Investment Rating - The investment rating for the company is "Buy" and it is maintained [9]. Core Viewpoints - The company reported a revenue of 9.20 billion yuan and a net profit attributable to shareholders of 0.52 billion yuan for the first half of 2025, representing a year-on-year decline of 19% and 43% respectively [2][6]. - The revenue for Q2 2025 was 5.08 billion yuan, with a net profit of 0.30 billion yuan, showing a year-on-year decrease of 18% and a slight decrease in net profit of 7% [2][6]. - The company is facing operational pressure but is looking forward to a recovery in market conditions [6]. Revenue Analysis - The revenue decline in H1 2025 was primarily due to intense industry competition, the impact of real estate market conditions on new housing demand, and delays in the implementation of consumption policies [11]. - The breakdown of revenue by product categories showed declines of 18.42% for water tanks and accessories, 22.72% for smart toilets and covers, and 6.86% for drainage systems [11]. - Domestic revenue fell by 27.76%, while overseas revenue saw a slight increase of 0.60% [11]. Profitability Analysis - In Q2 2025, the gross margin improved on a quarter-on-quarter basis, with a net margin increase year-on-year [11]. - The gross margin decreased by 1.0 percentage points year-on-year but improved by 2.3 percentage points compared to Q1 2025 [11]. - The company maintained a research and development expense ratio of around 5%, with a total of 2075 patents held as of June 30, 2025 [11]. Market Outlook - The domestic market for smart toilets has significant growth potential, with an estimated penetration rate of only 9.6% compared to more mature markets [11]. - The company is expected to benefit from the implementation of mandatory product certification, which may lead to increased industry concentration as weaker brands exit the market [11]. - The overseas market presents opportunities for expansion, particularly in regions like the Middle East, Europe, and South America, leveraging the company's cost control capabilities [11]. Earnings Forecast - The company is projected to achieve net profits of 1.3 billion yuan, 1.6 billion yuan, and 2.0 billion yuan for the years 2025, 2026, and 2027 respectively, with corresponding price-to-earnings ratios of 23, 19, and 16 [11].

Revenue Performance - In 2024, the company achieved revenue of 2.358 billion yuan, a year-on-year increase of 8%, while net profit attributable to shareholders decreased by 17% to 181 million yuan, and net profit excluding non-recurring items fell by 20% to 160 million yuan [1] - For Q4 2024, the company reported revenue of 648 million yuan, with a year-on-year increase of 2%, and net profit attributable to shareholders increased by 28% to 55 million yuan, while net profit excluding non-recurring items rose by 26% to 47 million yuan [1] - In Q1 2025, revenue dropped to 412 million yuan, a year-on-year decline of 21%, with net profit attributable to shareholders falling by 63% to 21 million yuan, and net profit excluding non-recurring items decreasing by 67% to 18 million yuan [2] Market Dynamics - The decline in Q1 2025 revenue is primarily attributed to disruptions in subsidy schedules, with a significant impact observed in January and February, although sales showed signs of recovery in March [3] - The overall performance of the company is better than the industry average, with the online retail market for smart toilets in China expected to decline by 18.6% in 2024, with retail volume down by 18.0% [3] - The company's product segments showed varied performance in 2024, with water tanks and accessories growing by 2.93%, smart toilets and covers by 13.37%, while same-layer drainage systems decreased by 13.54% [3] Profitability Analysis - In Q1 2025, the gross margin slightly increased by 0.3 percentage points to 24.7%, while the net profit margin decreased by 6.0 percentage points to 5.2% [4] - The company maintains a stable R&D investment of around 4%, with 1,940 patents held as of December 31, 2024, including 181 invention patents [4] - The company is recognized as one of the four bathroom enterprises with the title of "National Industrial Design Center," indicating strong R&D and manufacturing capabilities [4] Growth Prospects - The company is expected to achieve good revenue growth in 2025, driven by its dual strategy of "own brand + OEM," with domestic brand sales transitioning from e-commerce to offline channels [5] - The domestic market is anticipated to benefit from government subsidies, leading to a favorable growth trend for the company's own brand [5] - The company is expected to maintain rapid growth in overseas markets, particularly in the Middle East and Europe, despite potential challenges from U.S. tariffs affecting shipments [5] Profit Forecast - The company is projected to achieve net profits of 200 million yuan, 230 million yuan, and 280 million yuan for the years 2025, 2026, and 2027, respectively, with corresponding price-to-earnings ratios of 14, 12, and 10 [6]