Investment Rating - The report maintains a "Buy" rating for the company, with a target price based on expected earnings growth and market performance [7]. Core Views - The company is experiencing stable domestic growth while showing signs of recovery in overseas operations, with expectations for profit restoration in 2025 [1][5]. - The company's revenue for H1 2025 was 1.37 billion yuan, a decrease of 5% year-on-year, while net profit attributable to shareholders increased by 45% to 90 million yuan [1]. - The report highlights effective cost control measures leading to improved profitability, with a net profit margin increase of 2.5 percentage points to 8.5% in H1 2025 [1][2]. Financial Performance Summary - **H1 2025 Performance**: Revenue was 1.37 billion yuan (-5% YoY), net profit was 90 million yuan (+45% YoY), and non-recurring net profit was 70 million yuan (+19% YoY) [1]. - **Q2 2025 Performance**: Revenue was 680 million yuan (-3% YoY), net profit was 40 million yuan (+50% YoY), with a net profit margin of 8.8% [2]. - **Profitability Metrics**: H1 2025 gross margin decreased by 2.5 percentage points to 66.7%, while the net profit margin improved by 2.5 percentage points to 8.5% [1]. Regional and Channel Performance - **Domestic Growth**: Domestic comparable revenue grew by approximately 4.9% in H1 2025, with a notable 8.4% growth in Q2 [3]. - **Sales Channels**: Offline and online revenues for H1 2025 were 1.086 billion yuan (-8% YoY) and 268 million yuan (+5% YoY), respectively [3]. - **Direct vs. Franchise Sales**: Direct sales revenue was 1.22 billion yuan (-3% YoY) with a gross margin of 73.0%, while franchise sales revenue was 133 million yuan (-25% YoY) with a gross margin of 18.9% [3]. Brand Performance - **Main Brand Trends**: Key brands such as Laurel and self-portrait showed strong growth, with sales for H1 2025 at 215 million yuan (+10% YoY) and 285 million yuan (+21% YoY), respectively [4]. - **Store Count**: As of H1 2025, the number of stores for key brands was ELLASSAY (290), Laurel (92), IRO (102), and self-portrait (75) [4]. Inventory and Cash Flow Management - **Inventory Management**: Inventory at the end of H1 2025 decreased by 21% to 740 million yuan, with inventory turnover days reduced by 71 days to 309.4 days [5]. - **Cash Flow**: Operating cash flow for H1 2025 was 220 million yuan, approximately 2.6 times the net profit for the same period [5].