Incident: 2024H1's revenue of 3.21 billion yuan decreased by 4.35%; net profit to mother of 4.89 million yuan decreased by 62.02%; net loss of non-return to mother of 0.017 billion yuan decreased by 0.021 billion yuan year-on-year. Q2 revenue of 1.844 billion yuan decreased by 7.86%; net profit to mother of 0.051 billion yuan decreased by 26.36%; net profit of non-return to mother of 0.041 billion yuan decreased by 35.20%.

Decrease in new projects and decline in H1 revenue: The same decline in 2024H1 revenue and performance is mainly due to the decline in the company's new projects against the backdrop of real estate fluctuations, and the decline in the performance of products highly related to real estate. Looking at 2024H1 by product, 1) In terms of door and window business, door and window hardware systems/door and window accessories achieved revenue of 1.387/0.239 billion yuan, a decrease of 16.04%/18.78%. The volume of real estate projects declined significantly, and the company broadened hedging pressure in new fields; 2) In terms of diversified home furnishing business, household products/other construction hardware achieved revenue of 0.59/0.518 billion yuan, respectively, +13.67%/+16.59%. New products drive growth in related sectors and continue to increase investment in new products; 3) Point support glass curtain wall components/door control hardware system revenue of 0.18/0.168 billion yuan +18.15%/-6.16% year over year. By region, domestic/overseas revenue was 2.845/0.365 billion yuan, -5.82%/+8.97% year-on-year. The company initially replicated the domestic sales model overseas to develop markets in emerging countries.

The gross margin was basically the same, and the gross margin of cost dilution and bad debts affected the performance: 2024H1 gross profit margin increased by 0.08pct at 31.27%, of which the gross margin of door and window hardware/ household products/ other construction hardware was 39.94%/29.22%/16.65%, compared with +0.58/-1.15/+1.23pct. The gross margin of door and window hardware fluctuated with the price of metal raw materials. The cost ratio for the H1 period increased by 27.95% by 0.39 pct. Among them, the sales/management/R&D expenses ratio was 17.06%/6.27%/4.21%, respectively, -0.53/+0.47/+0.37pct, with good cost control; asset and credit impairment losses were 0.095 billion yuan, and the asset and credit impairment loss rate of 2.96% increased by 1.12 pct. Expenses were not significantly diluted as revenue declined, and the H1 net interest rate to mother also fell 0.23pct to 0.15%. After deduction, the net loss was mainly due to the depreciation of accounts receivable and an additional 0.019 billion yuan. Net cash flow outflow of 0.19 billion yuan improved 0.238 billion yuan year over year; revenue ratio of 90.3% year over year -20.3 pct; current payment ratio of 80.7% year on year - 38.9 pct year on year.

Investment advice: We predict that the company's net profit for 2024-2026 will be 0.271/0.398/0.483 billion yuan, a year-on-year growth rate of -16.30%/46.89%/21.30%, corresponding EPS of 0.77/1.13/1.37 yuan respectively, and the latest closing price corresponding to 2024-2026 PE will be 28.94x/19.70x/16.24x respectively, maintaining the “gain” rating.

Risk warning: risk of macro-environmental fluctuations, increased industry competition, accounts receivable risk.