Core Viewpoint - The company reported a significant increase in "other main revenue" for the first half of 2025, indicating strong growth in new product categories and market segments [1] Group 1 - The "other main revenue" for the first half of 2025 reached 1.138 billion, representing a year-on-year growth of 46.97% [1] - The revenue growth is attributed to new product lines including non-woven fabrics, Hongshi emulsion, silk nanomembrane, pipe industry products, and adhesives [1] - The company emphasized the resilience of growth in new categories and market segments, supported by brand and channel synergies [1]

Financial Performance - In the first half of 2025, the company achieved operating revenue of 13.569 billion CNY, with a net profit attributable to shareholders of 564 million CNY, showing a decline compared to the same period last year [2] - The second quarter showed significant improvement, with a notable reduction in the year-on-year decline in revenue compared to the first quarter [2][3] - Overseas revenue grew by over 40% in the first half of 2025, alleviating some pressure on overall revenue [2] Profitability Metrics - The gross margin for the second quarter was 26.71%, reflecting a 3% increase from the first quarter, driven by improved revenue scale and stable pricing [3] - The company’s retail business segment experienced growth, positively impacting the overall gross margin [3] Cash Flow and Operational Quality - The net cash flow from operating activities increased by 70.18% year-on-year in the first half of 2025, with the second quarter's cash flow exceeding the net profit for the period [4] - The company has successfully transitioned from a direct sales model to a retail and engineering channel model, with revenue from these channels reaching 11.406 billion CNY, accounting for 84.06% of total revenue [4] Cost Management - The company has implemented cost control measures, resulting in a decrease in sales and management expenses compared to the previous year [8] - Organizational restructuring and optimization have led to improved management efficiency and reduced personnel costs [8] New Revenue Streams - Other main revenue, including non-woven fabrics and new product categories, reached 1.138 billion CNY, a year-on-year increase of 46.97% [9] - The sand powder business achieved sales of 5.57 million tons, with revenue of 1.996 billion CNY, despite a slight decline in average price due to product mix changes [10] Strategic Acquisitions and International Expansion - The acquisition of Construmart in Chile is underway, aimed at leveraging local market channels to enhance competitiveness and profitability [11] - The company’s overseas business generated 576 million CNY in revenue, a year-on-year increase of 42.16%, indicating the effectiveness of its overseas strategy [12] Dividend Policy - The company plans to implement a mid-term cash dividend, reflecting confidence in its operational performance and commitment to shareholder returns [13][14] - The cash dividend will not impact the company’s operational funding needs, as the business model has shifted to reduce working capital requirements [14][15]

Investment Rating - The investment rating for the company is "Buy" [1] Core Views - The company experienced a 14.52% year-on-year decline in revenue due to industry demand downturn and proactive business structure adjustments. Direct sales revenue dropped significantly by 58.75% to 4.277 billion yuan, impacting overall revenue. However, retail and engineering channels showed robust growth, with combined revenue of 23.562 billion yuan, up 8.10% year-on-year, accounting for 83.98% of total revenue [3][4] - The company has successfully optimized its sales channels, with the C-end revenue reaching 10.209 billion yuan, up 9.92% year-on-year, and the small B-end revenue at 13.354 billion yuan, up 6.74% year-on-year. The growth in these segments has mitigated the decline in direct sales [3][4] - The company reported a significant improvement in cash flow, with operating cash flow reaching 3.457 billion yuan, a 64.39% increase year-on-year, indicating successful channel transformation and improved operational quality [6] Financial Summary - The company achieved a total revenue of 28.056 billion yuan in 2024, down 14.52% year-on-year, with a net profit attributable to shareholders of 108 million yuan, down 95.24% year-on-year. The operating cash flow was 3.457 billion yuan, showing a significant improvement [5][10] - For 2025, the company is projected to generate revenue of 28.946 billion yuan, with a net profit of 1.347 billion yuan, reflecting a substantial recovery in profitability [10][13] - The company plans to distribute a cash dividend of 18.50 yuan per 10 shares, totaling 4.419 billion yuan [5] Growth Prospects - The company is accelerating its overseas business expansion, with foreign revenue reaching 877 million yuan, up 24.73% year-on-year. The establishment of factories in Malaysia, the USA, and Saudi Arabia is expected to enhance its global supply chain and revenue growth [7] - Revenue projections for 2025-2027 are 28.946 billion yuan, 31.158 billion yuan, and 33.739 billion yuan, respectively, with net profits expected to recover to 1.347 billion yuan, 1.812 billion yuan, and 2.268 billion yuan [8][10]

Group 1: Shuiyang Co., Ltd. - Shuiyang Co., Ltd. aims for globalization, planning to expand three store formats in the top ten global cities, focusing on the US, China, UK, and France [1] - The RV brand business is primarily in the US, with minimal short-term impact from tariffs; the company plans to adjust its team and ensure business operations and brand upgrades in the US market this year [1] - EDB is expected to achieve around 20% revenue growth this year, with a focus on offline channels and reducing head sales [1] - The PA brand saw over 300% growth last year and is expected to maintain 100% growth this year, with efforts to strengthen global channel construction and product line expansion [1] - The company is reducing investment in celebrity endorsements and focusing more on offline experience stores and stable channel development [1] Group 2: Longci Technology - Longci Technology has a minimal direct export to the US, thus limited impact from US tariff policies [2] - The company aims for a long-term permanent magnet production capacity of 60,000 tons, with an expected capacity of 50,000 tons this year [2] - The Vietnam factory's permanent magnet capacity has expanded to 10,000 tons per year, while the Thailand soft magnet factory plans for 8,000 tons capacity [2] - The company is focusing on developing chip inductors and automotive inductors, leveraging customer synergy to penetrate the automotive inductor market [2] Group 3: Dongfang Yuhong - Dongfang Yuhong's overseas business revenue grew rapidly in Q1 2025, with the Malaysia factory completed in Q1 [3] - The company is enhancing operational efficiency through organizational restructuring, redundancy elimination, and workflow simplification [3] - The company is focusing on expanding its product categories, with non-waterproof product revenue accounting for half of total revenue this year [3] - The integration of the architectural coating business with the sand powder group aims to achieve supply chain and process synergy, enhancing cost reduction and efficiency [3]