Core Viewpoint - The 2025 China International Coatings Expo showcased the vibrant and innovative presence of Baohinia Advanced Materials Group, highlighting its commitment to youth-oriented design and technology-driven green coatings [1][20]. Group 1: Event Overview - The expo took place from September 3 to 5, 2025, at the Shanghai Pudong New International Expo Center, gathering hundreds of leading companies from the global coatings industry [1]. - Baohinia Advanced Materials Group's booth featured a youthful design with a primary color of "Spring Purple," aimed at appealing to younger consumers [3][20]. Group 2: Product Showcase - The company presented a diverse range of products, including industrial anti-corrosion coatings, furniture coatings, toy coatings, and high-performance decorative coatings, demonstrating its comprehensive capabilities and diversified business development [6][11]. - The booth attracted significant attention from attendees, showcasing innovative products and unique technologies that align with market trends [11][20]. Group 3: Corporate Strategy and Future Plans - The company aims to explore new retail models, integrating online and offline operations to enhance customer experience and product accessibility [19]. - Baohinia plans to focus on environmentally friendly, healthy, and personalized product development while aligning its brand communication with the lifestyles of younger demographics [21][20]. - The company emphasizes its commitment to high-quality coatings and a healthy living environment, aiming to drive the coatings industry towards high-quality development [23][20].

Investment Rating - The report maintains a "Buy" rating for the company [7] Core Views - The company is experiencing a turning point in operations, supported by the resilience of the retail market and the rapid replication of new business models such as "Immediate Move-In" and "Beautiful Countryside" [1][2] - The overall price competition in the paint industry has temporarily subsided, leading to a steady growth in retail and an improvement in gross margins [2] - The demand for renovation in the paint sector has exceeded 50%, with the "Immediate Move-In" model aligning well with consumer needs in the existing housing market [3] - The company is actively participating in rural revitalization, maintaining the top market share in the imitation stone paint segment [4] Summary by Sections Financial Performance - In the first half of 2025, the company achieved revenues of 1.574 billion, 1.795 billion, 1.733 billion, and 460 million for home decoration wall paint, engineering wall paint, base materials, and waterproof membranes respectively, with year-on-year changes of +8.4%, -2.3%, +10.4%, and -28.6% [2] - The overall gross margin improved to 32.35%, a year-on-year increase of 3.7 percentage points, with specific margins for home decoration wall paint, engineering wall paint, base materials, and waterproof membranes at 49.4%, 35.4%, 20.6%, and 13.8% respectively [2] - The company forecasts net profits of 780 million, 980 million, and 1.21 billion for 2025, 2026, and 2027 respectively, with a compound annual growth rate (CAGR) of 54.0% [5] Market Position and Strategy - The company has over 2,300 "Immediate Move-In" community stores, reaching 420,000 households, with more than 15,000 professional service personnel [3] - The imitation stone paint market in China is projected to reach 22 billion by 2024, with the company holding a market share of 7.6% [4] - The company's revenue from the "Beautiful Countryside" business, primarily based on imitation stone paint, reached 940 million, growing over 50% year-on-year [4] Valuation - The target price for the company is set at 53.19 RMB, with a closing price of 47.71 RMB as of August 27 [11] - The report assigns a 40x price-to-earnings (PE) ratio for 2026, reflecting the strong retail attributes of the paint sector and the potential for domestic brand replacement [5]

Core Viewpoint - The company reported significant growth in revenue and net profit for the first half of 2025, outperforming its main competitor in the wall paint segment, indicating a successful differentiation strategy in products and services [1][2][3] Financial Performance - For the first half of 2025, the company achieved revenue of 5.82 billion yuan, a year-on-year increase of 1%, with net profit attributable to shareholders reaching 440 million yuan, up 107.5%, and net profit excluding non-recurring items at 290 million yuan, up 268.5% [1] - In Q2 2025, revenue was 3.69 billion yuan, with net profit attributable to shareholders at 330 million yuan, and net profit excluding non-recurring items at 310 million yuan, showing year-on-year changes of -0.2%, +103%, and +96% respectively [1] Product Performance - The company's wall paint revenue significantly outperformed competitor N, with home decoration wall paint and engineering wall paint revenues at 1.57 billion yuan and 1.80 billion yuan respectively, showing year-on-year changes of +8.4% and -2.3% [1] - Excluding the impact of waterproof coating revenue, home decoration and engineering wall paint revenues grew by 13.5% and -2.7% respectively, leading to a combined growth of 4.6% [1] Competitive Strategy - The company's success is attributed to its differentiated product and service strategy, focusing on multi-channel approaches in rural and urban markets through initiatives like "Beautiful Countryside" and "Immediate Move" [2] - The gross profit margin in Q2 increased by 4.3 percentage points, reflecting improved pricing power and product competitiveness in the retail sector [2] Cost Management - The company achieved a reduction in sales and administrative expense ratio by 1.6 percentage points in the first half of 2025, primarily due to lower sales and financial expense ratios [2] - The asset-liability ratio at the end of the first half of 2025 was 76.45%, down 4.5 percentage points year-on-year, indicating improved financial health [2] Future Outlook - Revenue projections for 2025 to 2027 are 13.03 billion yuan, 14.49 billion yuan, and 16.10 billion yuan, with year-on-year growth rates of 7.61%, 11.26%, and 11.07% respectively [3] - Net profit forecasts for the same period are 891 million yuan, 1.07 billion yuan, and 1.31 billion yuan, with substantial growth rates of 168.55%, 20.19%, and 22.32% respectively [3] - The company is positioned as a leading domestic paint manufacturer, with a strong recommendation rating based on improved operational fundamentals and competitive performance [3]

