Core Viewpoint - The company reported a significant decline in revenue and net profit for 1H25, aligning with previous profit warnings, primarily due to inventory reduction and competitive pressures in the market [1][2]. Revenue Performance - The company's revenue for 1H25 was 9.15 billion yuan, a year-on-year decrease of 9.4%, while the net profit attributable to shareholders was 1 billion yuan, down 46.7% [1]. - The decline in revenue was attributed to intense industry competition, proactive inventory reduction, and delays in new product launches due to regulatory approvals [1]. - The company's market share decreased by over 1 percentage point during the first half of the year, with all product lines experiencing negative growth [1]. Profitability Analysis - The gross profit margin for 1H25 fell by 6.3 percentage points to 61.6%, influenced by impairment losses on bulk powder and a 1.2 billion yuan sales subsidy that negatively impacted revenue [2]. - The sales expense ratio remained stable, while the management expense ratio increased by 1.1 percentage points due to reduced economies of scale from declining revenue [2]. - Additional negative impacts on net profit included a reduction in government subsidies by 150 million yuan and a 100 million yuan increase in fair value losses related to livestock [2]. Future Outlook - The company anticipates continued pressure on revenue in the second half of the year due to ongoing inventory adjustments, although inventory levels have reached historical lows [3]. - A potential improvement in revenue performance is expected starting in September, with a more noticeable recovery in Q4, despite an overall projected double-digit decline for the year [3]. - The company is actively expanding its overseas presence and full lifecycle health business, with current international operations covering North America, the Middle East, and Southeast Asia [3]. Shareholder Returns - The company has announced a minimum dividend of 2 billion yuan for the year, corresponding to a payout ratio of over 90% and a dividend yield of 6.7%, along with a share buyback plan of around 1 billion yuan [3]. Earnings Forecast and Valuation - Due to inventory adjustments and impairment losses, the earnings forecasts for 2025 and 2026 have been reduced by 24% and 17%, respectively, to 2.19 billion yuan and 3.05 billion yuan [3]. - The target price has been lowered by 11.67% to 5.3 HKD, reflecting a price-to-earnings ratio of 20 and 14 times for 2025 and 2026, respectively, with a potential upside of 21% [3].