Both revenue and profit were under pressure in the first half of the year. We look forward to subsequent improvements. The “buy” rating company 24H1 achieved revenue of 2.377 billion yuan (yoy -11.14%), net profit of 0.064 billion yuan (yoy -37.64%), deducting non-net profit of 0.055 billion yuan (yoy -43.09%). Among them, Q2 achieved revenue of 1.448 billion yuan (yoy -12.37%) and net profit of 0.099 billion yuan (yoy -31.76%) to mother. The flooring and wood-based panel business in the first half of the year was affected by the real estate cycle, and demand performance was weak; at the same time, the decline in revenue led to a weakening effect on cost dilution and an increase in cost ratios, which led to a higher decline in profit than revenue. Considering that demand has yet to recover, we lowered our revenue forecast. The net profit for 24-26 is 0.311/0.341/0.372 billion yuan respectively (previous value of 0.382/0.429/0.479 billion yuan), corresponding EPS is 0.57/0.62/0.68 yuan. Referring to comparable company Wind's 24-year wind, the average PE value is outstanding. Considering the company's stable leading position in the wooden flooring industry, the brand value is outstanding. At the same time, we are actively promoting the construction of aluminum sheet and battery foil projects. The company maintained a “buy” rating by 12 times PE in 24 years, with a target price of 6.84 yuan (previous value of 9.10 yuan).

Terminal demand performance was weak, wood flooring revenue declined year on year, and revenue from panels etc. increased year on year by business: 1) 24H1 wooden floor revenue was -22.86% to 1.405 billion yuan. We judge that it was mainly due to weak terminal demand and increased industry competition; 2) In terms of board, 24H1 medium and high density board revenue was +3.59% to 0.583 billion yuan. The company continued to strengthen new product development to create differentiated products to improve customer stickiness; 3) Furthermore, 24H1 bamboo and stone plastic flooring, wooden doors and hats room YoY revenue +38.21%/+21.90% to 0.349/0.02 billion yuan. Overall, the company's revenue in the first half of the year was affected by the real estate cycle. Demand performance was weak, and we look forward to subsequent improvements.

Profitability was under pressure, and the cost ratio increased year-on-year during the period

The gross sales margin of 24H1 also decreased by 0.44pct to 25.89%. We judge that it was mainly due to increased competition in the industry and changes in the company's business structure; the cost ratio increased 2.16 pcts to 23.32% during the 24H1 period, with the sales expenses ratio increasing 0.83 pct to 10.23%, management+R&D expenses also increased 0.73 pct to 13.47%, and the absolute amount of sales, management, and R&D expenses of 24H1 decreased year-on-year. However, the dilution effect on rigid expenses weakened as revenue declined, leading to a year-on-year increase in the cost ratio ; The 24H1 financial expense ratio also increased by 0.60pct to -0.38%, mainly due to a decrease in exchange earnings compared to the same period last year.

Under the combined influence, the company's 24H1 net margin was 2.42% (year-on-year -1.38pct).

A leader in the flooring/wood-based panel industry, looking forward to subsequent business improvements

The company is a leading domestic wooden floor and wood-based panel industry. On the manufacturing side, the company currently has an annual floor production capacity of 80 million square meters and an annual production capacity of 1.55 million cubic meters of medium and high density board and chipboard. The scale advantage guarantees market competitiveness; on the marketing side, the company has established nearly 3,000 flooring specialty stores in China, while actively laying out online and new retail channels. In the long run, the company's brand and scale advantages in the industry are still prominent, and we look forward to future business improvements. In addition, the company will actively promote investment and construction of aluminum strip and battery foil projects, and is expected to contribute new performance growth points in the future.

Risk warning: Demand recovery falls short of expectations, raw material costs are rising, and new business development falls short of expectations.