Investment Rating - The investment rating for the company is "Outperform the Market" [5][3]. Core Insights - The company is experiencing ongoing operational pressure, with a significant decline in revenue and net profit for the first three quarters of 2025. Revenue decreased by 34.1% to 550 million, and net profit fell to -70 million, a decline of 601.0% [1]. - The company is actively exploring new growth opportunities by transforming its offline stores into a new model combining "technology products + quick-effect massage," launching the "Light Relaxation Moment" health management brand, and leveraging innovative technologies in product development [2][3]. - The gross profit margin has decreased by 5.9 percentage points to 60.9% in Q3, indicating pressure on profitability due to fixed costs and declining revenues [3]. Financial Performance Summary - For 2025, the company is projected to have a total revenue of 835 million, a decrease of 23.1% year-on-year, with a net profit of -54 million, reflecting a significant decline of 622.3% [4][26]. - The company anticipates a gradual recovery in revenue and profitability from 2026 onwards, with expected net profits of 25 million in 2026 and 48 million in 2027, indicating a turnaround [4][25]. - The company’s PE ratio is projected to be -48.1 for 2025, reflecting the current challenging operating environment [4][27].

Core Viewpoint - The company's 1H25 performance fell short of expectations, with significant declines in revenue and net profit due to lower sales and rigid operating expenses [1][2]. Revenue Performance - In 1H25, the company reported revenue of 385 million yuan, a year-on-year decrease of 36%, primarily driven by a decline in online sales [2]. - The company's online sales through major platforms like Tmall and JD.com saw a drop of over 50% [2]. - Key product categories, including shoulder, scalp, eye, and back massagers, experienced substantial revenue declines [2]. Product Innovation - The company launched several new products in 1H25, including the Ginger Bamboo A3 and various massagers, aiming to leverage innovation as a competitive advantage [2]. - There is an expectation for a breakout product similar to the successful Neck N5 Mini from 2023 to improve business performance [2]. Financial Analysis - The gross margin for 1H25 was 62.8%, an increase of 0.8 percentage points year-on-year, attributed to product mix and improved performance in higher-margin offline direct sales [2]. - Despite the gross margin improvement, the period expense ratio increased by 11.6 percentage points to 70.8%, leading to a net profit margin of -9.4% [2]. Business Model Upgrade - As of 1H25, the company has established 125 direct stores and 77 franchise stores globally, focusing on high-traffic areas [3]. - A new business model combining "technology products + quick-effect massage" is being introduced in physical stores to enhance customer traffic and store efficiency [3]. - The company has also opened six "Relax Moment" stores in cities like Shenzhen and Guangzhou, emphasizing service-oriented offerings [3]. Profit Forecast and Valuation - Due to weak current profitability, the net profit forecast for 2025 has been reduced by 88% to 4.83 million yuan, while the 2026 net profit estimate remains unchanged at 72.36 million yuan [4]. - The company is expected to be in a business transformation phase in 2025, making the valuation for that year less relevant, thus shifting focus to 2026 with a target price increase of 33% to 37.89 yuan, reflecting a 45x P/E ratio for 2026 [4].