Amid the ongoing adjustments in the real estate industry and the yet-to-fully-recover consumer confidence, the bathroom fixtures industry as a whole faces dual challenges of weak demand and channel restructuring. However, structural opportunities are quietly emerging—national policies promoting "upgrading" in home renovation and bathroom fixtures, the accelerated rise of the silver economy, and the rapid penetration of "light smart" products are injecting strong momentum into the niche segment of smart toilets. As a leading domestic bathroom fixtures enterprise, Arrow Home has demonstrated significant operational resilience and growth potential in 2025, leveraging its keen insights into market trends, continuous optimization of product portfolios, and deep reforms in its channel and operational systems.

The penetration rate of smart toilets in China currently stands at less than 10%, far below the over 90% levels in mature markets such as Japan and South Korea, indicating substantial room for growth. In January 2025, six departments, including the Ministry of Commerce, jointly issued the "Notice on Promoting 'Upgrading' in Home Renovation and Bathroom Fixtures in 2025," explicitly including smart toilets in the subsidy scope for aging-adaptation renovations, with a maximum subsidy ratio of 30%. This policy not only effectively lowers the purchase barrier for middle-aged and elderly consumers but also drives the transformation of smart toilets from high-end optional consumer goods to household necessities. Meanwhile, "light smart" products, with their focused functionality, affordable pricing, and user-friendly operation, are becoming a key breakthrough for tapping into lower-tier markets and public scenarios. According to the "China Smart Bathroom Appliances Industry Development Research Report (2025)," the production share of light smart toilets reached 28.5% in 2024, a significant increase of 15.9 percentage points year-on-year. Industry concentration is also rising simultaneously. Data from AVC shows that the online CR3 for smart toilet integrated units reached 45.39% in the first half of 2025, an increase of over 8 percentage points compared to 2022, indicating that leading brands are accelerating their capture of market share.

Arrow Home foresightedly introduced the concept of "light smart" as early as 2015, effectively controlling costs and enhancing product value for money by simplifying non-high-frequency functions and increasing the in-house production rate of core components. This strategy has demonstrated strong vitality in the current market environment. In the first three quarters of 2025, the company’s smart toilet business generated revenue of 1 billion yuan, a year-on-year increase of 3.24%, with its contribution to total revenue rising to 22.63%, reflecting a continuous optimization of the product portfolio toward higher value-added offerings. Addressing the new demands brought by an aging society, the company launched the "Heyue" barrier-free wellness bathroom series, systematically integrating three major scenarios—toilet use, washing, and showering—effectively tackling pain points such as difficulty in standing up and inconvenient operation for the elderly, precisely targeting the blue ocean of the silver economy. Catalyzed by supportive policies, this series is expected to become a new growth engine.

In terms of brand strategy, Arrow Home relies on its three sub-brands—Arrow, FAENZA, and ANNWA—to build a comprehensive portfolio covering the mass, mid-range, and high-end markets. Among them, Arrow focuses on smart home integrated solutions, FAENZA emphasizes artistic design and premium experiences, while ANNWA attracts younger consumers with its high value for money. Compared to international brands, the average price of Arrow’s smart toilets is only 2,685 yuan, significantly lower than TOTO (8,295 yuan) and Kohler (5,846 yuan), providing a distinct price advantage under comparable performance and laying a solid foundation for domestic substitution. This multi-brand synergistic strategy not only enhances market coverage but also improves overall risk resilience.

Channel development has been a key focus of Arrow Home’s reforms in recent years. The company adheres to a retail-centric approach, building a diversified terminal network encompassing six store types, including exclusive stores, home renovation stores, community stores, and township stores. By the end of 2024, the total number of terminal stores exceeded 20,000, with a strategic focus on expanding into third- and fourth-tier cities as well as county-level markets. In 2025, the company initiated the "Store Efficiency Doubling" pilot project, empowering distributors through digital tools, standardized operations, and personnel training to enhance per-store productivity. Preliminary results of these reforms are emerging: in the first three quarters of 2025, retail revenue from distributors grew against the trend by 4.54%, reaching 1.731 billion yuan. In online channels, the company employs a "1+N" multi-store matrix strategy, combining official flagship stores with category-specific stores to precisely target different customer segments, while actively expanding into emerging content platforms such as Douyin and Xiaohongshu. As of December 2025, its official Douyin account has surpassed 1.14 million followers, reflecting continuously enhanced content marketing capabilities.

