Investment Rating - The industry investment rating is "Positive" and maintained [8] Core Insights - The report highlights a divergence in operations between the two leading companies, Nippon Paint China and Three Trees, as the market landscape is being reshaped [6][10] - Nippon Paint China's sales revenue for Q2 2025 was 117.7 billion JPY, equivalent to 5.8 billion RMB, representing a year-on-year decline of 14%. However, operating profit was 18.5 billion JPY, approximately 910 million RMB, showing a year-on-year increase of 3% [2][6] - The report indicates that Nippon Paint's architectural coatings revenue faced significant pressure, while automotive coatings experienced growth [10] Summary by Sections Sales Performance - Nippon Paint's Q2 sales revenue was approximately 5.8 billion RMB, down 14% year-on-year, with architectural coatings revenue around 4.8 billion RMB, down 18%. In contrast, automotive coatings revenue grew by 19% year-on-year [10][6] - Over the past five quarters, Nippon Paint's architectural decorative coatings revenue growth rates were 6%, 2%, 5%, 3%, and -18%, while Three Trees' wall coatings revenue growth rates were 2%, -6%, -8%, 7%, and 4% [10] Profitability - Nippon Paint's Q2 operating profit margin was 14.0%, up 2.4 percentage points year-on-year, primarily due to price increases and a decrease in raw material costs. However, the margin decreased by 0.8 percentage points quarter-on-quarter [10] - Three Trees showed a more significant improvement in profitability, with a Q2 operating profit margin of approximately 11.5%, up 7.6 percentage points year-on-year and 5.8 percentage points quarter-on-quarter [10] Growth Targets - Nippon Paint has revised its growth targets for 2025, lowering the actual revenue growth target from 5-10% to 0-5%. The retail segment target was adjusted from 10% to 0-5%, while the engineering segment target was revised from 5% to a decline of 10-15% [10] - Conversely, the revenue target for automotive coatings was raised from 10% to 20% growth [10] Strategic Recommendations - The report continues to recommend Three Trees as a leading player, noting its revenue and profitability growth against the trend, attributed to its strategic adaptability and new business models [10]

Investment Rating - The industry investment rating is "Positive" and maintained [5]. Core Viewpoints - Nippon Paint China reported a sales revenue of 127.6 billion JPY (approximately 6.1 billion CNY) in Q1 2025, representing a year-on-year growth of 4%. The operating profit was 19.3 billion JPY (approximately 0.93 billion CNY), with a year-on-year increase of 13% [4][6]. - The revenue growth target for Nippon Paint China in 2025 remains consistent with the previous year, aiming for a 5-10% increase, with retail revenue expected to grow by 10% and engineering revenue by 5% [7][8]. Summary by Sections Revenue Performance - Nippon Paint China's Q1 2025 sales revenue was approximately 6.1 billion CNY, with architectural coatings revenue around 5.3 billion CNY, growing by 3% year-on-year. Automotive coatings saw an 18% increase, while industrial coatings declined by 5% [7][8]. - The revenue growth for Nippon Paint's architectural coatings has been relatively stable over the past five quarters, with year-on-year growth rates of 13%, 6%, 2%, 5%, and 3% respectively [7]. Profitability - Nippon Paint China's operating profit margin in Q1 2025 was 14.8%, an increase of 2.0 percentage points year-on-year, attributed to a higher proportion of retail business and a reduction in price competition [7][8]. - The company implemented price increases for retail products in December 2024 and for engineering products in February 2025, which contributed to the improvement in profitability [7]. Market Outlook - The company remains optimistic about the potential of the Chinese architectural coatings market, noting that per capita paint consumption is only 50-60% of that in developed countries, indicating significant long-term growth potential [7][8]. - Nippon Paint's strategy focuses on defending and expanding market share, particularly in lower-tier cities, while maintaining healthy profit margins without sacrificing profitability for growth [7].

Investment Rating - The investment rating for the industry is "Positive" and is maintained [8]. Core Insights - Nippon Paint China achieved a sales revenue of 127.6 billion JPY (approximately 6.1 billion CNY) in Q1 2025, representing a year-on-year growth of 4%. The operating profit was 19.3 billion JPY (approximately 930 million CNY), with a year-on-year increase of 13% [2][6]. - The revenue growth target for Nippon Paint China in 2025 remains consistent with the previous year, aiming for a 5-10% increase, with retail revenue expected to grow by 10% and engineering revenue by 5% [10]. Summary by Sections Revenue Performance - Nippon Paint China's Q1 2025 sales revenue was approximately 6.1 billion CNY, with a 4% year-on-year increase. The architectural coatings segment generated about 5.3 billion CNY, growing by 3% year-on-year. Automotive coatings saw an 18% increase, while industrial coatings declined by 5% [10]. - The revenue growth for Nippon Paint's architectural coatings has been positive over the past five quarters, with year-on-year growth rates of 13%, 6%, 2%, 5%, and 3% respectively [10]. Profitability - The operating profit margin for Nippon Paint China in Q1 2025 was 14.8%, an increase of 2.0 percentage points year-on-year, attributed to a higher proportion of retail business and a reduction in price competition [10]. - The operating profit margin for the competitor, San Ke Tree, was approximately 5.7%, with a year-on-year increase of 3.8 percentage points [10]. Market Strategy - Nippon Paint China is optimistic about the potential of the Chinese architectural coatings market, noting that per capita paint consumption is only 50-60% of that in developed countries, indicating significant long-term growth potential [10]. - The company aims to expand its market share in lower-tier cities while maintaining healthy profit margins, avoiding growth at the expense of profitability [10].