Company Overview: A leading custom home furnishing enterprise, with gradual improvements in operations, maintaining an “increase in holdings” rating. The company is a leading enterprise in the custom home furnishing industry. It first proposed the concept of “whole house customization” in China in 2007, and was listed on A-shares in '17. On the product side, the company covers space products such as guest restaurants and bedrooms, and space products such as kitchens and bathrooms; on the channel side, as of 23H1, the company had 54 direct-run stores, 322 self-operated city franchise stores, and 2009 franchise stores. In addition, the company is driven by Yuanfang Software's information technology, cloud computing, and big data applications, and has accumulated strong informatization capabilities, leading the application of AICG technology.
We expect net profit for 23-25 to be 1.06/1.86/273 million yuan, corresponding to EPS of 0.53/0.94/1.38 yuan. Referring to the comparable company Wind's consensus estimate for 24 years 14 times the PE average, considering that the company's AICG technical ability is leading the industry, the compound profit growth rate in 23-25 is superior to that of comparable companies, giving the company a target PE of 22 times in 24 years, corresponding to a target price of 20.68 yuan, maintaining an “increase in retention” rating.
Customized home: the market size is considerable, and concentration is expected to increase
According to data from the China Business Industry Research Institute, the market size of China's custom home furnishing industry reached 473 billion yuan in '22, and the market size is impressive. However, judging from the competitive pattern, the competitive pattern of the industry is still scattered. According to the revenue performance of listed companies, the market share of leading customized companies in 2022 was only 7.00%/3.47% 1.66%/1.48%/1.08%; Referring to mature overseas markets, according to data from China Kitchen Cabinet Network, the CR5 of the European kitchen cabinet industry reached 35% as early as 2015. According to the Enex annual report, as early as 2016, the CR3 of the Korean cabinet industry reached 74%, with the largest cabinet in Hanson Industry market The share is as high as 42.9%. It can be seen that the concentration of China's customization industry still has a lot of room for improvement.
Strategy update: Whole-house customization revives, and information technology leads the company to refocus on the whole house customization market from 2023. On the product side, a new “whatever choice” model of whole-house customization is launched, that is, through professional design+personalized customization+overall support, customers can buy the whole house in one stop within a clear price range; on the channel side, the company continues to increase market investment and optimize channel layout for direct management and franchise, and vigorously expand multi-channel business cooperation such as handbags and decoration companies. In addition, Yuanfang Software, a subsidiary of the company, is deeply involved in the informatization model of the home furnishing industry and has a first-mover advantage in the field of AICG technology application. AICG technology applications are expected to empower the company's business in program design, sales achievement, production delivery, etc., effectively improving store operation efficiency and customer satisfaction.
Real estate policy is improving again, which is expected to boost confidence in the industrial chain
In terms of sales, according to data from the Bureau of Statistics, the monthly sales area of commercial housing in November was -10.3% to 79 million square meters, and the decline narrowed by 0.7 pct month-on-month, with a cumulative decline of 8.0% to 1.05 billion square meters in January-November; real estate sales performance improved slightly in November, and Beijing and Shanghai further optimized their real estate demand-side policies on December 14, which is expected to drive improvements in the local market and inject confidence into the recovery of national market expectations. In terms of completion, the completed housing area in November increased by 12.2% to 101 million square meters, and the growth rate narrowed by 1.1 pct over month. The cumulative increase from January to November was 17.9% to 652 million square meters, which is expected to support the performance of household demand.
Risk warning: Downstream demand falls short of expectations, real estate sales have declined more than expected, and raw material prices have fluctuated greatly.