Domestic and export sales both grew:

In fiscal year 2024, the company achieved operating income of HK$18.411 billion, an increase of 6.1% over the previous year. The Chinese market revenue of HK$11.987 billion increased 8% year over year, with sofa revenue up 3.1% year on year and mattress revenue up 9.6% year on year. As of March 31, 2024, the number of company stores was 7,236, a net increase of 765 stores. Overseas market revenue of HK$6.153 billion rose 3.2% year on year, with the North American market up 2.3% year on year, and European and other overseas markets up 3.2% year on year.

New housing deliveries have declined, but the stock era has arrived:

The company's management believes that domestic sales were affected by the completion of new homes last year, the share of functional sofas is still very low, and channel development in Tier 1 and 2 cities needs to be strengthened. According to the consumer age group analysis, consumers born after 2000 have become the main force. The penetration rate of functional sofas in the Chinese market has rapidly increased to 9.7% in 2023, and is expected to reach 13% within 5 years. More capital will be invested in improving the quality of life, which will help sell functional sofas. Currently, 90% of houses in China have been built in the past 20 years, and it is unlikely that there will be rapid growth in the next few years. In the future, the number of new housing starts in China will shift to the European and American model.

Marketing strategy:

In terms of domestic sales, the company is actively expanding its multi-market and multi-channel revenue strategy, led by multiple marketing models of offline store+e-commerce and live streaming, while actively adopting the “old with new, strong with weak” model to cultivate an excellent dealer team. Overseas, management said that the company is currently focusing on in-depth research and development of functional sofas, enriching products in overseas markets, and improving the layout of the product line covering high and low end.

Our point of view:

Overall, the company is a leading functional sofa. It continues to innovate on the product side, gradually improving its overseas production capacity layout (Vietnam, Mexico), and gradually strengthening its overall competitiveness. It is recommended to maintain active attention.