HUIDA Sanitary Ware (603385.SH), a long-established domestic sanitary ware company, has once again sounded an earnings alarm. On the evening of January 12th, the company issued an announcement forecasting a net loss attributable to shareholders for the 2025 fiscal year. Securities Star notes that this marks another negative "turnaround" in the company's performance following its first post-listing loss in 2023 and a brief return to profitability in 2024.

To address performance pressure, the company is undergoing strategic contraction, adjusting its previously heavily expanded ceramic tile business and divesting related loss-making assets in an attempt to reduce its operational burden. However, this self-rescue attempt has not proceeded smoothly. How the company will adjust its strategy and rebuild profitability moving forward has become a key question under close market scrutiny.

Core Business Profitability Under Pressure, Earnings Fall Back into Loss

HUIDA Sanitary Ware is primarily engaged in the R&D, production, and sales of sanitary ware products. The company's recent announcement indicates an expected net loss attributable to shareholders for the 2025 fiscal year.

This loss is not entirely unexpected. Looking at the financial data for the first three quarters, the company's operations already showed significant weakness. During the reporting period, the company achieved operating revenue of 2.21 billion yuan, a year-on-year decrease of 10.71%; net profit attributable to shareholders was 15.24 million yuan, a sharp decline of 83.69% year-on-year; and net profit after deducting non-recurring gains and losses was -47.35 million yuan, plummeting 205.29% year-on-year. These figures indicate that the company's core business has entered a state of bleeding.

Examining quarterly performance, the core business has been in loss for multiple consecutive quarters. In the third quarter of 2025, the company achieved revenue of 785 million yuan, down 12.09% year-on-year. Although this represented a slight sequential increase of 3.03%, net profit attributable to shareholders was -2.73 million yuan, and net profit after deducting non-recurring items was -17.49 million yuan, declining 108.25% and 196.84% year-on-year, respectively.

Notably, the net profit attributable to shareholders for the first three quarters remained positive primarily due to the support of 27.70 million yuan in investment income. This non-operating income somewhat masked the severe reality of losses in the core business.

Looking at performance over a longer period, Securities Star notes that HUIDA Sanitary Ware maintained steady growth in its early post-listing years. However, starting in 2020, the company's core business revenue declined for four consecutive years, culminating in its first annual loss since listing in 2023. Although the company returned to profitability in 2024, it may fall back into loss in 2025, reflecting that its fundamental operations have not fundamentally improved.

Regarding the performance changes, the company explained that it was affected by multiple factors including international geopolitical conflicts, industry cyclical fluctuations, and changes in market demand. Terminal demand for the company's products fell short of expectations, leading to a simultaneous decline in sales revenue and gross margin. Additionally, based on its assessment of the industry's competitive landscape and future development trends, the company proactively promoted strategic business adjustments and made corresponding provisions for asset impairment losses.

Currently, China's sanitary ware industry is gradually shifting from an incremental market to a stock market. Although the overall industry scale continues to grow, the growth drivers have shifted from past real estate dividends to more diversified demands such as renovation of existing homes and consumption upgrades. During this transition, industry differentiation is becoming increasingly evident: leading companies continue to expand market share by leveraging brand and channel advantages, while small and medium-sized brands face intensified pressure to exit.

During this critical period of industry transformation, smart sanitary ware has become a significant growth engine. In 2025, the growth rate of smart sanitary ware products was nearly 20%. The smart toilet market size is expected to exceed 60 billion yuan, with the national average penetration rate approaching 20%, and penetration in developed eastern regions exceeding 25%.

Domestic brands like JOMOO and ARROW have already established dominance in the smart sanitary ware field, collectively holding over 60% market share. Judging from HUIDA Sanitary Ware's performance, revenue from its smart sanitary ware products already accounts for nearly 17%. However, relative to the scale of its traditional business, the smart transformation is still in a growth stage and has not yet fully offset the performance pressure caused by the decline in traditional business.

Self-Rescue Attempt Meets Obstruction, Ceramic Tile Business Asset Divestment Fails

Faced with continuous performance pressure, HUIDA Sanitary Ware attempted to "stem the bleeding" through strategic contraction, focusing its business adjustment on the previously heavily expanded ceramic tile business. It hoped to reduce the overall operational burden by divesting related loss-making assets and optimizing the business structure.

In September 2025, the company announced its intention to publicly transfer 100% equity and related creditor's rights of Guangxi XIN GAO SHENG Thin Type Building Ceramics Co., Ltd. (hereinafter "Guangxi XIN GAO SHENG") with a reserve price of 144 million yuan. The equity portion was valued at just 1 yuan, while the creditor's rights were to be disposed of at a 50% discount. However, this self-rescue attempt did not proceed smoothly. It ultimately ended with the termination of the listing process due to no bidders, marking an initial failure in the strategic contraction effort.

Public information shows that Guangxi XIN GAO SHENG was established on January 19, 2011. It is a high-tech enterprise primarily engaged in the R&D, design, production, and sales of ceramic thin slabs and large-format panels. Its thin panel and large-format panel product brand, LA'BOBO, was one of the earliest brands to introduce thin panels into the home improvement market in China.

When signs of weakness first appeared in HUIDA Sanitary Ware's core business, the company made a significant investment in Guangxi XIN GAO SHENG, aiming to diversify from single sanitary ware products into a broader range including integrated kitchen and bathroom products, ceramic tiles, and large-format panels, to build a more complete home furnishing product matrix.

However, affected by multiple factors such as slowing macroeconomic growth and liquidity tightness in the real estate industry, demand in the ceramic tile market remained sluggish, and the industry as a whole entered an adjustment cycle.

According to research data from Zhiyan Consulting, in 2022, national ceramic tile output was 7.32 billion square meters, a year-on-year decrease of 10.5%; sales volume was 6.737 billion square meters, down 11.1% year-on-year; the overall industry market size was 237.51 billion yuan, a decline of 12.2% year-on-year. In 2023, the market declined further. China's tile production decreased by 8%, from 7.312 billion square meters to 6.73 billion square meters. Domestic tile consumption fell by 9.2%, from 6.737 billion square meters to 6.118 billion square meters. By 2024, the national capacity utilization rate for ceramic tiles had dropped below 50%.

Against this backdrop, Guangxi XIN GAO SHENG also fell into continuous losses, becoming insolvent long ago. It incurred a loss of 34.886 million yuan in 2024 and another 29.3084 million yuan in the first half of 2025. Its net assets are approximately -150 million yuan, and it is currently in a state of production suspension, becoming a "burden" dragging down the company's performance.

HUIDA Sanitary Ware had hoped to divest this asset to recover funds and refocus on its core sanitary ware business. However, the failed transfer means the company must still bear its related liabilities and losses, not only failing to alleviate operational pressure but further consuming its own cash flow and profitability.

The company mentioned in its announcement that strategic business adjustments made in light of the industry's competitive landscape and future development trends led to corresponding increases in provisions for asset impairment losses.

In the first three quarters of 2025, the company had already recognized asset impairment losses of 25.76 million yuan. For HUIDA Sanitary Ware, which is already in a performance predicament, the increase in asset impairment losses undoubtedly adds insult to injury, further eroding the company's profits.

Facing performance volatility and transformation challenges, HUIDA Sanitary Ware is undergoing a critical adjustment period. Whether the company can find an effective path amid industry changes to achieve sustainable operations in the future remains to be seen.