Investment Rating - The investment rating for the company is "Buy" and is maintained [9] Core Views - The company is facing operational pressure due to a weak demand environment, but is actively transforming to respond to market changes [2][6] - For the first three quarters of 2025, the company achieved revenue, net profit attributable to the parent, and net profit excluding non-recurring items of 3.074 billion, 173 million, and 119 million yuan respectively, representing year-on-year declines of 16%, 35%, and 49% [2][6] - In Q3 2025, the revenue, net profit attributable to the parent, and net profit excluding non-recurring items were 1.174 billion, 35 million, and 32 million yuan respectively, with year-on-year declines of 20%, 70%, and 70% [2][6] Revenue Analysis - Revenue is significantly impacted by a decline in bulk business, while retail shows relative resilience, and the whole-house solution contributes incremental growth [2][6] - For the first three quarters, retail, bulk, and export revenues declined by 8%, 43%, and increased by 65% respectively, with whole-house solutions showing better growth [2][6] - In Q3, retail, bulk, and export revenues declined by 14%, 38%, and increased by 54% respectively [2][6] Profitability Analysis - The industry demand pressure has led to a decline in profitability, with gross margin decreasing by 2.6 percentage points year-on-year for the first three quarters [2][6] - In Q3, gross margin decreased by 5.6 percentage points, with net profit margins attributable to the parent and excluding non-recurring items declining by 5.0 and 4.6 percentage points respectively [2][6] Store Optimization - The company has reduced the number of dealerships for kitchen cabinets, wardrobes, and wooden doors by 164, 236, and 8 respectively, focusing on enhancing the resilience of existing stores and optimizing the store structure [2][6] Operational Outlook - The company aims to explore potential and control costs, actively transforming to meet changing consumer trends and firmly executing its overseas strategy [2][6] - The company plans to continue developing whole-house solutions and strengthen its capabilities in this area, while also focusing on high-end and light customization markets [2][6] - The company expects net profits attributable to the parent for 2025-2027 to be approximately 270 million, 300 million, and 360 million yuan, corresponding to PE ratios of 15, 13, and 11 times [2][6]

Industry Dynamics - The Chinese home decoration industry is undergoing a deep transformation driven by digital intelligence, with Tmall redefining home consumption paradigms through a new category called "light customization" [2][3] - This innovation aims to balance standardization and personalization in home decoration, addressing consumer needs for aesthetics, functionality, cost-effectiveness, and efficiency [3][5] Light Customization Model - The "light customization" model utilizes AI technology and brand supply chain support to reduce renovation costs while efficiently meeting personalized home decoration demands [3][4] - It features a modular approach combining standardized cabinet modules with personalized design, significantly shortening delivery times to around 15 days and eliminating hidden fees [3][5] AI Capabilities - Tmall has developed a four-part AI capability matrix covering design, interaction, manufacturing, and delivery, allowing consumers to generate design plans through mobile photos and receive instant responses to their needs [3][4] - The AI manufacturing process utilizes extensive housing data to produce standardized dimensions and functional modules, covering over 90% of consumer cabinet needs [3] Market Response and Growth Potential - The "light customization" solution has received strong recognition from various brands, filling the market gap between traditional ready-made cabinets and fully customized solutions [5][6] - The market for light customization is projected to reach 50 billion yuan, driven by the increasing demand for partial renovations in second-hand housing, which now accounts for over 50% of transactions in first- and second-tier cities [5][6] Future Implications - The emergence of "light customization" signifies a shift from scale expansion to value creation in the industry, leveraging digital technology to reconstruct existing industry elements [6] - This model represents a new path from "scale dividends" to "value dividends," indicating a transition towards a user-centered, evolving home consumption era [6]