Core views
The company is deeply involved in the field of office seating. It has the highest sales volume in the lumbar chair category in the world and has been operating steadily for a long time. The CAGR of 17-22 revenue and net profit after deducting non-return to mother was 17, respectively. 1%, 22. 2%.
1) ODM business: We estimate that 23Q1-3 achieved revenue of 2.1 billion yuan/ -27%, accounting for about 84%, affected by overseas customers leaving the warehouse and being pressured by growth. Currently, customers are at the end of leaving the bank. As inflation gradually recedes, the Federal Reserve may start cutting interest rates in 2024, and real estate recovery is expected to boost China's furniture exports. Looking ahead to 2024, ODM is expected to resume steady growth as the company's overseas base layout improves to handle order transfers and the smooth introduction of new categories of customers such as lift tables. 2) OBM business: The company's 23Q1-3 independent brand business achieved revenue of about 400 million yuan/ +34%, accounting for about 16% of revenue. The company collaborated on the product, channel, and brand side to accelerate the construction of its own brand. The “Double 11" record was outstanding, and JD's turnover was +206 year-on-year. 6%, Douyin sales +6275% year-on-year, the highest growth rate in the industry.
Brief review
1. Deeply cultivate office seat manufacturing, relieve it with overseas customers, or welcome the repair of inflection point office seat faucets, and operate steadily for a long time. Established in 2001, Yongyi Co., Ltd. is deeply involved in the health system industry such as office chairs, lift tables, massage chairs, and sofas. It is one of the largest office chair providers in China and the first listed company in the Chinese chair industry. According to Frost & Sullivan, the company has the highest sales volume in the world for three consecutive years in the chair category. The company's revenue for 2017-2022 increased from 18. It increased to $4.1 billion to 40 million. 5.5 billion yuan, CAGR is 17. 1%, net profit not attributable to mother is 0. 7.5 billion yuan increased to 2. At 4.2 billion yuan, the CAGR is 22. 2% 1) By product, office chairs, sofas, massage chair bodies, and leisure chairs each achieved revenue of 27 in 2022. 76, 8. 18, 3. 50, 0. 3.5 billion yuan, accounting for 68 billion, respectively. 5%, 20 2%, 8. 6%, 0. 9% 2) By region, the company achieved revenue of 8 in 2022, both domestic and overseas. 26, 32. 09 billion yuan, accounting for 20 yuan respectively. 4%, 79 1% 3) By channel, in 2022, the company achieved online and offline revenue 2 respectively. 85, 37. 5 billion yuan, accounting for 7 percent respectively. 0%, 92 5%
Affected by overseas customers leaving the warehouse, the company's growth is under pressure, and it is expected to recover in 24 years. Influenced by customer withdrawals, the company achieved revenue of 40 in 2022. 5.5 billion yuan/-13. 0%, net profit attributable to mother 3. 3.5 billion yuan/+84. 9%; 2023Q1-3 achieved revenue of 25. 100 billion yuan/-21. 6%, net profit attributable to mother 2. 1.1 billion yuan/-25. 9% (mainly due to the impact of confirmed proceeds from the disposal of approximately 90 million illiquid assets in the same period last year). Currently, downstream customers in the US are at the end of their withdrawal. As inflation data gradually falls, the Federal Reserve may start cutting interest rates in 2024. US real estate is expected to recover and drive a recovery in Chinese furniture exports. Looking at a single quarter, the company's revenue has declined year-on-year for 7 consecutive quarters since 22Q1, 2
The 3Q3 company achieved revenue9. 6.4 billion yuan/-1. 4%, net profit attributable to mother 0. 6.9 billion yuan/-53. 4%. The revenue side decline has narrowed sharply, and orders have improved month-on-month, which is expected to usher in an inflection point in recovery.
2. ODM: Overseas bases help increase share, and new categories of lift tables are expected to expand
Adhering to the big customer value marketing system, the top five major customers accounted for a total of 68 sales. 7% The company's ODM business achieved revenue of 36 in 2022. 07 billion yuan/-15. 4%, accounting for 89% of revenue. We estimate that 23Q1-3 achieved revenue of 2.1 billion yuan/ -27%, accounting for about 84% of revenue. The company's main customers are large overseas office furniture retailers, importers, manufacturers and system integrators. The company continues to implement the KAM key customer value marketing system and has established long-term strategic partnerships with many well-known global buyers, retailers and brands, including IKEA, the leading Asian health equipment brand Dadong Aosheng OSIM, a major Hong Kong trading company, Hong Kong Lifeng, and the world's largest office supplies retailer Audi Office Depot, Staples, Japan's largest home furnishing retailer, Yidori Nitori, etc. The company's top five customers continued to have a high share of sales in 2023, up from 68 in 2022. 7%
Leading R&D and design capabilities, mastering core support technologies such as adaptive chassis systems. The company attaches importance to R&D and design. In 2010, it was rated as a national high-tech enterprise. The R&D cost rate has remained around 4% for a long time. It has mastered key core technologies such as ergonomic adaptation, and the product has received many awards such as the German Red Dot Award, iF Design Award, and the American Pinnacle Design Award.
Growth driver 1: The global manufacturing base layout is expected to benefit from the transfer of orders from major customers. The company took the lead in “going global” in the industry in 2018. It is one of the earliest and largest enterprises in the domestic office chair industry to build foreign production capacity. Currently, it has formed three major production bases in China, Vietnam and Romania, with a forward-looking layout of production capacity, and the overseas base is expected to contribute about 20% of the shipment volume. Vietnam: In January 2019, the company successfully shipped its Vietnam base (total investment of US$9.5 million), and decided to invest in the construction of the Vietnam Phase II production base in December 2019 (total investment of about US$35 million), and in November 2023, it was decided to invest in the construction of the Vietnam Phase III production base (total investment of about US$50 million). Romania: In February 2019, the company decided to invest in the construction of a production site in Romania (with a total investment of about US$9.5 million), which will start production and shipment in the first half of 2023. As European and American customers pay more and more attention to supply chain security, the company's overseas bases are expected to benefit as it may usher in a new round of peak order transfers.
