Since the beginning of 2024, China's light industry exports have performed better than expected, mainly driven by inventory replenishment and improved overseas consumer demand, with export growth. In March, due to the high base, the growth rate of some categories fell back, but it resumed an upward trend in April.
Guolian Securities released a research report stating that China's light industry exports have performed better than expected since early 2024, mainly driven by inventory replenishment and improved overseas consumer demand, and the growth rate of most light industrial products in April achieved double-digit year-on-year growth. It is expected that in the second half of 2024, due to the base disturbance, the growth rate may slow down, but the incremental effects in emerging markets such as Latin America, combined with the recovery of demand in developed economies, will continue to drive the upward trend of exports. Therefore, the export chain sector is expected to remain bullish, and related areas such as Henglin Home Furnishings (603661.SH) and Loctek Ergonomic Technology Corp. (300729.SZ) should be watched carefully, maintaining an industry rating of "stronger than large market".
Guolian Securities' main points are as follows:
In April, export performance improved and the inventory turnover ratio returned to normal levels.
The disturbance of high base caused a decline in furniture exports in March, but it returned to normal levels in April, with positive growth in exports of furniture and its components. Looking at the two-year compound growth rate to exclude the base effect, the year-on-year growth of exports in M4/Q1 2024 was +1.75%/+2.02% respectively. The cumulative year-on-year growth from January to April was 1.94%, which continued to improve and was better than expected. In March 2024, the warehouse turnover ratio of American retailers, manufacturers, and wholesalers declined compared to the beginning of the year, but it remains at the level before the epidemic in 2019. Channel businesses such as Home Depot still have low warehouse turnover ratios. It is expected that American real estate will continue to moderately grow in 2024, thereby driving the strong demand for related industries in the home furnishings chain such as furniture.
To cope with anti-dumping measures, mattress exports have shifted to new markets while the export market for sofas in Europe and America continues to grow.
Since 2018, the export of spring mattresses have been continuously affected by the three rounds of anti-dumping measures by the United States, and domestic companies have gradually opened up emerging markets. The cumulative year-on-year growth from January to April was +43.0%/+47.7% for spring mattresses and +12.1%/+0.1% for latex mattresses. Latin America had the fastest growth, followed by Europe, Asia, and other regions. The increase in sofa volume led to an increase in sales. The main distribution channels were large-scale KA such as Costco and furniture dealers such as Asheley. The export market for sofas and European and American markets will continue to grow in 2024. From January to April, the cumulative year-on-year growth for leisure sofas was +18.6%/+22.5%, and for functional sofas, it was +21.6%/+22.8%.
Bathroom ceramic inventory has returned to normal levels, and cross-border e-commerce has boosted the growth of office furniture demand.
Affected by the epidemic in 2021, there was a large increase in bathroom ceramic product inventory, and inventory reduction started in 2022. In 2024, the inventory is expected to gradually return to normal levels, with cumulative year-on-year growth rates of 17.4%/32.0% in exports from January to April. North America and Europe became the fastest growing regions in exports in 2024, and growth in emerging markets such as Latin America and Oceania is also considerable. Asia is the largest market for ceramic sanitary ware exports, and its year-on-year growth rate in 2024 achieved positive growth. In addition, cross-border e-commerce has enabled continued growth in demand for office furniture from January to April 2024, with significant growth rates in the height-adjustable desk and chair categories. The cumulative export amount reached 1.284 billion US dollars, with a 20.5% year-on-year growth.
Demand for major customers' orders for thermoses such as PMI and Yeti has been steady, and the trend of electrification and expanded use cases continue to boost demand for electric vehicles.
Steady demand from downstream major customers such as PMI and Yeti has ensured steady growth in exports of thermoses from 2020 to 2024, with a cumulative year-on-year growth of 14.8%/22.1% from January to April. In April, sales of thermoses returned to double-digit year-on-year growth. For electric and special vehicle categories, the cumulative export amount from January to April for motorcycles and bicycles increased year-on-year by 13.8%/33.2%, all-terrain vehicles by 16.4%/22.8%, and golf carts by 15.2%/21.1%. In the future, the electrification of categories such as motorcycles and all-terrain UTV is expected to drive structural growth in the industry, and the expanded use cases of golf carts are expected to unlock demand.
Risk warning: 1) Risk of consumer willingness failing to meet expectations; 2) Risk of overseas operating environment and policies; 3) Risk of fluctuations in the RMB exchange rate.