The Zhitong Finance App learned that Guosheng Securities released a research report stating that Minhua Holdings (01999) received the “buy” rating for the first time. The revenue for the 2024-26 fiscal year is expected to increase 12%/13.4% year-on-year to HK$19.427/220.3/24.984 billion, and net profit to HK$23.63 billion, 2,702/3,095 billion year on year. The company has been deeply involved in functional sofas for more than 20 years. It is the leading global functional sofa company, ranking first in global sales for 5 consecutive years. The domestic market share has reached about 60%, and it is in the top three among US manufacturers. The company's business performance is steady, focusing on functional sofas, and actively promoting diversification and expansion of categories.

The bank believes that functional sofas have low penetration and high growth, and the growth dividends of the mattress track still exist. 1) Functional sofas: China's functional sofa market is in a dividend period of low penetration and high growth. The domestic market size in 2020 was 8.78 billion yuan (2014-2020 CAGR was 12.8%). Currently, the penetration rate is less than 10%, and there is still plenty of room for improvement. The functional sofa market in China is relatively concentrated, and the company's domestic market share has reached about 60%. It is expected that it will fully enjoy the dividends of increasing category penetration. 2) Mattresses: China is a major consumer of mattresses. In 2011-2020, mattress consumption increased from 4.70 billion US dollars to 8.54 billion US dollars (CAGR is 6.9%). With the advent of the era of soft home stocks and the improvement of residents' healthy sleep attitudes, the increase in penetration rate+the shortening of replacement cycles have jointly driven an increase in mattress stock replacement demand. The competitive pattern of the mattress industry is scattered. Leading companies create products with both quality, functionality and cost performance, and are optimistic that their market share will gradually increase.

According to the report, in terms of the company's domestic sales: on the product side, the company focused on the core product function sofa and expanded to categories such as household beds, mattresses, and custom furniture. The category expansion achieved remarkable results. The revenue CAGR for FY2018-FY2023 bedding/iron frame business was 41.8%/16.4%, respectively. On the channel side, the company's channel sank and accelerated, refined management empowered efficiency, and the efficiency of single-store operations was superior to that of peers; online traffic trends were actively grasped, new retail was increased, the Chivas brand led the online market share, and the e-commerce channel performed beautifully. On the production side, the company accelerated the integration of the industrial chain, achieved complete self-research and production of core components such as iron frames and motors, and comprehensive cost control created a deep moat. In terms of export sales: Export performance in FY2023 was hampered by macro factors. Currently, overseas customer inventories have reached the bottom, and the peak overseas season has spawned demand for inventory replenishment. It is expected that the pace of customer orders will continue to improve, and the revenue side is expected to improve steadily month-on-month. Furthermore, the company continues to improve its overseas supply chain layout, and its market share is expected to increase further.