[Key Investment Points]

Henglin Co., Ltd. is a full-scenario service provider that provides overall spatial solutions for various office and civil places around the world. Since its establishment in 1998, the company has focused on seat design and development. It is one of the leading health seat developers and office chair manufacturers and exporters in China. Since 2019, the company has promoted cross-border e-commerce and major household strategies. Currently, the main business is the design, manufacture and online sales of office furniture, soft furniture, panel furniture, new material floors, etc.; the business model includes OEM/ODM contract and OBM's own brand production; downstream channels include their own Amazon cross-border e-commerce, and world-renowned furniture retailers such as IKEA, NITORI, and Office Depot. The company has a strong competitive advantage in the industry in the fields of cross-border e-commerce and furniture design and manufacturing.

Promote cross-border e-commerce and help the development of own brands. The company entered the foreign trade market in 2002, and achieved the ranking of office chair exports in the country for 10 consecutive years in 2017, with deep accumulation in international trade. Since 2019, the company has promoted cross-border e-commerce. It has successively acquired overseas manufacturers, established overseas production bases, and laid out its own warehouses and developed its own IT systems. It has formed a “manufacturing+service” cross-border e-commerce ecosystem pattern. In 2022, the company's cross-border e-commerce revenue reached 980 million yuan, an increase of more than 50% over the previous year. At the same time, the company's e-commerce business is dominated by the OBM model. The rapid development of e-commerce business helps the company promote its own brands and move towards a high-value-added smile curve.

The leading position of office chairs is stable, and the product advantages are remarkable. Office chairs require high professional fields such as ergonomics and mechanical design. The company has 25 years of experience in office chair manufacturing and has strong advantages in product design and manufacturing. In terms of product design, the company established the first academician and expert workstation in the national chair industry, participated in the formulation of international standards and received four major awards in industrial design, and has accumulated R&D achievements such as deep patents. In terms of product manufacturing, the company has the advantages of intelligent manufacturing, vertical integration, domestic industrial clusters and global layout, which can effectively reduce costs and increase efficiency and avoid trade frictions.

Implement the large housing strategy to open up growth ceilings. Since 2019, the company has begun implementing a large home strategy, and has successively acquired Swiss companies Lista Office (2019), Dr. Chef (2021), and Yongyu Home (2022), expanding its business into the fields of office system solutions, panel furniture, and new material flooring. Currently, the company has formed a multi-channel and multi-category development pattern, which is expected to open up the ceiling of a single category and push performance to a new level.

[Investment advice]

The company focuses on cross-border e-commerce business. Facilities such as overseas production, warehousing and logistics services are continuously upgraded, and combined with the advantages of the original product, it is expected to achieve rapid growth in performance in the context of marginal improvement in overseas demand. We expect the company's revenue for 2023-2025 to be 82.12/96.13/11.150 billion yuan, net profit of 4.61/5.71/670 billion yuan, corresponding EPS of 3.31/4.11/4.81 yuan, respectively, and PE of 9.40/7.59/6.47 times for 2023-2025. Based on the valuation situation of comparable companies, we gave the company 10.50 times PE in 2024, with a corresponding market value of 5.996 billion yuan, and a corresponding target price of 43.12 yuan within 12 months, giving it a “buy” rating.

[Risk Reminder]

Online sales fell short of expectations;

The recovery in overseas demand fell short of expectations.