【Huachuang Real Estate | Tubabao Commentary】Revenue Slightly Declined, Optimistic on Township Channel Realization + Custom Business Profitability Recovery

(Source: Huachuang Real Estate Research)

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For the full report, please refer to the Huachuang Securities research report published on March 15: “Slight Revenue Decline, Optimistic About Township Channel Fulfillment + Custom Business Profit Recovery”

Authors:

Dan Ge 15210984979 (Practicing License: S0360522110001)

Xu Changjie 19946003269 (Practicing License: S0360525030002)

Yang Hang 17826876583 (Practicing License: S0360525090001)

Event

The company released its 2025 performance quick report: in 2025, the company achieved revenue of 8.887 billion yuan, down 3.29% year-over-year; net profit attributable to shareholders of the parent was 722 million yuan, up 23.29% year-over-year; net profit after deducting non-recurring gains and losses attributable to shareholders was 392 million yuan, down 20.06% year-over-year.

Commentary

Revenue faces pressure, but equity investments support a year-over-year increase in net profit attributable to shareholders. 1) In 2025, the company’s full-year revenue decreased by 3.29% YoY, mainly due to industry demand decline caused by the real estate downturn. The decorative materials business accounted for 77% of revenue (H1 2025). In the first half, revenue from decorative materials decreased by 8.58% YoY, with channel and non-channel (excluding brand licensing fees) segments down 9.27% and 9.57%, respectively. Full-year sales are expected to remain under pressure. 2) Net profit attributable to shareholders increased by 23.29% YoY mainly because the company’s associate, Hanko Group, went public in July 2025, with fair value changes increasing gains by 253 million yuan. Tubaobao actively invests in the industrial chain, strengthening supply chain coordination through equity stakes. In 2021, the company invested in the upstream decorative paper company Jiasi Jia, holding a stable 4.84% stake. The company’s IPO application has been in inquiry, and if listed, it could bring investment returns to Tubaobao.

Custom home furnishing business margins have reached relatively low levels, with negative impacts from engineering customization decreasing, potentially leading to profit recovery. 1) The scale and gross margin of the custom home furnishing business (excluding brand licensing fees) have undergone three years of deep adjustment. From 2022 to 2024, revenue continued to decline, reaching 1.712 billion yuan in 2024, a 37% decrease from 2021; gross margin also declined, reaching 20.88% in 2024, down 4.75 percentage points from 2021. 2) The engineering customization segment, serving major real estate clients, was more affected by industry downturn, shrinking to 248 million yuan in 2025, down 362 million yuan or 87% from 2021. In 2024, it accounted for 36% of total custom home furnishing revenue, down from 70% in 2021. As high-risk bulk business volume decreases to low levels, the engineering segment’s risk exposure is more controlled. Given that the overall gross margin of the custom home furnishing business exceeds that of decorative materials, and with negative impacts from the engineering segment diminishing and business structure returning to normal, scale recovery and structural improvements are expected to further enhance the company’s overall profitability.

Industry total remains stable and growing, with advantages from township channel fulfillment expected to boost competitiveness. 1) In 2024, China’s production and consumption of artificial boards reached 34.917 million and 32.967 million cubic meters, respectively, up 3.9% and 3.5% YoY, maintaining stable growth; among these, plywood accounts for 65.5% of both production and consumption, roughly unchanged from 2023. 2) The company has strong brand and channel advantages in the plywood sector. Currently, it is in a critical period of expanding market share through township channels, which is expected to benefit from township channel fulfillment and downstream demand structural recovery.

Investment recommendation: The artificial board industry landscape continues to optimize, downstream demand accelerates recovery, and the company’s deep brand accumulation and extensive channel layout position it well. Custom home furnishing profitability is about to recover, and market share is expected to steadily increase. We adjust the company’s EPS forecast for 2025-2027 to 0.87, 0.94, and 1.08 yuan per share (previously 0.94, 0.95, and 1.04 yuan), corresponding to P/E ratios of 18x, 17x, and 15x. Please see the full report for details. Maintain a “Buy” rating.

Risk factors: less-than-expected channel development, brand image damage from public events, real estate downturn risks.