Overview: Smart home leader, independent brand sets sail

The company is an important ODM supplier for the global smart electric sofa and smart electric bed industry. With excellent design and development, excellent product quality and reliable after-sales service, the company has established good long-term business partnerships with internationally renowned furniture companies such as Ashley Furniture, Pride Mobility, HomeStretch, RayMoursFurniture, and R.C. Willey. At the same time, the company owns independent brands with certain international popularity, such as MotoMotion, MotoSleep, MotoLiving, HHC, and Yourway, and is vigorously developing its own brand business. As of 2024H1, the company has built more than 100 small-scale in-store stores in US retailer customers' stores, taking the first step of “building its own brand overseas.”

Industry: Smart home penetration rate is increasing, sofas and mattresses are the core categories

Consumer demand for convenience and personalization is driving the popularity of smart furniture. In 2023, the global smart home market is 101.07 billion US dollars, and is expected to grow from 121.59 billion US dollars in 2024 to 633.2 billion US dollars in 2032, with a CAGR of 22.9%. Among them, the global functional sofa market size in 2022 was 29.8 billion US dollars. The United States, as the birthplace of functional sofas, accounts for about 54% of the world's functional sofas, and the market penetration rate is 49.7%.

The size of the global smart electric bed market in 2022 is 5.207 billion US dollars. The US accounts for about 44% of the smart electric bed market, and the market penetration rate is 14%.

Company: Actively explore the market and build its own brand with great results

1) Product: The company attaches importance to research and development. From appearance, function, materials to quality, the team has comprehensive insight and meets the individual needs of customers. Every year, breakthrough products are launched. As of the end of June 2023, the company had a total of 620 domestic and foreign authorized patents and 215 patents pending. 2) Brand: The company has its own brands such as MotoMotion, MotoSleep, and MotoLiving. Since 2023, the company has adopted an innovative “store-in-store” model to successfully introduce products and brands into the retail terminal market. As of 2024H1, the company has built more than 100 small-scale in-store stores in US retailer customers' stores, taking the first step in “building its own brand overseas.” 3) Production: The company currently has two major production bases in Changzhou and Vietnam. The company started production in 2019. The company's furniture products exported to the US are currently all produced in Vietnam. The company's global production capacity layout has maintained the company's ability to operate sustainably while reasonably evading tariffs, anti-dumping duties and countervailing duties. 4) Customers: On the one hand, the company has deep cooperation with leading companies such as Ashley Furniture. As the market expansion of these customers accelerates, the company's order volume will gradually increase and achieve common growth. On the other hand, the company increased its investment and efforts to develop the US market, and new retail customers contributed significantly to the increase. From January to June 2024, the company received a total of 49 new customers, all of whom were retailers.

Investment advice

On the one hand, as an important ODM supplier in the global smart electric sofa and smart electric bed industry, the company has long-term stable customer resources, sufficient overseas production capacity layout, perfect integrated supply chain layout, and market share is expected to continue to increase; on the other hand, the company actively promotes its own brand development and deepens channel construction through the “store-to-store” model, and its own brands are expected to contribute to increased performance. We expect the company's revenue for 2024-2026 to be 2.491/3.203/3.861 billion yuan, respectively, up 29.7%/28.6%/20.6% year on year; net profit to mother will be 0.528/0.658/0.765 billion yuan, respectively, up 29.7%/24.5%/16.3% year on year. As of September 23, 2024, the total share capital and closing market value of EPS were $3.18/3.95/4.60, respectively, and the corresponding PE was 15.56/12.50/10.75 times, respectively. First coverage, giving a “buy” rating.

Risk warning

Macroeconomic risk, overseas market risk, international transportation price fluctuation risk, raw material price fluctuation risk, exchange rate fluctuation risk, management risk.