Core Viewpoint - The company reported its 1H25 performance, showing a slight revenue growth and a significant increase in net profit, aligning with expectations [1] Financial Performance - In 1H25, the company achieved revenue of 4.021 billion yuan, a year-on-year increase of 1.59%, and a net profit attributable to shareholders of 266 million yuan, up 14.04% year-on-year [1] - The company declared a dividend of 0.28 yuan per share (before tax), representing 39% of the net profit for 1H25 [1] - Quarterly breakdown shows 1Q25 revenue of 1.73 billion yuan (down 1.76% year-on-year) and 2Q25 revenue of 2.29 billion yuan (up 4.27% year-on-year) [1] Product and Channel Performance - The mattress segment experienced stable growth, while the self-branded engineering business grew rapidly [2] - Revenue by product for 1H25: mattresses 2.662 billion yuan (up 10%), soft beds and accessories 924 million yuan (down 13%), sofas 328 million yuan (down 24%), and wooden furniture 107 million yuan (up 115%) [2] - Revenue by channel: self-branded retail 2.53 billion yuan (up 5%), self-branded engineering 290 million yuan (up 23%), OEM 1.08 billion yuan (down 8%), and cross-border e-commerce 130 million yuan (down 17%) [2] - As of 1H25, the company operated 5,304 offline stores, with a decrease in specialized stores compared to the end of 2024 [2] Profitability and Cost Management - The gross margin improved, with a 2.6 percentage point increase to 38.42% in 2Q25 [3] - The expense ratio for 2Q25 was 27.5%, with a slight increase of 0.02 percentage points year-on-year [3] - Net profit margin for 2Q25 was 8.53%, reflecting a year-on-year increase of 1.27 percentage points [3] Future Outlook - The company is advancing AI-enabled technological innovations, which are expected to drive continued performance improvement [4] - Product upgrades include the launch of the "Net Sleep Deformaldehyde Technology" and new AI product lines [4] - Collaborations with Tsinghua University and other tech firms aim to enhance AI product technology and develop sleep solutions based on brain-computer interface technology [4] Earnings Forecast and Valuation - The earnings forecast for 2025/2026 remains unchanged, with the current stock price corresponding to a P/E ratio of 16/15 times for those years [5] - The target price is maintained at 19 yuan, indicating a potential upside of 5% from the current stock price [5]

Investment Rating - The report maintains a "Buy" rating for the company, with a target price not specified [5]. Core Views - The company has achieved steady growth in mattress revenue, with a focus on advancing into the smart sleep sector, supported by strategic initiatives and product enhancements [2][3]. - The company reported a revenue of 17.30 billion yuan in Q1 2025, a decrease of 1.76% year-on-year, and a net profit attributable to the parent company of 0.71 billion yuan, down 4.02% year-on-year [1]. - The company aims to transition from "AI-assisted sleep" to a more human-centered "AI companionship" model, enhancing its product offerings [3]. Financial Performance Summary - In 2024, the company generated total revenue of 87.29 billion yuan, a slight increase of 0.59% year-on-year, while the net profit attributable to the parent company was 3.22 billion yuan, down 24.84% year-on-year [1]. - The gross margin for 2024 was 33.67%, a decrease of 0.7 percentage points, and the net profit margin was 3.7%, down 1.2 percentage points [1]. - The company expects net profits for 2025, 2026, and 2027 to be 4.2 billion yuan, 5.0 billion yuan, and 5.6 billion yuan respectively, with corresponding P/E ratios of 14X, 12X, and 11X [5]. Product Segment Performance - Mattress revenue in 2024 reached 52.7 billion yuan, up 5.05% year-on-year, with sales volume of 5.366 million units, an increase of 6.19% year-on-year [2]. - Revenue from soft beds and accessories was 24.4 billion yuan, down 8.39% year-on-year, while sofa revenue was 7.2 billion yuan, down 6.55% year-on-year [2]. Retail Business Transformation - The company reported distribution revenue of 32.1 billion yuan in 2024, with a gross margin of 45.41%, and a total of 5,065 exclusive stores by the end of 2024 [4]. - Online revenue reached 19.8 billion yuan, an increase of 9.88% year-on-year, with a gross margin of 44.61% [4]. - The company is enhancing its marketing network through a multi-channel strategy, including e-commerce and social media, to improve brand penetration and operational efficiency [4].