Growth engine 2: New categories of lift tables are expected to be released, and cost reduction and efficiency will continue to advance. In addition to traditional office seating, the company is actively speeding up the development of new smart furniture products such as smart chairs and smart lift tables. Currently, smart desk and chair products have been integrated into mainstream smart ecosystems such as Huawei Hongmeng and Graffiti Intelligence. The company adheres to a differentiated position and cooperates with many well-known e-sports brands around the world to develop e-sports-style lift tables. Currently, the company's lift table products have successfully entered large-scale retailer customers in mainstream global markets, and are expected to be sold in 24 years. On the operational side, the company took more measures to reduce costs and increase efficiency. By integrating procurement needs, enhancing bargaining power, cultivating strategic suppliers, gradually promoting self-production of key materials such as sponges, injection molding, hardware, etc., and continuously optimizing the supply chain, the company's gross sales gap was 16 in Q1-3 in 2023. 9% /+1 8pct
3. OBM: Product, channel and brand collaboration to accelerate the creation of independent brands
Products, channels, and brands work together to accelerate the development of independent brands. The company's OBM business achieved revenue in 2024. 2.8 billion yuan/+18. 1%, accounting for 10% of revenue. 6%, 23Q1-3 achieved revenue of about 400 million yuan/ +34%, accounting for about 16% of revenue. We estimate that cross-border e-commerce, domestic e-commerce, and domestic offline channels account for about 5%, 5%, and 6% respectively
1) On the product side, using “support” as the value anchor point, it forms four product lines: zonal support, adjustable support, flexible support, and active support to achieve full coverage of different price ranges.
2) On the brand side, we continue to carry out marketing activities in line with the brand positioning through visual optimization, content marketing, outdoor advertising, brand co-branding, etc., and carry out brand content delivery through platforms such as Audience, Douyin, Xiaohongshu, Zhihu, and Station B. On September 26, 2023, the “Make a Supporting Friend” Yongyi Support Technology Conference was held in Shanghai to reach a strategic cooperation with Focus Media. According to Jiuqian Zhongtai data, Yongyi's sales share in the Tmall and Jingdong computer chair categories reached 3 in November 2023, respectively. 8%, 5. 4%, both ranked 4th.
3) On the channel side, online and offline, at home and abroad go hand in hand to continuously expand sales channels for brand products. Domestic online: In addition to continuing to cultivate traditional e-commerce channels such as Tmall and Jingdong, we are speeding up the deployment of platforms such as Douyin, Pinduoduo, and private social marketing to cover consumers in different regions and circles; domestic and offline: increasing the expansion of major direct customers, it has been used for the Hangzhou G20 summit, China Development Bank, Bank of Communications, Pudong Development Bank, Poly Group, Huawei, Gree, BYD, Xiaomi, Baidu, NetEase, Nongfu Shanquan, and Bull Channel Group, etc., and accelerated the layout of offline dealer channels and offline 2C; Cross-border e-commerce: in line with the digital development trend of trade, Actively develop cross-border e-commerce. According to Yongyi's official website, Yongyi's own brand of waist support chairs achieved excellent results during the “Double 11" period in 2023: JD's turnover was +206 year over year. At 6%, Douyin's sales volume was +6275%, the highest growth rate in the industry. The new product Flow 550 ranked first in the Douyin seat category of good products.
Profit forecast: We expect the company to be 35. 2, 43. 3, 52. 400 million yuan, a year-on-year increase of -13, respectively. 1%, 22. 8%, 21. 1%; net profit attributable to mother was 2, respectively. 8, 3. 3, 4. 100 million yuan, a year-on-year increase of -17, respectively. 1%, 19. 0%, 24 1%, corresponding to 23-25 PE is 13. 5x, 11 4x, 9 4x, giving a “buy” rating.
Risk warning: 1) Risk of exchange rate fluctuations: The company's products such as office chairs and sofas are mainly exported, and the overseas base business is developing rapidly. Although the company has actively promoted RMB settlement in recent years, the current foreign currency settlement volume is still large, and fluctuations in the RMB exchange rate have a certain impact on the business performance of the enterprise. Since 2022, the overall exchange rate of RMB against the US dollar has shown an upward trend. If the US dollar depreciates against the RMB in the future, it may cause a negative impact on the company's gross margin and also cause certain exchange losses. 2) Major customer concentration risk: The company's customer sales are relatively concentrated. The sales revenue of the company's top five customers accounted for 64 of the company's sales revenue in each period in 2020-2022, respectively. 7%, 62 0% and 68. 7%, the concentration is relatively high. The cooperative relationship between the company and major customers has a significant impact on the company's profitability and business development. 3) Risk of fluctuations in raw material prices: The company's raw materials mainly include iron parts, plastics, fabrics, wood parts, sponges, packaging, etc., which account for a relatively high proportion of product production costs (77% of material costs in 2022). If the main raw materials rise sharply, it will squeeze the company's profits in the short term, which in turn will affect the company's operating performance. Based on the 2022 operating results, assuming a 2%, 5%, and 8% increase in raw material costs, we estimate that the company's net profit may decrease by 13%, 32%, and 52% if other conditions remain unchanged.