In the engineering channel, the company proactively adjusted its client structure, forming a six-dimensional layout covering "real estate + healthcare + education + hotels + government," effectively mitigating risks arising from fluctuations in the real estate industry. Overseas expansion has also performed impressively, with Southeast Asia as a strategic breakthrough. In 2025, the company opened a flagship store in Ho Chi Minh City, Vietnam, and accelerated its presence in emerging markets such as Indonesia and Russia. From 2022 to 2024, the company’s overseas revenue achieved a compound annual growth rate of 183.58%. Even after excluding the U.S. market, which was impacted by trade policies, overseas revenue in the first three quarters of 2025 still grew rapidly by 132.74%, demonstrating the strong momentum of its internationalization strategy.

Improvements in internal management efficiency are key to sustaining Arrow Home’s long-term competitiveness. In 2024, the company completed a significant organizational restructuring, shifting from a traditional functional structure to a divisional structure, establishing independent divisions for smart toilets, hardware and showers, key accounts, overseas markets, and e-commerce, significantly enhancing decision-making efficiency and market responsiveness. At the same time, it introduced advanced management systems such as DSTE (From Strategy to Execution), IPD (Integrated Product Development), and IPMS (Integrated Project Management System), integrating the entire chain from R&D to production and marketing. On the manufacturing front, the company continues to advance automation and digital transformation: deploying robotic glazing and automated kiln loading/unloading systems, and establishing unmanned high-pressure casting workstations. Through systems like APS (Advanced Planning and Scheduling) and MRP (Material Requirements Planning), it achieves production-sales coordination, reduces inventory turnover days, and improves delivery efficiency.

In terms of R&D investment, the company operates 16 R&D centers. In the first three quarters of 2025, the R&D expense ratio reached 5.45%, an increase of 2 percentage points compared to 2021. Technological accumulation is not only reflected in product functionality iterations but also extends to service aspects—the company is actively exploring applications of technologies such as AI customer service and IoT remote diagnostics to enhance user experience and after-sales response efficiency. This dual-drive model of "hard manufacturing + soft services" is gradually building a competitive barrier that is difficult to replicate.

From a financial performance perspective, although the company’s net profit attributable to shareholders declined to 67 million yuan in 2024, hitting a seven-year low due to the impact of the real estate sector, 2025 has shown clear signs of improvement. In the first three quarters, net profit attributable to shareholders turned positive year-on-year, growing by 1.74%. The gross margin recovered to 28.51%, indicating gradual restoration of profitability. Based on the current operational trends, the market generally expects the company’s net profit attributable to shareholders for 2025–2027 to reach 87 million yuan, 223 million yuan, and 310 million yuan, respectively, with EPS of 0.09 yuan, 0.23 yuan, and 0.32 yuan, corresponding to P/E ratios of 92.68x, 35.99x, and 25.89x. Although valuations face short-term pressure, as profit release accelerates, the valuation center is expected to steadily decline.

Arrow Home’s development is not without concerns. Its reliance on certain regional real estate clients in the engineering channel has not been entirely eliminated, the management complexity arising from its extensive distributor network remains, and the operational efficiency of some stores in lower-tier markets still has room for improvement. Additionally, in the high-end product segment, gaps with international first-tier brands in core technologies (such as ceramic glaze, waterway systems, and quiet flushing) still require time to bridge. However, these shortcomings do not overshadow the overall positive fundamentals and instead leave room for future improvements.

Arrow Home stands at the intersection of industry transformation and its own transition. By focusing on two deterministic trends—"light smart" and "aging adaptation"—optimizing its product portfolio, deepening channel reforms, and strengthening internal operations, the company has preliminarily validated its ability to navigate cycles. With the overlapping tailwinds of policy dividends, consumption upgrading, and domestic substitution, Arrow Home is poised to emerge from industry restructuring and embark on a new phase of high-quality, sustainable growth. Its steady strategic focus and solid execution capabilities deserve greater market attention and recognition.