The company released the 2024 mid-year report performance forecast

The estimated net profit of 24H1 is 0.03-0.04 billion yuan, -82% ~ -77% YoY; net profit without return to mother is 0.013-0.015 billion yuan, -91% ~ -90% YoY;

24Q2 net profit to mother was 0.12-0.13 billion yuan, -28% to -23% year over year, net profit not attributable to mother 0.119-0.121 billion yuan, -28% to -27% year over year.

The operating environment was under pressure, and gross margin improved month-on-month in Q2

Competition in the 2024H1 bathroom industry has further intensified. The company is actively promoting product line optimization, omni-channel marketing and management efficiency improvement. However, due to continuous adjustments in the real estate market and weakening consumption expectations, 24H1's revenue fell by about 10% year on year. At the same time, due to product prices, 24H1 gross margin decreased by 2.68% year on year, 24Q2 gross margin was -0.82 pct year on year, and +3.74 pct month on month, which improved month-on-month.

In the second half of 2024, the company will continue to improve product planning capabilities, optimize product structure, speed up new product launches and store upgrades, accelerate channel decline and overseas exports, continue to improve omni-channel layout, and accelerate cost reduction and efficiency efforts to enhance the company's profitability.

Product intelligence has been upgraded, channels are actively sinking, and the share is expected to increase

In terms of products, the company continues to deeply cultivate all categories of sanitary ware, promote product structure optimization and intelligent development of bathroom space products, accelerate the development and launch of new products at various price points; at the same time, achieve cost reduction and efficiency in the value chain through measures such as component standardization, platformization, increase self-production rate, and end-to-end opening; in terms of channels, the domestic offline market continues to expand, and continues to promote omnichannel marketing systems covering retail, e-commerce, home improvement, engineering, etc., and continues to promote omnichannel marketing systems covering retail, e-commerce, home improvement, engineering, etc., and in terms of sinking channels, priority is given to high-quality distributors with network resources and distribution teams. Targeted according to regional conditions Develop dealers and support the implementation of activities by holding distributors' order meetings, etc.

Furthermore, through the establishment of its own e-commerce operation team and cooperative e-commerce dealers, the company carries out direct e-commerce and dealer e-commerce business. In addition to the JD and Tmall platforms, the company continues to develop emerging platforms and expand the e-commerce category.

In a competitive market environment, the company's products and channels continue to gain strength and polish internal skills. We expect the market share of domestic brands to continue to increase.

Adjust profit forecasts to maintain “buy” ratings

The company adjusts the product line based on user needs, accelerates channel decline and overseas exports, continues to improve the omni-channel layout, actively promotes cost reduction and efficiency, and profitability is expected to increase. We expect net profit to be 0.48/0.56/0.67 billion yuan in 24-26, respectively, and the corresponding PE is 15/12/10X, respectively.

Risk warning: Increased market competition; fluctuations in the real estate market and slowing consumer demand; risk of fluctuations in raw material prices; expansion of channels and smart categories falling short of expectations; performance forecasts are only preliminary estimates; specific data is based on semi-annual reports, etc.