SKSHU PAINT CO. (603737.SS) Skshu store visit & Nippon Paint China site tour takeaways: Extended demand weakness and intense competition; FAI acceleration/stimulus key to watch; Buy

We recently visited Skshu's retail store and went on Nippon Paint's China Site Tour 2026 early this week in Guangzhou; Nippon Paint is the No. 1 player in the China Paint industry in terms of sales. Overall, our observations of industry dynamics and the competitive landscape include: 1) amidst the tough outlook for project demand, Nippon expects its TUB business to bottom out in 4Q26E while Skshu remains concerned; 2) shared focus on two fast-growing retail segments, i.e. repaint demand for aged urban housing and "stone-effect" exterior wall coating for rural self-built housing, where competition has been intensifying but both companies believe room for growth remains promising; 3) rising industrial coating penetration, with Nippon well ahead of Skshu in revenue share, suggesting wide room for growth for Skshu with a clear strategy for this segment;