Key points of investment:

The company is a major cross-border seller of home furnishing brands focusing on the European and American markets

The company is a cross-border e-commerce company focusing on furniture and home furnishing products. The online B2C platform is the company's main sales channel. In 2022, it accounted for 80.53% of the main business revenue. The sales platforms covered well-known overseas e-commerce platforms such as Amazon, Cdiscount, ManoMano, and eBay. Among them, the sales revenue achieved by the Amazon B2C platform in 2022 accounted for 67.61% of the main business revenue. In 2018-2022, the company's revenue rapidly increased from 1,595 billion yuan to 5.455 billion yuan, corresponding CAGR of 36%; net profit to mother increased from 41 million yuan to 250 million yuan, corresponding CAGR of 58%.

Cross-border e-commerce helps Chinese household products go overseas

The import demand for furniture products in Europe and the US is high. Among them, 39% of furniture in the US comes from imports, and more than 50% of furniture consumption in Germany, France, the United Kingdom, and Canada comes from imports. At the same time, the problem of overcapacity in China's furniture production is becoming more and more prominent. Between 2012 and 2022, the number of loss-making companies in China's furniture manufacturing industry increased from 7139 in 2012 to 20,366 in 2022, so going overseas has become the key to supporting the development of China's furniture enterprises. Compared with the traditional foreign trade model, the cross-border e-commerce model shortens the transaction chain and is an efficient model for furniture to go overseas.

The company's expansion of categories and markets is expected to bring in new volume

Advantages: The company continuously improves the user purchasing experience and strengthens the company's core competitiveness in terms of improving management processes, adhering to private brand building, laying out overseas warehouses, and localizing operations in target markets. Incremental space: 1) Expanding category+channels: In the future, the company will cover more segments and actively develop offline KA channels through the development of new categories; 2) Increase share+expand the market: Compared with Europe, the company currently has a lower market share in the US. In the future, the company plans to invest more resources and capital to increase its market share; at the same time, develop new markets such as Latin America and Australia.

Profit Forecasts, Valuations, and Ratings

We expect the company's 2024-2026 revenue to be 76.74/93.70/11.258 billion yuan, respectively, with year-on-year growth rates of 26.34%/22.10%/20.14%; net profit to mother will be 4.84/6.17/ 763 million yuan, with year-on-year growth rates of 17.29%/27.47%/23.62%, EPS 1.21/1.54/1.90 yuan/share respectively, and a 3-year CAGR of 22.72%. The DCF absolute valuation method measured the company's value per share of 26.83 yuan, and the average PE of comparable companies in 2024 was 23 times higher. Taking into account the PE valuation method and the FCFF valuation method, the company was given 23 times PE in 2024, corresponding to a target price of 27.74 yuan/share, covered for the first time, and given an “increase in holdings” rating.

Risk warning: risk of overseas economic fluctuations; increased risk of industry competition; risk of rising international shipping costs.