Cement companies are actively transforming and are mainly engaged in e-commerce services and water purification taps. The company was founded in 1999 and initially focused on the production and operation of cement and concrete. In November 2016, the company transferred 70% of Longjing Water's shares with 116 million yuan in cash, and the business switched to manufacturing and sales of water purification taps (including accessories); in December 2016, the company sold business related to the main cement business to shareholder Shitou Group; in September 2020, the company purchased 40% of Quentin Technology's shares through cash payment, and completed the acquisition of 18% of Quentin Technology's shares in January 2023. The main business switched to e-commerce services in the future. Establish own brands in fields such as sexual skin care. In the first three quarters of 2023, the company achieved operating income of 320 million yuan, -10.51% year-on-year; net profit of net profit of -17 million yuan, year-on-year profit and loss.

Continue to develop e-commerce services and strive to build a “food and medicine dual drive” brand system for pets. Since 2023, the company has firmly focused on the main business and continued to make efforts in the field of e-commerce services, focusing on the brand operation capabilities, channel influence capabilities, and digital link capabilities of its holding subsidiary Quentin Technology. The company has integrated Quentin Technology's high-quality platform resources and brand incubation and promotion capabilities to gradually establish a competitive advantage in the field of e-commerce services. At the same time, we have fully grasped the opportunities for the localization of pet food and the rapid growth of pet health products and pharmaceuticals, and are committed to building an independent brand management system with a “double drive for food and medicine”. The company's independent pet food brand “Unrivaled” and the pet health product's own brand “Mito Elephant” have begun operation. In the first half of 2023, due to adverse market factors, adjustments in e-commerce supply prices, and increased labor costs to expand independent pet food brands, increase management team building, etc., Quentin Technology achieved operating income of 144 million yuan, -15.91% year-on-year; net profit of 0.7 billion yuan, -43.90% year-on-year.

It is one of the largest domestic water purification faucet manufacturers, and its products are exported overseas. Longjing Water Industry is one of the largest manufacturers of household water purification taps in China. It has the most advanced automated assembly line in the world, a complete range of testing equipment such as spectral analyzers and salt spray testers, etc., and has a production capacity of 20,000 water purification taps per day. The comprehensive performance of the water purifier faucet developed independently by the company is at the leading domestic and international advanced level. It has a full range of similar domestic products, has obtained many patents, and is exported to the United States, Canada, South Korea, North America and European countries and regions. In the first half of 2023, Longjing Water Industry achieved operating income of 119 million yuan, -19.20% year-on-year; net profit of -01 million yuan, year-on-year profit and loss.

Profit forecast: First coverage, giving the company an “increase in holdings” rating. We estimate that the company's 2023-2025 operating income will be 491/5.39/600 million yuan, net profit will be 0.03/0.09/11 billion yuan, and corresponding PE will be 562.65x/187.76x/149.68x, respectively.

Risk warning: Changes in the macroeconomic situation at home and abroad have exceeded expectations, market competition has intensified, brand customer loss risk, risk since third-party e-commerce platforms, risk of inventory management risk, risk of fluctuations in customer brand image and product quality, risk of fluctuations in customer brand image and product quality, risk of major asset restructuring and subsequent integration, profit forecasts and valuation models falling short of expectations