Event: the company releases its 2023 half-yearly report. During the reporting period, the company achieved revenue of 1.336 billion yuan, an increase of 38.67% over the same period last year; net profit of-150 million yuan, a decrease of 60.88% over the same period last year; and basic earnings per share of-0.36 yuan. Among them, the company's revenue in the second quarter reached 782 million yuan, an increase of 32.81% over the same period last year; the net profit returned to the mother was-59 million yuan, and the loss decreased by 57.27% over the same period last year.

After the epidemic, business returned to normal, and profitability improved significantly compared with the same period last year. In terms of gross profit margin, during the reporting period, the company's comprehensive gross profit margin was 32.6%, an increase of 6.55 pct over the same period last year. Among them, 23Q2's single-quarter gross profit margin was 31.82%, an increase of 10.19 pct over the same period last year and a decrease of 1.87 pct from the previous month.

In terms of expense rate, in the first half of 2023, the expense rate during the company period was 45.94%, a decrease of 34.2 pct compared with the same period last year. Among them, the sales / management / R & D / financial expense rates were 26.72% / 12.29% / 5.35% / 1.57%, respectively, compared with the same period last year:-25.18 pct /-7.64 pct /-1.5 pct / + 0.12 pct. In terms of net interest rate, during the reporting period, the company's net interest rate was-10.92%, an increase of 30.19 pct;23Q2 per quarter net interest rate to-7.49%, a year-on-year increase of 16.92 pct, and a month-on-month increase of 8.27 pct. The company's business loss in the first half of the year is mainly due to the seasonal characteristics of the home decoration industry, and the performance of the year shows the law of profit after loss.

Steadily promote the digital installation business, digital empowerment to optimize the traditional home decoration. The company firmly promotes the digital strategy, with a long-term investment of more than 1.2 billion yuan, shaping the core barriers to digitization. During the reporting period, the company further defined the positioning of middle and high-end customers, continuously enhanced the digital application experience and exhibition hall display, expanded supply chain channels to enrich the middle and high-end product base, optimized and upgraded the real home system and 4D cloud whole-house customization system, greatly improved woodwork design efficiency, accuracy and customer experience, and effectively supported the improvement of front-end sales conversion rate. Xingyao SAAS system achieves digital full-cycle management and control, the overall node punctuality rate of digital loading business is more than 97%, the delivery completion rate is more than 90%, and customer satisfaction is more than 9.6 points.

Actively expand the application of AIGC, three products to achieve energy and efficiency. The company relies on a large amount of high-quality underlying data to promote the application of AIGC in the home decoration industry: 1) the "creative master" can generate hundreds of pictures in an hour to meet the needs of inspiration; 2) "real home AIGC" forms 110 AI space style training sets, which can realize the complete delivery of the model to deepening and then to accurate landing; 3) the "rookie designer" can generate switchable designs in one minute by uploading space photos. We believe that the application of the three AIGC products will greatly improve the design efficiency, reduce the dependence of designers, and then save costs.

Investment advice: the company ploughs the home improvement industry, long-term investment in digital construction to build a moat, digital & AIGC application will break through industry restrictions, market share is expected to continue to improve, superimposed efficiency reduction, outstanding long-term growth, the company is expected to achieve 2023 / 24 / 25 basic earnings per share of 0.25 / 0.51 / 0.84 yuan, corresponding to PE of 34X / 17X/ 10X, maintaining the "recommended" rating.