Core Viewpoint - The report highlights significant improvements in the profitability of SanKeTree (三棵树) due to structural enhancements in its product offerings and effective cost control measures, despite facing challenges in revenue growth and competition in the waterproofing sector [1][2][3][4]. Financial Performance - In the first half of the year, the company achieved revenue of 5.816 billion yuan, a year-on-year increase of 0.97%, and a net profit attributable to shareholders of 436 million yuan, up 107.53% [2]. - The second quarter saw revenue of 3.686 billion yuan, a slight decline of 0.24% year-on-year, while net profit reached 331 million yuan, reflecting a growth of 102.97% [2]. Product Performance - Revenue from various product segments in the first half included: home decoration wall paint (1.574 billion yuan, +8.43%), engineering wall paint (1.795 billion yuan, -2.26%), base materials (1.733 billion yuan, +10.40%), and waterproofing membranes (460 million yuan, -28.62%) [3]. - The average price of home decoration wall paint increased by 3% to 5.9 yuan/kg, while the average price of engineering wall paint decreased by 8.5% to 3.4 yuan/kg [3]. Profitability and Cost Control - The company's gross margin improved to 32.35%, an increase of 3.7 percentage points year-on-year, with specific margins for product segments being: home decoration wall paint (49.41%, +5.5), engineering wall paint (35.42%, +2.9), base materials (20.62%, +5.3), and waterproofing membranes (13.8%, -0.9) [3]. - The net profit margin for the first half was 7.48%, up 3.85 percentage points year-on-year, with Q2 net profit margin at 8.94% [4]. - The company effectively controlled its expenses, with a total expense ratio of 23.67%, down 1.57 percentage points year-on-year [4]. Future Outlook - Revenue projections for 2025 and 2026 are estimated at 13.19 billion yuan and 14.89 billion yuan, representing year-on-year growth of 9.0% and 12.9%, respectively [4]. - Expected net profits for 2025 and 2026 are forecasted at 1.03 billion yuan and 1.18 billion yuan, with significant growth rates of 210.9% and 14.0% [4].

Investment Rating - The investment rating for the company is "Buy," indicating an expected relative increase in stock price of over 20% compared to the benchmark index within six months [13]. Core Views - The company reported significant improvement in profitability in Q2 2025, with a notable increase in net profit by 102.97% year-on-year, driven by structural enhancements in its product offerings [5][6]. - The company's revenue for the first half of 2025 was 5.8 billion yuan, a slight increase of 0.97% year-on-year, while the net profit reached 436 million yuan, marking a substantial growth of 107.53% [5]. - The company is experiencing a shift in its product mix, with a focus on retail new formats, which has positively impacted its gross margin, reaching 32.35%, an increase of 3.7 percentage points year-on-year [6][7]. Financial Performance Summary - The company achieved a revenue of 58.16 billion yuan in H1 2025, with a net profit of 4.36 billion yuan, reflecting a year-on-year growth of 107.53% [5]. - The gross margin for the company's products showed improvement, with the gross margin for home decoration wall paint at 49.41%, an increase of 5.5 percentage points year-on-year [6]. - The company’s net profit margin improved to 7.48% in H1 2025, with Q2 showing a net profit margin of 8.94%, indicating effective cost control measures [7]. Earnings Forecast - The company is projected to achieve revenues of 131.9 billion yuan and 148.9 billion yuan in 2025 and 2026, respectively, representing growth rates of 9.0% and 12.9% [8]. - The forecasted net profit for 2025 and 2026 is expected to be 10.3 billion yuan and 11.8 billion yuan, reflecting significant growth of 210.9% and 14.0% year-on-year [8].

