Operations were under pressure in the first half of the year. We expect subsequent improvements to maintain the “buy” rating company 24H1 to achieve revenue of 0.923 billion yuan (yoy -5.06%), net profit of 0.045 billion yuan (yoy -46.90%), deducting non-net profit of 0.03 billion yuan (yoy -48.85%); of these, Q2 achieved revenue of 0.52 billion yuan (yoy -16.70%) and net profit of 0.032 billion yuan (yoy -55.55%) to mother. Demand for home furnishings has yet to recover in the first half of the year, and the decline in the traditional retail market dragged down revenue performance; at the same time, the company actively sought changes, bucked the trend and increased investment, and the cost rate increased. Considering that demand has yet to recover, we lowered our revenue forecast. The net profit for 24-26 is 0.204/0.226/0.245 billion yuan respectively (the previous value was 0.244/0.274/0.304 billion yuan), and the corresponding EPS is 0.66/0.73/0.79 yuan, respectively. Referring to the comparable company's 24-year Wind, the average PE value is 9 times higher. Considering the company's focus on endogenous growth, the big home strategy is progressing steadily. There is considerable room for channel and category expansion, giving the company 24 The annual PE is 13 times, and the target price is 8.58 yuan (previous value: 10.92 yuan), maintaining the “buy” rating.

Traditional retail sales are under pressure. In terms of categories, the overall 24H1 wardrobe/ wooden door revenue was -8.71%/-8.24% year-on-year to 0.662/0.033 billion yuan. We judge that it was mainly due to weak demand in the retail market; 24H1 cabinet/finished product supporting revenue was +18.08%/+5.32% to 0.141/0.044 billion yuan year-on-year, respectively. Our judgment is mainly due to continued progress in household strategies and growth in the bulk business. By channel, 24H1's direct operation/distribution revenue increased by +0.09%/-11.97% to 0.036/0.714 billion yuan year-on-year; in terms of engineering, thanks to the continuous optimization of the company's customer structure, 24H1's own bulk business revenue also increased 72.61% to 0.13 billion yuan; in addition, the company actively explored assembly channels, and 24H1's consolidated revenue also increased by more than 130%, which has become an important supplementary channel.

In the first half of the year, gross margin also decreased by 0.84 pct. Expense ratio increased year-on-year during the period 24H1. Gross sales margin also decreased by 0.84 pct to 35.03%, mainly due to changes in business structure. The cost ratio also increased by 2.34 pct to 30.59% during the 24h1 period, with the sales expense ratio increasing by 0.93 pct to 14.56%, and the management+R&D expense ratio by 1.49 pcts to 14.41%. The company bucked the trend and increased cost investment to build all-category+omnichannel business capabilities. At the same time, the dilution effect on rigid costs weakened as revenue declined, leading to a year-on-year increase in the cost ratio; the financial expense ratio also decreased by 0.08 pct to 1.62%, mainly due to an increase in interest income. Under the combined impact, the net sales margin also fell by 3.83 pct to 4.86%.

Optimize omni-channel operation management and accelerate product iterative upgrades

On the channel side, the company further enhances omni-channel operation and management to achieve the goals of strengthening retail, expanding assembly, and improving engineering. On the one hand, we are reorganizing existing retail channels, optimizing and adjusting inefficient stores to reduce operating risks; on the other hand, we are actively developing complete channels, deepening bulk channels, and cultivating foreign trade channels.

On the product side, the company continues to accelerate the iterative upgrading of products, strengthen market research and customer demand analysis, and sort out and optimize all aspects of the IPD process to achieve efficient innovation and continuous improvement of product quality.

Risk warning: Demand recovery fell short of expectations, real estate sales declined, and new channel expansion fell short of expectations.