The 24Q2 revenue/net profit ratio was -16.0%/-23.7%, maintaining that the “purchase” 24H1 company achieved revenue/net profit of 3.09/0.04 billion yuan, or -10.1%/-77.8%, which is basically in line with the performance forecast. Among them, 24Q2 revenue/net profit to mother was 1.95/0.13 billion yuan, -16.0%/-23.7% YoY. Profitability rebounded in the single quarter. Considering that price competition in the bathroom industry is still fierce, we expect the company's net profit to be 0.41/0.48/0.57 billion yuan in 24-26. Comparatively, the average expected value of the company Wind corresponds to 13xPE in 24 years. We are optimistic about the growth potential of the company's smart bathroom. The consumer goods trade-in policy is expected to drive demand growth, giving the company 20xPE in 24 years, with a target price of 8.40 yuan to maintain a “purchase”.

The share of smart toilet revenue continued to increase. The Q2 gross margin improved month-on-month. 24H1's revenue for sanitary ceramics/faucet hardware/ bathroom furniture/ bathroom/ tiles was 15.7/8.3/0.33/0.15/0.134 billion yuan, -6.1%/-0.2%/-14.2%/-37.4%, of which smart toilets revenue was 0.63 billion yuan, -7.7% year-on-year, and revenue share increased 0.5 pct to 20.6% year over year. By channel, 24H1's distribution and retail/e-commerce /home improvement/engineering revenue was 12.5/0.63/0.48/0.7 billion yuan, -6.3%/-12.6%/-6.0%/-17.7% year-on-year. 24H1's overall gross profit margin was 27.0%, 2.4-pct year-on-year, 24Q2 gross profit margin 28.6%, same-month-on-month -0.4/+4.2pct, of which the gross profit margin for sanitary ceramics/faucet hardware/bathroom furniture was 25.3%/26.7%/25.5%, 4.3/-1.0/-2.6pct year-on-year, mainly due to intense competition and price decline, but there was an improvement from month to month.

The cost rate increased slightly during the period, and the net operating cash flow decreased by 24.9% year-on-year, to +2.9 pct year-on-year. Among them, the sales/management/R&D/finance expenses rates were 7.6%/11.2%/5.5%/0.6%, respectively, and -0.9/+2.0/+1.1/+0.7 pct year on year. The decrease in the sales expense ratio was mainly due to the company changing the subsidy fee for dealers to price discounts. 24H1's net profit margin was 1.2%, -3.8 pct year on year, 6.6% for 24Q2, -0.6/+14.6 pct month-on-month, a significant improvement from month to month. The company's balance ratio/interest-bearing debt ratio at the end of 24H1 was 49.2%/16.7%, -2.2/-2.0pct year-on-year.

24H1's net operating cash flow was 0.59 billion yuan, -0.77 billion yuan year on year, and 0.35 billion yuan in Q2, or -54.2% year over year, mainly due to a decrease in sales revenue and an increase in payment of materials and employee remuneration.

The number of distribution outlets continues to grow, and overseas markets expand at an accelerated pace

24H1 continues to accelerate channel sinking, improve the network structure, and expand sales coverage. By the end of 24H1, the company had 0.019 million distribution outlets, +11.7% over the same period last year. Meanwhile, since this year, the company has accelerated overseas market expansion. 24H1 overseas revenue was 0.16 billion yuan, +178.3% year-on-year, accounting for 5.3% of revenue. In April '24, 14 departments including the Ministry of Commerce issued the “Action Plan to Promote Trade-In of Consumer Goods” to encourage all regions to support partial upgrades such as old house decoration, kitchen and bathroom, and home aging adaptation, and promote the implementation of smart homes in more life scenarios such as health, bathroom, and nursing care. Continued introduction of relevant trade-in policies in various regions is expected to drive the company's demand for smart toilets and other products.

Risk warning: The penetration rate of smart bathrooms has not increased as much as expected, and the expansion rate of stores has fallen short of expectations, etc.