH:603737) SINOLINK SECURITIES·2025-07-06 07:35Investment Rating - The report maintains a "Buy" rating for the company, indicating an expected price increase of over 15% in the next 6-12 months [5][13]. Core Insights - The company is projected to achieve a net profit attributable to shareholders of 3.8-4.6 billion RMB in the first half of 2025, representing a year-on-year increase of 80.94%-119.04% [2]. - The company’s retail business continues to grow against the backdrop of a declining real estate market, with revenue growth rates for home decoration wall paint projected at 18.2%, 2.6%, and 12.8% from 2022 to 2024 [3]. - Gross margin is recovering, with a gross margin of 32.5% in Q4 2024, up 0.44 percentage points year-on-year, and 31.05% in Q1 2025, up 2.67 percentage points year-on-year [4]. - The company is expected to achieve net profits of 9.0 billion RMB and 12.5 billion RMB for 2025 and 2026, respectively, with corresponding P/E ratios of 31.0 and 22.3 [5]. Performance Summary - The company reported a historical high in total profit for the first half of 2025, with a net profit forecast midpoint of 4.2 billion RMB [2]. - The company has effectively reduced expenses through improved operational efficiency, with a 2024 expense ratio of 25.7%, down 0.5 percentage points year-on-year [4]. - The revenue forecast for the company shows a slight decline in 2024, followed by a recovery with growth rates of 8.00% and 12.49% in 2025 and 2026, respectively [10]. Financial Projections - The projected diluted earnings per share for 2025 is 1.221 RMB, with a significant increase in net profit growth rate expected at 171.32% [10]. - The return on equity (ROE) is expected to rise to 27.92% in 2025 and stabilize around 30.91% by 2027 [10]. Market Sentiment - The report indicates a favorable competitive landscape in the incremental market segments, with sustained demand despite the overall industry challenges [3]. - The company’s strategic focus on consumer-oriented growth and product structure optimization is expected to drive profitability and market share [4].