The company announced that the controlling shareholder signed a “strategic cooperation agreement” with Jinyu Group and transferred 10% of the company's shares to it. On the evening of November 17, the company announced that it had signed a “strategic cooperation agreement” with Beijing Jinyu Group. In the future, the company and Jinyu Group plan to carry out in-depth cooperation with Jinyu Group in the fields of store operation, real estate development, assembly business, property management, digital transformation, and logistics delivery network construction; in addition, the company's controlling shareholders actually hold and co-actors Wang Linpeng, Huixinda Building Materials and Jinyu Group jointly signed a “Share Transfer Agreement”. Easun Holdings transferred 629 million shares of the company to Jinyu Group (accounting for 10% of the company's total issued shares), and the transfer price is 3.55 Yuan/share (closing price on November 17 was 3.56 yuan/share), and the total transfer price was 2,232 billion yuan.

Jinyu Group has strategically invested in shares and formed a strong alliance with the company. The synergies are expected to continue to be unleashed. Jinyu Group has the advantages of vertical integration and unique industrial chain, and has built a complete building materials industry chain with new green building materials manufacturing, real estate development, property investment and management, and upstream and downstream commercial logistics; while the company specializes in home furnishing stores, has a mature and efficient distribution network and offline store resources covering the whole country, rich store management experience, and strong brand influence and marketing capabilities for consumers. Jinyu Group's strategic entry into the market is a recognition of the company's home furnishing store operation experience, digital transformation results, pan-home ecosystem layout, and brand position. It is expected that its industrial advantages, policy advantages, capital advantages and resource advantages will continue to empower the company in the future. In the future, the company can rely on the industrial advantages of Jinyu Group to achieve industrial collaboration in the fields of store cooperation, real estate development, asset activation, assembly and property management, digital transformation, logistics and testing, etc., to promote the healthy development of the home furnishing industry. At the same time, it can use the capital, resources and policy advantages of Jinyu Group as a state-owned listed company to enhance the company's resilience to risks and accelerate the enterprise development strategy of transformation and upgrading to a digitally intelligent industrial service platform. Specific in-depth cooperation includes:

1) Store cooperation: Jinyu Group will actively promote building materials trading stores within the system to enter EasyStore, and actually give preferential prices in terms of rent costs, etc. It actually used its store resources to provide more promotion opportunities for Jinyu Green Building Materials products.

2) Real estate development: In terms of real estate development, Jinyu gives priority to selecting home decoration materials from home furnishing store tenants, and actually provides quality services. Jinyu Commercial Real Estate gives priority to cooperation with real estate.

3) Asset revitalization: In the process of expanding the business layout of home shopping malls, shopping centers, warehousing and logistics, etc., priority is given to the use of Jinyu's land, real estate and other assets across the country to improve the efficiency of Jinyu's land and real estate utilization. At the same time, Jinyu gave corresponding preferential prices to land and real estate that it actually leases.

4) Assembly business and property management: The two sides promote the integrated development of their respective assembly businesses, jointly expand the overall scale of the assembly business, strengthen internal ties, jointly enhance the assembly business, seize the trend of assembly development, and simultaneously improve the “building materials - construction - decoration - decoration” integrated industry chain.

5) Digital transformation: The two sides give full play to their respective advantages to jointly develop digital industry platforms, create a high-quality pan-home service platform integrating online and offline and experiential scenario services, expand the scale of the digital economy, and raise the digital level of the home furnishing industry. Promote the deep integration of consumer-side data that has actually been accumulated and accumulated with the multi-dimensional behavior data of customers obtained by Jinyu in real estate, home improvement, furniture, retail, hotels, etc.

6) Logistics and testing business: The two sides jointly plan to use Jinyu Group's land to build a warehousing and logistics base to accelerate resource integration and service sharing between Jinyu's online freight business and the actual “cave car” platform. Jinyu actually provides inspection services for home building materials products for established brands and assists in monitoring the quality of shopping mall products. It actually uses the advantages of channels and resources to actively promote the established customers of well-known home building materials brands to reach inspection, testing and certification cooperation with Party A, thus strengthening the service stickiness with the resident enterprises.

7) Comprehensive utilization of resources: Give full play to the complementary advantages of real collection channels and Jinyu disposal technology, and adhere to the principle of mutual benefit and win-win situation. Jinyu uses the collaborative advantages of its cement kilns to consume and dispose of waste that cannot be recycled, such as old homes that have actually been traded in, and simultaneously improve its own fuel replacement rate.

Looking forward to the future: The digital transformation has achieved remarkable results, and the pan-home industry ecosystem is gradually taking shape. I am optimistic about the company's long-term growth in the future.

The effects of digital transformation have been remarkable, and the cave has ushered in rapid growth. The long, low frequency, high customer value, and heavy experience of home building materials have determined that the transaction destinations for online customer acquisition and drainage are still offline stores. The company adopted digital transformation that prioritizes priority and then puts emphasis on digital transformation, cooperated with Ali on Tmall Tongcheng Station, and built its own online store platform “Cave” to achieve integrated online and offline sales. By the end of 2023H1, “Dongwo” had launched 557 stores, 68,000 merchants, and 5.796 million products, including 264 external stores, 30,000 external merchants, and 3.753 million external products; the number of registered users reached 17.564 million, monthly active users was 3.413 million; and the 2023H1 Dongwo GMV was 39.55 billion yuan, an increase of 411.3% over the previous year.

The pan-home ecosystem is gradually taking shape, creating new traffic entrances and becoming a consumer brand. Using its advantages as a channel traffic portal, the company gradually extends to the pan-home industry chain including design, home improvement, smart home, intelligent logistics, and post-home improvement services, and develops diversified business structures, which is expected to contribute to future performance elasticity; in a longer term dimension, the construction of a pan-home industry chain can effectively enhance linear service capabilities, realize the full life cycle layout of consumer homes, and create value for users. As new businesses gradually mature, it is expected to become a new traffic portal, creating traffic for itself.

The home furnishing store industry has a vast space, and the logic for national chain enterprises to launch and occupy the market is smooth. Stores have contributed to steady growth through regional expansion and channel decline. Furthermore, the company has gradually expanded from its main store business to the pan-home furnishing industry chain including design, home improvement, smart home, intelligent logistics, and post-home improvement services, and has improved operational efficiency through new digital retail. The ability to serve merchants, consumers and brands continues to increase, driving the growth of single stores. With Jinyu Group's strategic shareholding, the synergy effect is expected to continue to be unleashed, helping the company further improve its position in the industry and accelerate its transformation into a service platform for the digital intelligence industry. Maintaining the company's 2023-2025 net profit forecast of 17.06/18.98/2.161 billion yuan, up 3.5%/11.3%/13.9% year-on-year respectively, corresponding to 2023-2025 PE of 13/12/10 times, maintaining the “buy” rating.

Risk warning: Terminal consumer demand is recovering slowly.