Investment Rating - The investment rating for the company is "Buy" with a target price of RMB 13.50 [7][8]. Core Views - The company reported a revenue of RMB 1.061 billion for H1 2025, a year-on-year decrease of 32.78%, and a net profit attributable to shareholders of RMB 102 million, down 32.31% year-on-year. The decline in revenue is attributed to slower construction progress and significant price competition in the pipeline industry [1][2]. - Despite the challenges, the demand for engineering pipelines is expected to improve due to the rapid implementation of major water conservancy projects and urban renewal initiatives [1][4]. - The company has a sufficient order backlog, and as key engineering projects progress in the second half of the year, the order backlog is expected to be released [2]. Summary by Sections Financial Performance - In H1 2025, the company achieved revenue of RMB 1.061 billion, with a Q2 revenue of RMB 539 million, reflecting a year-on-year decline of 42.23% and a quarter-on-quarter increase of 3.37%. The net profit for Q2 was RMB 59.04 million, down 40% year-on-year but up 37.84% quarter-on-quarter [1][2]. - The gross margin for H1 2025 was 20.08%, a slight increase of 0.55 percentage points year-on-year. The gross margins for pipe sales and pipeline engineering installation were 23.4% and 45.0%, respectively [2]. Cost and Cash Flow - The operating expense ratio for H1 2025 was 12.34%, an increase of 2.93 percentage points year-on-year. The company effectively controlled accounts receivable, which decreased by 5.27% compared to the beginning of the year [3]. - The net cash flow from operating activities was RMB 41 million, a year-on-year increase of 125.60%, primarily due to increased cash received from sales of goods and services [3]. Industry Outlook - The company is positioned to benefit from national policies promoting the construction of water and gas pipelines, as well as urban infrastructure upgrades. This presents a significant opportunity for the pipeline industry [4]. - The company plans to leverage its comprehensive pipeline industry chain advantages and adopt a dual sales model to enhance its market position [4]. Profit Forecast and Valuation - The profit forecasts for 2025-2027 have been revised downwards due to ongoing price competition in the short-cycle pipeline industry. The expected net profits for 2025, 2026, and 2027 are RMB 153 million, RMB 177 million, and RMB 224 million, respectively [5][11]. - The company is assigned a PE valuation of 25 times for 2025, leading to an adjusted target price of RMB 13.50, reflecting a favorable outlook based on its strategic positioning and market conditions [5].