Investment Rating - The investment rating for the company is "Buy-A" with a 12-month target price of 52.8 CNY, compared to the current stock price of 45.42 CNY [4]. Core Views - The company demonstrated resilience in revenue generation despite a downturn in industry demand, achieving a revenue of 5.816 billion CNY in H1 2025, a year-on-year increase of 0.97% [2]. - The significant increase in net profit by 107.53% year-on-year to 436 million CNY in H1 2025 is attributed to improved gross margins, reduced expense ratios, and increased non-recurring gains [2][3]. - The company has optimized its business structure by reducing low-margin waterproofing material operations while enhancing high-margin retail segments [2]. Summary by Sections Revenue Performance - In H1 2025, the company reported a revenue of 5.816 billion CNY, with Q1 and Q2 revenue growth rates of 3.12% and -0.24% respectively [2]. - The revenue from home decoration wall paint reached 1.574 billion CNY, up 8.43% year-on-year, driven by a 5.44% increase in sales volume and a 2.78% increase in average price [2]. - The engineering wall paint revenue was 1.795 billion CNY, down 2.26% year-on-year, while the base material revenue was 1.733 billion CNY, up 10.40% year-on-year [2]. Profitability - The gross margin improved to 32.35% in H1 2025, an increase of 3.71 percentage points year-on-year, with Q2 gross margin at 33.10% [3]. - The company’s expense ratio decreased to 23.67%, down 1.57 percentage points year-on-year, with reductions in travel, sales personnel salaries, and advertising expenses [3]. - The net profit margin for H1 2025 was 7.48%, an increase of 3.87 percentage points year-on-year [3]. Future Projections - Revenue projections for 2025-2027 are 13.369 billion CNY, 14.674 billion CNY, and 16.016 billion CNY, representing year-on-year growth rates of 10.44%, 9.76%, and 9.15% respectively [8]. - Net profit projections for the same period are 811 million CNY, 971 million CNY, and 1.142 billion CNY, with year-on-year growth rates of 144.46%, 19.64%, and 17.67% respectively [8].

Investment Rating - The investment rating for the company is "Accumulate" (maintained) [2] Core Views - The company is experiencing continuous retail growth, with brand value becoming increasingly prominent. The retail segment is driving up average prices, while the engineering segment maintains stable volume and pricing [8][9] - The company is positioned in a recovering paint industry, with a focus on high-margin products and services, which is expected to enhance profitability [9] Financial Performance Summary - For 1H2025, the company reported revenue of 5.816 billion yuan, a year-on-year increase of 0.97%, and a net profit attributable to shareholders of 436 million yuan, up 107.53% year-on-year [9] - The company’s gross margin increased by 3.70 percentage points to 32.35% due to a 13% decrease in raw material costs and an increase in the proportion of high-margin home decoration paint [8][9] - The net profit margin rose by 3.85 percentage points to 7.49%, supported by cost reductions and improved pricing strategies [8][9] Earnings Forecast - The forecast for net profit attributable to shareholders for 2025-2027 is 1.081 billion, 1.335 billion, and 1.591 billion yuan, respectively, with corresponding EPS of 1.47, 1.81, and 2.16 yuan [7][9] - The projected PE ratios for 2025-2027 are 30.99x, 25.10x, and 21.06x, respectively [9] Market Performance - The company’s stock has shown a significant performance compared to the market, with a 66% increase over the last 12 months, outperforming the Shanghai Composite Index and the construction materials sector [4][9]

