Event: on August 19, the company released its 2021 semi-annual report. During the reporting period, the company achieved a total operating income of 1.743 billion yuan, an increase of 32.38% over the same period last year; a net profit of 112 million yuan, a decrease of 12.94% over the same period last year; and basic earnings per share of 0.29 yuan.

2021H1 company revenue scale is high, the domestic retail exhibition store restarts and the home improvement channel breaks the game two-wheel drive. In terms of domestic and export sales, as of 21H1, the company achieved 1.322 billion yuan respectively, changing by 41.09% and 10.55% respectively over the same period last year, accounting for 76.48% of the company's main business income and 23.52% of the company's main business income, respectively. It can be seen that the recovery of the domestic market is the core driving force for the growth of the company's 21H1 revenue scale. Further dismantling the domestic sales channel, the retail / engineering channel of 21H1 achieved 901 million yuan respectively by the end of the year, which increased by 51.14% and 23.52% respectively over the same period last year, and accounted for 68.13% of the main business revenue of the domestic market, accounting for 31.87%. It can be seen that the growth of the domestic market is mainly driven by the retail channel. In terms of retail channels, 21H1 "Huida" brand opened a total of 2323 stores, a net increase of 128over the same period last year, including 1900 bathroom brand stores, a net increase of 101over the same period last year, ceramic tile stores 423, a net increase of 27, indicating that the company's focus on retail channel development has shifted back to network expansion. In terms of engineering channels, the company continues to rely on the "1-5" project base to deepen strategic cooperation with Country Garden Holdings, Rongchuang, Poly and other well-known real estate developers. In terms of home decoration channels, during the reporting period, the company has signed strategic cooperation with head equipment enterprises such as "famous craftsmen" and "Industry Peak Decoration". The sales growth rate has increased significantly, and it is optimistic that the company will speed up the expansion of head equipment enterprises in the second half of the year and seize the front-end entrance of the flow.

21H1 full category restorative high growth, intelligent bathroom and overall bathroom growth performance is eye-catching.

2021H1, the company's sanitary ceramics / ceramic tiles / bathtub rooms / bathroom cabinets / hardware sanitary wares / other products realized revenue of 8.96 million yuan respectively, and increased by 23.72%, 54.97% and 57.48% respectively over the same period of last year. Among them, the intelligent bathroom / integral bathroom in sanitary ceramics reached 189.55 million yuan, respectively, with a year-on-year increase of 23.72%, 39.73%, 21.28%, and 2.37%, respectively, with a year-on-year increase of 23.72%, 54.97%, 57.48%, 48.86%, 39.73%, 21.28%, respectively. To achieve a year-on-year growth of 102.24% Universe 370.95%, it can be seen that the concept of intelligent bathroom products and prefabricated home decoration has been gradually recognized by consumers, and the company's experience and continuous investment in technology research and development will ensure that products keep up with the market trend. During the reporting period, the company completed a total of 165 new product designs and won many awards such as German Red Dot and IF, which shows the company's strong design and R & D strength.

Because the gross profit margin no longer enjoys the social security relief, the expense rate is basically stable, which leads to the reduction of the net profit rate. As of 21H1, the company's comprehensive gross profit margin was 28.19%, down 4.45% from the same period last year, mainly due to the fact that the company no longer enjoyed social security relief policies for the same period last year. In terms of expense rate, the sales / management / R & D / financial expense rate of 21H1 is 8.29%, 7.40%, 4.45% and 0.24% respectively, which is 0.34% higher than that of the same period last year, and the comprehensive expense rate is the same as that of last year. In terms of net interest rate, 21H1's net sales profit rate was 7.04%, down 2.84% from the same period last year, of which 21Q2 sales net profit rate was 7.75%, down 4.83% from the same period last year, and 1.75% higher than 21Q1, mainly due to the 1.01% increase in 21Q2 gross profit margin.

Investment suggestion: the company has initially completed the optimization of retail channels and has begun to add code to complete the channel, and it is optimistic that the company will continue to enhance its brand value in the future by virtue of multi-channel expansion and full-category layout. It is expected that the company will be able to achieve basic earnings per share of 0.85 pounds per share in 21-22-23, corresponding to PE of 11x, 8X, 7X, covering for the first time and giving a "recommended" rating.

Risk tips: the risk of a sharp rise in raw material prices; the risk of intensified competition in the industry.