Event
On December 18, 2025, Minhua Holdings announced the acquisition of GRIC Group for approximately US$58.7 million, of which US$32 million was for the 100% of the target company’s issued share capital, and the remaining approximately US$26.67 million was to fully repay all bank financing obligations of the target group with Bank of America as of the closing date. The PB ratio for this acquisition was 4.29 times.
Core Logic
The Target Group is primarily engaged in the manufacturing and sale of upholstered furniture in the United States. The Target Group’s headquarters is located in northern Mississippi and operates mainly under two brand names: Southern Motion, founded in 1996 and specializing in the manufacture of reclining furniture; and Fusion Furniture, founded in 2009 and specializing in the manufacture of fixed furniture. We believe that, following completion of the transaction, the cross‑selling opportunities arising from the Target Group’s furniture retail distribution network, which serves over 1,000 active customers, as well as the cost‑saving opportunities created through raw material procurement and enhanced manufacturing efficiency, will generate synergies between the Target Group and Minhua Holdings’ business. The Target Group owns eight production facilities in northern Mississippi, with a total area exceeding 2 million square feet. We anticipate that synergies will emerge between Minhua Holdings’ business and the Target Group’s operations, and we further expect that, after completion of the transaction, the company’s production footprint will expand into the United States to capitalize on the opportunities and address the challenges brought about by changes in the global trade environment.
In December 2025, U.S. existing-home sales are projected to reach 4.35 million units per year, placing them at the 14.7th percentile over the past 27 years. Overall demand remains at the bottom, but looking at the past two years, it has been steadily increasing. We believe that interest rate cuts may lead to some signs of recovery in the U.S. real estate market, while the wealth effect driven by the rise in U.S. stock prices is quite pronounced. Real estate demand is expected to gradually be unleashed. After Minhua completes its acquisition, leveraging its brand and distribution channels may further boost the company’s business development in North America.
Investment Recommendation
Domestic real estate is currently at the bottom of its cycle, awaiting the rollout of real estate policies to stimulate demand along the real estate value chain. At the same time, the company is undertaking multifaceted internal reforms, and its domestic operations are expected to return to a growth trajectory. In terms of overseas operations, the company has expanded its North American business through acquisitions that have brought in products, brands, production capacity, and sales channels, while also mitigating tariff risks. Going forward, synergies will emerge between Minhua Holdings and its subsidiaries’ businesses, and we look forward to further financial contributions from the group. We project that net profit attributable to parent shareholders for fiscal years 2026–2028 will reach 2.108/2.248/2.39 billion yuan, corresponding to P/E ratios of 8.12/7.62/7.16 times based on the closing price of HK$4.96 per share on February 9. We initiate coverage with an “Add” rating on the company.
Risk Warning
Risks associated with the domestic and international macroeconomic environment, intensifying market competition, changes in foreign trade policies, and acquisition and integration falling short of expectations.