Investment Rating - The report maintains a "Buy" rating for the company with a target price of RMB 53.19, based on a 40x PE for 2026 [1][6]. Core Views - The company is transitioning from incremental to stock demand in the domestic market, focusing on three new retail formats to enhance brand strength and drive sustainable revenue growth [1][14]. - The company is expected to see a profit margin inflection point and operational performance elasticity due to steady market share gains in the small B and C-end markets, alongside improved product and channel offerings [1][14]. Summary by Sections Retail Business - The company is targeting a total home decoration demand area of approximately 1.7 billion square meters from 2024 to 2026, with a compound annual growth rate (CAGR) of 5.0% for stock renovation demand, leading to a retail paint market exceeding RMB 60 billion annually [2][14]. - The company's retail market share is projected to reach about 7.9% in 2024, indicating significant room for growth compared to competitors [2][14]. Engineering Coatings - The company has shifted its channel strategy towards engineering distribution, with small B distribution revenue maintaining steady growth at a CAGR of 13.1% from 2020 to 2024, despite a decline in large B direct sales [3][16]. - The engineering coatings market is estimated to be around RMB 50-60 billion annually, with the company's market share expected to stabilize around 13% [3][16]. Market Positioning - The company is evolving from a single paint manufacturer to a comprehensive service provider, integrating paint, consulting, and construction services, which is expected to become a new growth driver [4][15]. - The company has established a solid position in the engineering market, with a stable market share and improved accounts receivable turnover, indicating a controlled risk environment [14][16]. Profit Forecast and Valuation - The company has adjusted its net profit forecasts for 2025-2027 to RMB 7.8 billion, RMB 9.8 billion, and RMB 12.1 billion, respectively, reflecting a CAGR of 54.0% [5][14]. - The target price of RMB 53.19 is based on a 40x PE for 2026, with the company expected to benefit from the rapid replication of new business formats and reduced impairment risks [5][14].

Investment Rating - The investment rating for the company is maintained as "Buy" with a target price of RMB 42.96 [8][9]. Core Views - The company is expected to benefit from the resilience of the retail market due to the expansion of home decoration subsidies and the improving channel structure, leading to a potential recovery in profit margins and operational flexibility [1]. - The "Immediate Living" and "Beautiful Countryside" initiatives are anticipated to accelerate the company's presence in the stock renovation and third- and fourth-tier markets, with a projected demand for stock renovation of approximately 11 to 12 million units per year from 2024 to 2026, reflecting a CAGR of 5% [2]. - The company is undergoing a channel transformation towards engineering distribution, maintaining a leading market share despite a decline in direct sales revenue, which is expected to stabilize in the coming years [3]. - The retail sales of construction and decoration materials reached RMB 53 billion in the first four months of 2025, showing a year-on-year increase of 2.3%, with a significant monthly increase of 9.7% in April [4]. Summary by Sections Financial Forecasts and Valuation - The company’s net profit forecasts for 2025 to 2027 are RMB 651.4 million, RMB 847.05 million, and RMB 1.09 billion respectively, indicating a CAGR of 48.7% [5]. - The company is assigned a PEG ratio of 0.75x for 2025, with a target price based on a PEG of 1.0x, reflecting the expected growth in the "Immediate Living" business and stable market share in engineering [5]. - The projected revenue for 2025 is RMB 13.203 billion, with a year-on-year growth of 9.07% [7]. Market Position and Competitive Landscape - The company is positioned to capture growth opportunities in the renovation market, with its brand strength gradually being validated against competitors like Nippon Paint [2]. - The engineering business is expected to maintain its leading market share while reducing impairment risks, with accounts receivable turnover improving to 3.6 in 2024 [3]. Operational Insights - The company is actively managing costs and improving operational efficiency, with expectations for continued profit elasticity due to effective expense control measures [4]. - The average price of titanium dioxide, a key raw material, has decreased by 9.6% year-on-year, which may limit further price declines in products [4].

Investment Rating - The investment rating for the company is "Buy" and is maintained [2] Core Views - The company has shown a significant improvement in retail competitiveness and continues to optimize its product structure. The retail business is rapidly growing, with high profit margins and growth rates across multiple modules. The company is also expanding its engineering services into niche markets, further enhancing its competitive advantage [5][7] Financial Performance - In 2024, the company achieved a revenue of 12.105 billion yuan, a year-on-year decrease of 2.97%. However, the net profit attributable to shareholders increased by 91.27% to 0.332 billion yuan. In Q1 2025, the revenue was 2.130 billion yuan, up 3.12% year-on-year, with a net profit of 0.105 billion yuan, reflecting a 123.33% increase [5][6] - The company's revenue from different product segments in 2024 included: - Home decoration wall paint: 2.967 billion yuan, up 12.8% - Engineering wall paint: 4.084 billion yuan, down 12.7% - Base materials: 3.269 billion yuan, up 1.25% - Waterproof membranes: 1.319 billion yuan, up 4.9% [6] Profitability Forecast - The company is expected to generate revenues of 13.7 billion yuan and 15.5 billion yuan in 2025 and 2026, respectively, representing year-on-year growth rates of 13.5% and 12.9%. The net profit attributable to shareholders is projected to be 0.752 billion yuan in 2025 and 0.949 billion yuan in 2026, with growth rates of 126.4% and 26.3% [7][9]