Business is expected to improve quarter by quarter. Q2 net profit from endogenous homogeneity increased by 11.11%, maintaining the “buy” rating company 23H1 to achieve revenue of 973 million yuan (yoy -30.32%), net profit of 8.49 million yuan (yoy -32.50%), net profit of 84.49 million yuan (yoy -32.50%), minus non-net profit of 58.85 million yuan (yoy -47.34%). Among them, Q2 achieved revenue of 625 million yuan (yoy -19.95%) and net profit of 72.48 million yuan (yoy -13.96%). The pressure on the company's performance in the first half of the year was mainly affected by Qianchuan, Hubei. Excluding the merger for the same period, 23H1's internal revenue was -8.59%, and net profit was -7.89%, of which Q2 was +11.11%.

Considering that demand is still recovering, we lowered our retail revenue forecast. We expect net profit to be 266/319/372 million yuan respectively in 23-25 (previous value: 3.02/361/419 million yuan), corresponding to EPS of 0.86/1.03/1.20 billion yuan, respectively. Referring to comparable companies, Wind unanimously expected an average PE value of 16 times in 23 years. Considering that the company's channel layout is slightly lower than that of comparable companies, we gave the company 14 times PE in 23 years. The target price was 12.04 yuan (previous value: 13.58 yuan), maintaining “buying” ” Ratings.

Retail channel revenue is under pressure, and the rapid progress of the integration and bulk channel business excludes the impact of Qianchuan's announcement. By category, 23H1's overall closet/wooden door/finished product supporting revenue was -11.1%/-2.7%/-19.0% year-on-year to 725/0.34/042 million yuan; benefiting from continued promotion of household strategies and bulk business growth, 23H1 cabinet revenue increased 13.8% to 119 million yuan. By channel, due to the weak recovery in terminal demand, the retail business is still under some pressure. 23H1 direct marketing/distribution receivables were -9.4%/-15.0% year on year to 0.36/811 million yuan, respectively. At the same time, the company actively developed integration channels, increased strategic cooperation with leading construction companies, and promoted independent channels to invest and build stores. 23H1 integration business revenue also increased by more than 30%. Furthermore, after Qianchuan's announcement, the company independently developed high-quality housing enterprise customers, and 23H1 bulk business revenue increased by 181.2% to 0.75 billion yuan.

23H1 gross sales margin decreased by 0.33 pct, net operating cash flow increased by 44.2%, 23H1 gross sales margin fell by 0.33 pct to 35.9%. We judge that this was mainly due to changes in business structure; 23H1 company's expenses ratio increased by 5.68 pct to 28.3% during the same period, of which the sales expenses rate also increased 2.97 pct to 13.6%, mainly due to increases in advertising expenses and office expenses; management+R&D expenses increased by 2.29 pct to 12.9%, and financial expenses increased 0.42 pct to 1.7%, mainly due to a year-on-year decline in revenue and a weakening dilution effect on rigid expenses. In addition, 23H1's net operating cash flow also increased by 44.2% to $200 million, mainly due to an increase in order advance payments.

Adhere to the implementation of the household strategy and increase the empowerment of retail terminals

According to the company's interim report, in the first half of the year, the company released a 4.0 store format, focusing on display strategies, color and lighting, and creating a sense of atmosphere. Continuously optimizing and upgrading terminal stores to help sell multiple categories. Driven by the company's household strategy, the proportion of orders placed by the company has steadily increased, and the retail unit value has continued to grow. In addition, the company has increased its ability to empower retail terminals, continue to promote the urban operating platform model and encrypted outlets in leading markets, and at the same time actively explore empty cities in sinking markets and expand market coverage capabilities.

Risk warning: Demand recovery fell short of expectations, real estate sales fell sharply, and raw material prices rose sharply.