Overview: From a single product management transformation to a full range of households, Gujia Home Furnishing is a world-renowned home furnishing brand that provides integrated overall solutions. It has shaped a strong moat advantage with its accumulated strong brand power, organizational strength, R&D and design ability, channel power, and product strength. The company's performance continues to grow steadily in the face of serious challenges at home and abroad and an increasingly fierce market competitive environment. From 2013 to 2023, the company's overall revenue showed an upward trend, growing from 2.682 billion yuan to 19.212 billion yuan, with a CAGR of 21.76%; net profit to mother increased from 0.404 billion yuan to 2.006 billion yuan, with a CAGR of 17.38%.

The first three quarters of 2024 achieved operating income of 13.801 billion yuan, a year-on-year decrease of 2.37%; net profit to mother was 1.359 billion yuan, a year-on-year decrease of 9.49%.

Categories: Diversified category layout, all-round development breakthroughs

The company is based on sofas, around the concept of “multiple brands, all categories”, continuously improving the category layout, optimizing the product structure, and rapidly expanding mattresses and customized products to cover all categories of upholstered furniture, moving from single product management to full category household management. The cornerstone category is sofa and bed products, which provide the company with a basic performance market; custom furniture is growing rapidly, providing a new impetus for the company's future performance growth.

Channel: Implement the “1+N+X” development strategy and carry out retail transformation. By implementing the “1+N+X” strategy, the company has achieved changes and innovation in the development of all categories of household products while consolidating the advantages of category specialty stores while accelerating the integration of large stores/category power stores. At the same time, the company actively promoted changes in channel organization, promoted the transformation of the division into a regional retail center, improved the flexibility of regional management, and gave them flexibility in terminal decisions, significantly improving management efficiency.

Globalization: Improve the layout of production bases and deepen the global market

Globalization is one of the company's long-term important development strategies. The company has been actively laying out domestic and overseas bases, improving the efficiency of the global supply chain. Along with the company's development, production bases were initially mostly in East China and then expanded to North China, while overseas bases in Vietnam and Mexico were successively laid out, covering markets such as North America and Southeast Asia. The construction of the production base has improved the company's production capacity layout, which is conducive to building the resilience and advantages of the supply chain.

Investment advice

In terms of categories, the company's full category matrix continues to be rich. Traditional categories are growing steadily, and the three major high-potential categories can be expected to grow. On the channel side, the company continues to push forward the 1+N+X channel strategy and regional retail center reform, and promptly adjusts the channel organization structure to enhance channel development vitality. In terms of supply chain, the company actively promotes overseas production capacity layout and deepens global market development. We expect the company's revenue for 2024-2026 to be 18.964/20.465/21.872 billion yuan, up -1.3%/7.9%, respectively, and net profit to mother of 1.878/2.057/2.241 billion yuan, respectively, up -6.4%/9.5%/8.9% year-on-year respectively. As of December 25, 2024, EPS was 2.29/2.50/2.73 yuan respectively, and the corresponding PE was 12.23/11.17/10.25 times, respectively. First coverage, giving a “buy” rating.

Risk Alerts

The risk of macroeconomic and market fluctuations, the risk of increased market competition, the risk of raw material price fluctuations, the risk of distribution network management, the risk of international trade friction, and the risk of exchange rate fluctuations.