On June 25, Easyhome and Huawei signed a 2024 strategic cooperation agreement

1) On the online side, the agreement focuses on adapting the three major apps of EasyHome's Designer, Dongwo, and Smart Home to Hongmeng. The app will start developing native applications based on pure blood Hongmeng's full-scene seamless circulation and native intelligence, further integrating Huawei's AI capabilities to enhance the industry's level of intelligent applications. EasyHome will co-build, co-create, and share a new Hongmeng ecosystem with Huawei to win new opportunities for intelligence.

2) At the offline business level, EasyHome relies on national store chains to actively implement sales scenarios for terminal products such as Huawei phones and smart cars, bringing consumers a new smart lifestyle concept integrating people, cars, and families.

There are two main forms of cooperation between the company and Huawei's whole house intelligence business. One is that Smart Home is actually an authorized Huawei dealer and has expanded its business through its own operation in Beijing, Hohhot, Wuhan, etc.; the other is to actively expand other Huawei agents in various provinces and cities to set up Huawei whole house smart stores in the company's stores. According to merchant feedback and company sales data, the unit price and floor efficiency of the Huawei Whole House Smart Store is ahead of other merchants in the same industry. The entry of Huawei Whole House Smart Store has a driving effect on attracting investment from other smart home brands in the store and will promote each other.

We believe that this expansion strategy is expected to further extend the growth curve of the three digital intelligence platforms; in addition, the expansion of the smart product matrix of Huawei terminals is expected to promote collaboration in smart home categories.

Accelerate the internationalization strategy and inject a new engine for development

The company has accelerated its internationalization strategy and has now opened overseas stores in Cambodia and Macau. Both stores currently have an investment rate of over 96%, and the operating conditions are good. In stark contrast to the intense competition in the domestic market, there is insufficient supply in the international market. The main reasons for choosing Southeast Asia as the first stop for internationalization are: 1) rapid economic growth in Southeast Asia in recent years; 2) demographic dividends and cultural advantages; 3) trade facilitation and policy support; 4) superior geographical location and global coverage.

In terms of offline business, in the next 3 to 5 years, the company will complete its strategic layout for ASEAN countries. It will make full use of the advantages of overseas resources, location, and cost factors to establish a comprehensive, full-chain furniture industrial park integrating design, intelligent manufacturing, warehousing and logistics, import and export, leading Chinese furniture, ceramics, building materials, and smart homes to collectively go overseas and give full play to the overall advantages of Chinese home furnishings. Smart Home's overseas business model is consistent with the domestic asset-light development model. Using “Actually Smart Home” as the unified trade name, it mainly develops franchise partners. Smart Home's first overseas store is the Macau store.

In terms of online business, the first is the internationalization of “Dongwo”, 1) cooperating with offline stores to build overseas industrial service platforms (currently online in Singapore and Cambodia), and 2) developing independent cross-border e-commerce (App+PC) self-operated business and the expansion of overseas third-party platform channels. Second, the designer's business has actually been internationalized. The designer platform has more than 14.77 million registered users, mainly overseas users (12.82 million overseas users). In the future, it will use 3D cloud design tools as the core to create a highly active and high-value designer ecosystem, rapidly expand overseas markets through the “Global City Partner Program”, and strive to become the world's leading AI design+marketing service platform for the home improvement industry.

Maintain profit forecasts and maintain buying ratings

The company is a leader in the pan-household service ecosystem. The main business has broken through the game, and digitalization and internationalization have created a new growth curve; we expect the company's net profit to be 14.5/15.9/1.74 billion yuan respectively in 24-26, corresponding to PE 11/10/9X, maintaining a “buy” rating.

Risk warning: Industry market competition increases risk, new store operations fall short of expected risk, strategic cooperation falls short of expected risk