Key points of investment:

The company is a world-renowned Internet home furnishing brand, targeting online “Ikea”. The company is engaged in R&D, design and sales of its own brand of household products. The products are divided into four major series: furniture, home, garden, and pets. The three core values of the brand are design, cost performance and convenience, and it is an online home furnishing brand that represents “Ikea”. The company has been deeply involved in the European and American online home retail market for more than ten years. Its products have been recognized by consumers in Europe and America, and various products rank among the top sellers on e-commerce platforms such as Amazon all year round. Backed by China's perfect supply chain manufacturing system and high-quality furniture and home furnishing industry clusters, the company adopts a product supply model of independent R&D or cooperative development and outsourced production. Through the cross-border warehousing and logistics system of overseas warehouses, the company uses well-known overseas e-commerce platforms such as Amazon as the main sales channel. The company's performance grew steadily. The company achieved operating income of 1.595/6.074 billion yuan in 2018/2023, with a CAGR of 31%; the company achieved net profit to mother of 0.041/0.413 billion yuan in 2018/2023, respectively, and a CAGR of 59% during the period.

The size of the home furnishing market is growing steadily, the online penetration rate in Europe and the US continues to increase, and supporting facilities for cross-border e-commerce are becoming more and more perfect. According to Statista, the global furniture and household goods market revenue showed a steady growth trend. The CAGR from 2014 to 2021 was 4.06%, which is expected to exceed 1.62 trillion US dollars in 2025; according to the 100 million European think tank, the retail scale of China's home furnishing industry is expected to reach 4.89 trillion yuan in 2026. China is currently the world's largest producer and exporter of furniture. Despite being affected by external adverse factors such as trade frictions, exports have maintained an upward trend in recent years. Export data for 2024 has performed well. Following the Federal Reserve's interest rate cut, it is expected that it will further release US demand for home purchases and drive the growth of China's household goods exports. In the context of inflation, European and American consumers have paid significant attention to the “cost performance” of products. Online shopping platforms have attracted a large number of consumers with their advantages of transparent prices, rich selection and high cost performance. According to Euromonitor, the e-commerce penetration rate in Europe, America and other countries has increased rapidly. According to Euromonitor, the US online retail penetration rate has climbed to 27.47%, and Europe has reached 15.80%. Compared with 36.22% in the Chinese market, there is still plenty of room for improvement. The cross-border e-commerce industry is different from traditional foreign trade. It is mainly B2C to help rapid export development. The country has introduced a series of policies to promote the rapid development of the cross-border e-commerce industry. The ability to operate overseas warehouses has become the core competitive advantage of cross-border e-commerce enterprises. The number of cross-border e-commerce entities nationwide has exceeded 0.12 million, and more than 2,500 overseas warehouses have been built.

The company is deeply involved in the European and American markets, and has first-mover advantages in terms of brands, channels, and warehousing. The company's products have been recognized by consumers in the European and American markets. As of March 31, 2024, the company's Amazon sites in Germany, France, the UK and Italy ranked first in the home furniture category; the company established an overseas “self-operated warehouse+platform warehouse+tripartite cooperative warehouse” storage layout, and established stable cooperative relationships with well-known logistics companies such as DPD and UPS during the last-end delivery process, forming efficient last-end delivery capabilities. By the end of 2023, the company's own warehouse area at home and abroad had reached 0.28 Million square meters. Up to now, the company added a self-operated overseas warehouse area of about 0.123 million square meters in 2024; the company has established a multi-level channel sales system in overseas markets. The main sales channel is Amazon B2C, and at the same time, it continues to expand channel coverage, from online to offline, and continues to expand well-known domestic e-commerce platforms such as TikTok Shop, SHEIN, and TEMU. Sea freight rates continued to rise in 2024. Although affected by factors such as the Red Sea incident, there is still a certain distance from the high price segment in 2022. As one of the leading cross-border e-commerce companies, the company has a clear scale advantage in the sea freight negotiation process, and has also reduced the impact of rising sea freight rates on the company's performance to a certain extent by signing long-term pricing agreements. As the market gradually invests in additional capacity, it is expected that there will be no impetus for sea freight rates to continue to rise sharply in the medium to long term. Tariffs account for a relatively small share of the company's total main business costs, far lower than product procurement costs, shipping costs and shipping costs. Since the US imposed multiple rounds of tariffs on Chinese goods in 2018, the company has taken a series of countermeasures such as appropriately adjusting terminal sales prices, continuous product iteration, purchaser-side price adjustments, and expanding business in other countries or regions to reduce the impact. The company will increase the scope and intensity of products purchased in Southeast Asia in 2024, and plans to increase the proportion of shipments from Southeast Asia to the US to about 20%, further reducing the impact of tariff costs on product competitiveness.

Profit forecasting and investment advice. The company's net profit attributable to shareholders of listed companies in 2024, 2025, and 2026 is estimated to be 0.451 billion yuan, 0.611 billion yuan, and 0.784 billion yuan, respectively. The corresponding EPS is 1.12 yuan, 1.52 yuan, and 1.95 yuan respectively. Based on the closing price of 18.96 yuan/share on July 22, the corresponding PE is 16.87 times, 12.46 times, and 9.71 times, respectively.

The company has been deeply involved in the European and American online home retail market for more than ten years. It has a first-mover advantage in the cross-border e-commerce field, and has accumulated a certain brand influence and recognition. In 2024, it will continue to expand the European market steadily, increase the penetration rate of the US market, and develop a layout in emerging markets including Mexico and Australia. It has further plans in terms of brand standardization, cost reduction and efficiency, channel expansion, and warehousing and logistics to maintain the company's “buy” rating.

Risk warning: risk of political and trade friction; risk of large fluctuations in sea freight rates; risk of large exchange rate fluctuations; risk of overseas demand falling short of expectations; risk of increased market competition.