Incident: The company released its semi-annual report. 24H1 achieved operating income of 1.44 billion yuan, a year-on-year decrease of 9.95%; realized net profit due to mother 0.1 billion yuan, a year-on-year decrease of 26.06%; realized net profit deducted from non-mother 0.08 billion yuan, a year-on-year decrease of 26.61%.

Looking at a single quarter, 24Q2 achieved operating income of 0.82 billion yuan, a year-on-year decrease of 11.28%; realized net profit of 0.08 billion yuan, a year-on-year decrease of 8.71%; realized net profit deducted from non-mother of 0.06 billion yuan, a year-on-year decrease of 14.61%.

24H1's consolidated gross margin was 22.23%, a decrease of 1.3 pct. The cost rate for the period was 14.32%, a decrease of 0.1 pct. Among them, sales/management/R&D/finance expenses were 7.62%/3.02%/3.17%/0.51%, respectively, with year-on-year change of -0.2pct/+0.2pct/-0.4pct/+0.1pct.

By product, plywood molded doors/solid wood composite door/cabinet products achieved revenue of 0.81/0.25/0.09 billion yuan, a year-on-year decrease of 13.73%/23.52%/21.06%; gross margins were 21.39%/18.85%/15.09%, respectively, a year-on-year decrease of 3.36pct/2.87pct/7.29pct.

By channel, dealers/bulk channels achieved revenue of 0.33/1 billion yuan, a year-on-year decrease of 24.66%/7.96%; gross margin was 19.59%/19.28%, respectively, a year-on-year decrease of 2.59pct/3.36pct.

Among the major channels, the engineering/agency channel achieved revenue of 0.4/0.55 billion yuan, a year-on-year change of -33.75%/+27.63%; gross margin was 23.81%/15.75%, respectively, a year-on-year decrease of 2.21pct/1.79pct. 24H1 added 15,860 new franchisees. As of 24H1, there were 52,368 franchised dealers.

Profit forecast and rating: We lowered the company's 24-25 net profit from 0.44/0.5 billion yuan to 0.28/0.31 billion yuan, a year-on-year change of -27%/+10%. The current stock price corresponds to the 24-year PE 11 times. The company was given a 24-year PE valuation of 13-15 times, with a reasonable value range of 20.84-24.04 yuan, giving it a rating of “superior to the market”.

Risk warning: Risk of increased market competition, risk of dealer management, risk of fluctuation in the real estate industry, risk of rising raw material prices and rising labor costs.