Main points of investment:

European-style furniture leading enterprises. The company is a collection of product research and development, design, production and sales as one, mainly engaged in the production and sales of high-grade furniture products, the leading products are "Asia vibration", "Asia vibration Livia" and "Asia vibration Georgia" brand series of European-style furniture. Is one of the earliest professional manufacturers and sellers of European furniture in China. The company's overall positioning of high-end products, and the implementation of multi-brand strategy, so that various brands complement and promote each other, maximize the occupation of the market and reduce business risks. The company's operating income from January to September 2016 was 370 million yuan, down 7.41% from the same period last year, and its net profit was 41.8666 million yuan, down 5.04% from the same period last year.

With the upgrading of consumption, the growth space of medium-and high-grade furniture market is more optimistic. As of September 2016, the per capita consumption expenditure of urban residents reached 16796 yuan, an increase of 7 percent over the same period last year, still maintaining a steady growth trend. With the increase of per capita consumption expenditure, urbanization rate and consumption upgrading trend in recent years, the medium-and high-grade furniture market has a certain growth space. On the one hand, with the development of the furniture industry, European furniture is constantly accepted and favored by consumers, especially by the middle and high income class. And consumers in the choice of European-style furniture, need to use curtains, wallpaper and accessories to create an European-style atmosphere of life. So consumers, especially middle-and high-income consumers, often purchase complete sets of furniture at once to ensure the consistency of quality, style and environment, and promote one-stop procurement at the same time. On the other hand, middle and high-end consumers are not sensitive to price, and affected by brand barriers, technical barriers and capital barriers, the company has fewer competitors and a relatively loose competitive environment. The competition between enterprises is mainly the competition between brands and sales channels.

The company has obvious competitive advantages in channels, brands and product categories. Channel: the company currently adopts the sales model of "direct marketing + distribution". By the third quarter of 2016, the company had 30 direct stores in Beijing, Shanghai, Nanjing and other cities, 135 distribution stores in more than 80 economically developed cities, and initially established a marketing network covering economically developed cities across the country. Brand: the company's brand "Yazhen" has a long history and is well-known. At present, it has authorized the distribution of Italy's top furniture brand "Chelini" to open up the high-end furniture market and open up overseas markets in stages. Rich in product categories: the company has six categories of products, including cabinets, bed groups, tables, chair frames, sofas and so on, which can provide consumers with nearly 100 categories of furniture products to meet the needs of consumers' one-stop purchase. In addition, the company has a good background of furniture enterprises, we expect the company to further expand the product category, to the overall household, everyone's direction of development.

Fund-raising projects to strengthen the layout of channels, future growth is expected. The planned issue of 54.7495 million shares is expected to raise a total of 426 million yuan, combined with self-raised funds of 630 million yuan will be used for the following five projects: 1) marketing network expansion project (416 million yuan), 2) sofa and furniture expansion project (98.36 million yuan), 3) furniture production line technical renovation project (57.9903 million yuan), 4) information system construction project (29.76 million yuan) 5) Home service cloud platform project (30.805 million yuan). The implementation of the fund-raising investment project will further expand and improve the layout and coverage of the company's sales network throughout the country, expand the company's brand awareness throughout the country, and effectively improve product quality and production efficiency. Improve the company's rapid response to the domestic market, enhance the company's profitability.

Profit forecast and investment advice. During the 2016 National Day, more than 15 first-and second-tier cities introduced real estate regulation and control policies, including purchase restrictions and credit tightening, and real estate sales may also be affected next year. However, the impact of the policy on medium-and high-grade furniture production enterprises is limited, and medium-and high-grade furniture mainly meets the rigid demand of housing. Middle and high-grade furniture enterprises benefit from the rigid demand for real estate and the rise of China's middle class, and in the process of slowing down the overall growth of the furniture industry, the brand effect is expected to bring about an increase in market share. As the future fund-raising projects are put into production and the channels are effectively rolled out nationwide, the company can achieve steady growth in the next three years. Based on this, we estimate that the diluted EPS of the company from 2016 to 2018 will be 0.38x0.41 PE 0.43 yuan respectively. Considering that the average PE of comparable companies in the same industry in 2017 is about 34 times, we give the 2017 valuation 34 times, corresponding to the target price of 13.94 yuan, and give a "buy" rating.

Risk hint. The development of the industry is weak, the company's channel layout is not as expected, and the release of production capacity is not as expected.