Investment Rating - The report assigns a "Buy" rating for the company, marking it as the first recommendation [1]. Core Views - The company's short-term export performance is under pressure, but its own brand and overseas capacity layout are strengthening its long-term resilience [5][6]. - The lighting industry is experiencing overall export pressure, with significant deceleration in growth during the third quarter [5]. - The company has seen a notable decline in performance, with a third-quarter revenue of 1.907 billion yuan, down 2.74% year-on-year, and a net profit of 58 million yuan, down 55.18% year-on-year [4][5]. Summary by Sections Financial Performance - For the first three quarters of 2025, the company achieved a revenue of 4.947 billion yuan, a year-on-year increase of 0.13%, while net profit was 127 million yuan, a year-on-year decrease of 54.35% [4]. - The third quarter alone saw a revenue of 1.907 billion yuan and a net profit of 58 million yuan, indicating a significant decline in profitability [4][5]. Market Conditions - The overall export of the lighting industry is under pressure, with a reported 6% year-on-year decline in total export value for lighting products in the first half of 2025 [5]. - Approximately 90% of the company's revenue comes from overseas markets, making it vulnerable to weak export demand and pricing pressures from clients [5]. Strategic Initiatives - The company has been enhancing its own brand strategy, which is expected to become a key growth driver in the medium to long term [8]. - The company has established a manufacturing base in Thailand to mitigate risks associated with U.S. tariff policies, with production capacity expected to ramp up in the coming years [6]. Earnings Forecast - Despite short-term profitability pressures, the company is expected to see a gradual improvement in operational quality as overseas capacity ramps up and brand business share increases [9]. - Revenue projections for 2025-2027 are estimated at 6.882 billion, 7.242 billion, and 7.752 billion yuan, respectively, with corresponding EPS of 0.39, 0.54, and 0.69 yuan [9].

Core Viewpoint - The company reported a decline in revenue and net profit for 1H25, primarily due to uncertainties surrounding U.S. tariff policies, leading to cautious ordering from clients [1][2]. Financial Performance - 1H25 revenue was HKD 2.33 billion, down 2.3% year-on-year, while net profit attributable to shareholders was HKD 260 million, a decrease of 6.1% year-on-year [1]. - The company declared an interim dividend of HKD 0.125 per share, corresponding to a payout ratio of approximately 50% [1]. - Gross margin for 1H25 decreased by 0.4 percentage points to 26.6%, mainly due to a decline in capacity utilization [2]. - The net profit margin for 1H25 was 11.2%, down 0.4 percentage points year-on-year [2]. Product Performance - Revenue from fabrics, webbing, and lace for 1H25 showed mixed results: fabrics down 4.4% to HKD 1.81 billion, webbing up 6.9% to HKD 501 million, and lace down 20.6% to HKD 22 million [1]. - The decline in fabric revenue was attributed to cautious ordering from U.S. apparel brands, particularly in the sportswear segment [1]. Operational Efficiency - Inventory turnover days increased from 112 days at the end of 2024 to 131 days in 1H25 due to the impact of U.S. tariff policies [2]. - The company maintained stable accounts receivable turnover days at 60 days [2]. - Operating cash flow for 1H25 increased by 14.2% year-on-year to HKD 348 million, reflecting improved working capital management [2]. Debt Management - Net debt decreased by 37.1% from the end of 2024 to HKD 300 million, with the net debt-to-equity ratio dropping from 13.5% to 8.2% [2]. Market Outlook - Approximately 50% of the company's revenue comes from the U.S., and it is expected that clarity on U.S. tariff policies will lead to a gradual recovery in client orders in the second half of the year [3]. - The company is anticipated to benefit from new product orders in the sportswear segment and long-term capacity growth supported by a new factory in Vietnam [2][3]. Earnings Forecast and Valuation - The 2025 earnings forecast was revised down by 3.6% to HKD 617 million, with a new 2026 earnings estimate of HKD 661 million [3]. - The current stock price corresponds to a P/E ratio of 5.9x for 2025 and 5.5x for 2026, with a target price increase of 65% to HKD 4.45, indicating a potential upside of 27.5% from the current price [3].