Investment Rating - The report maintains a "Buy" rating for Ping An Bank [2] Core Views - The bank's revenue for the first half of 2025 decreased by 10% year-on-year, with a net profit attributable to shareholders down by 3.9% [5][7] - The bank's asset quality remains in line with expectations, with a slight decrease in the non-performing loan ratio to 1.05% and an increase in the provision coverage ratio to 238% [5][9] - The report highlights a shift in focus towards credit structure adjustment, indicating that the reduction in high-risk retail loans may be entering its later stages [7][9] Financial Data and Earnings Forecast - Total revenue is projected to decline from 164,699 million in 2023 to 134,676.6 million in 2025, with a year-on-year growth rate of -8.19% [6] - Net profit attributable to shareholders is expected to decrease slightly from 46,455 million in 2023 to 44,109.44 million in 2025, reflecting a year-on-year growth rate of -0.90% [6] - The bank's return on equity (ROE) is forecasted to decline from 11.37% in 2023 to 9.39% in 2025 [6] Revenue and Profitability Analysis - The decline in net interest income continues to pressure revenue, with a 9% year-on-year decrease in the first half of 2025 [7][8] - Non-interest income also saw a decline of 11% year-on-year, but the rate of decline has slowed compared to previous quarters [7] - The bank's net interest margin is reported at 1.8%, down 16 basis points year-on-year, with expectations of further pressure on loan pricing [9][12] Loan and Asset Quality - The bank's non-performing loan generation rate is estimated at 1.66% for the first half of 2025, a decrease of 20 basis points compared to 2024 [9] - The report indicates a continued focus on reducing high-risk retail loans, with a significant reduction in the volume of such loans observed [7][10] - The bank's total loans decreased by 0.1% year-on-year in the second quarter of 2025, with a net reduction of approximately 32 billion [7][10] Dividend Policy - The bank plans to maintain its mid-term dividend at 2.36 yuan per 10 shares, corresponding to a dividend payout ratio of 20.1% [7][9]

Summary of Conference Call on the Coating Industry Industry Overview - The conference focused on the **building coatings industry**, specifically the competitive dynamics between **Nippon Paint** and **Sankeshu** in 2024 and projections for 2025 [1][2][3]. Key Points and Arguments Price Competition and Market Dynamics - In 2024, a **price war** erupted between Nippon Paint and Sankeshu, particularly over products like "Moon White High Coverage Coating," leading to significant price reductions [1][2]. - Nippon Paint's sales volume increased by approximately **30%**, but revenue did not grow, indicating that profit sacrifices did not translate into market share gains [1][2]. - Sankeshu ceased the price war and adjusted its retail structure, increasing retail business share to over **40%**, which improved overall operating profit [1][3]. - Both companies are expected to engage in **price recovery** in 2025 due to the adverse effects of the price war on profitability [1][3]. Pricing Strategies - In 2024, Sankeshu maintained its factory price around **85 RMB** while Nippon Paint reduced prices for mid-to-low-end products to increase market share, with prices dropping to **65 RMB** for its Pro product [4]. - By 2025, Nippon Paint raised prices multiple times due to higher profits from deliveries to Singapore and increased market share for Sankeshu in rural areas [5]. Market Conditions and Challenges - The **ToC (Consumer-to-Business)** segment is shifting towards **ToB (Business-to-Business)** partnerships with large real estate companies, which are pressuring coating companies to lower costs, negatively impacting profit margins [10][14]. - The retail market is gradually recovering, particularly with improvements in second-hand housing sales and increased demand for high-quality residences [11]. Competitive Landscape - In the C-end market, Sankeshu focuses on lower-tier cities while Nippon Paint dominates first and second-tier cities, leading to a **differentiated competition strategy** [12][13]. - Both companies are exploring community store formats to reach consumers more effectively, although success rates remain uncertain [13]. Future Market Trends - The **water-based sand market** is expected to grow significantly, with rural housing renovation needs presenting substantial opportunities for coating companies [24][25]. - The overall market for rural self-built housing is projected to expand, with only Nippon Paint and Sankeshu currently possessing comprehensive competitive capabilities across all product categories [26]. Pricing Logic and Profitability - Nippon Paint's pricing is more transparent, typically at **2 to 2.5 times** the factory price, while Sankeshu's retail prices can reach **2.5 to 3 times** the factory price, indicating different pricing strategies [20][22]. - Both companies face challenges from the **full-package service model**, which requires maintaining high service quality to avoid negative customer feedback [22]. Long-term Outlook - Despite short-term challenges, the long-term outlook for the industry remains positive due to increasing demand for high-quality housing and supportive government policies [15]. - The combined market share of Nippon Paint and Sankeshu is expected to exceed **30%** in the next three years, driven by their scale advantages and cost control capabilities [32]. Additional Important Insights - The **current market for latex paint** is in a recovery phase, with demand still present across various price segments [8]. - The **price reduction trend** is primarily driven by Nippon Paint and Sankeshu's ability to lower costs through economies of scale [31]. - Future price increases are unlikely due to reduced raw material costs and already optimized profit margins [33].