Yongyi Co., Ltd. is a leading enterprise in the seat industry and has mastered the core “support” technology.

Yongyi Co., Ltd. is a leading enterprise in the Chinese chair industry. It was founded in 2001 and focuses on providing the world's leading sitting health solutions. Supported by core supporting technology, the company has achieved outstanding achievements in innovative R&D, intelligent manufacturing and global sales, and is a national high-tech enterprise. Yongyi Co., Ltd. has five production bases and more than 5,000 employees. The product line covers office chairs, lift tables, massage chairs, sofas, etc., and has built a comprehensive seating solution. Yongyi's chair has been the number one seller in the world for three consecutive years. It has been exported to 82 countries. It is centered on technological innovation and user experience, and strives to become a global leader in the field of sitting health. The company has been established for more than 20 years and has received many national awards, focusing on developing spine protection for sedentary users. The core support technology system includes four product lines: active support, flexible support, adjustable support, and zoned support. Through innovative seat structures, it fully supports healthy sitting posture.

Office chairs are the main source of performance, with a steady increase in export customers and great potential for domestic sales. Faced with disruptive factors such as rising raw material prices, the epidemic, and inventory fluctuations, the company relied on measures such as increasing market share, strengthening domestic sales, and reducing internal costs and increasing efficiency to offset the impact of some adverse factors, and the year-on-year decline in revenue gradually narrowed. It is expected that in the future, the decline in revenue will narrow further as customer demand releases, and the company's domestic and foreign sales growth prospects can be expected, catalyzed by factors such as increased revenue from independent brands, reduced pressure on raw materials, and the appreciation of the US dollar.

Leading companies benefit from increased concentration, interest rate cuts are expected to be realized, and confidence in channel preparation is expected to recover. China's office chair industry is booming with the advantage of industrial clusters. In particular, the Anji region of Zhejiang has become the center of the seat industry, forming a strong regional brand “hometown of the Chinese chair industry”. China became the world's largest exporter of office chairs in 2022, accounting for 67% of the market share. China's office chair production cost is low. From 2018 to 2021, China's office chair exports grew at an average annual rate of 8%. Among Chinese office chair export companies, Yongyi Co., Ltd. is the leading company, with a market share of 12% in 2022. Yongyi Co., Ltd. increased its share of office chair exports from 9% to 11.5% between 2018 and 2022, consolidating its leading position in the market.

The slowdown in the Federal Reserve's interest rate hike is expected to stimulate consumption, boost market sentiment, and ease inventory pressure.

The office chair market is undergoing a development path similar to smart toilets and functional sofas, transforming from traditional seats to functional seats. Despite the current low penetration rate, ergonomic office chairs attract consumers with their obvious advantages. The size of the office chair market has shown a steady upward trend in recent years, reaching 30.8 billion yuan in 2021, an increase of 16.2% over the previous year, reflecting the continued increase in demand for office chairs. With the increase in the number of enterprises and emphasis on the office environment, the office chair market has broad prospects for the future and has a good momentum of development. In this development trend, ergonomic office chairs are expected to play an increasingly important role in the field of office furniture. Furthermore, the penetration rate of health office products in China is expected to continue to increase. Although it is currently relatively low, demand for office environments and supplies in China is growing rapidly as social and economic development and health concerns increase. Although per capita consumption is relatively low, this also means that China has more room for growth in the field of healthy office supplies. Looking forward to the future, China is expected to gradually catch up with other countries, achieve more balanced and healthy development in the field of office health, and bring rich development opportunities to the industry.

Domestic sales Double Eleven data is impressive, multi-channel layout, and core products are popular. On the online side, the Double Eleven data is impressive, and the core products are popular. Deeply cooperate online with platforms such as Tmall, JD, Pinduoduo, Douyin, and community private domain marketing, and seize the opportunities of the rise of interested e-commerce to actively carry out Douyin live streaming, celebrity live streaming, and internal and external content marketing to promote both sales revenue and brand awareness. During Double Eleven in '23, the computer chair category in the Tmall store increased by 226.91% year on year, JD's turnover increased 206.6% year on year, and Douyin waist chair surpassed 10 million and increased 6275% year on year. Yongyi's multi-platform sales have exploded, and the industry's growth rate is far ahead of other brands. The high-end flagship product, FLOW550, which was newly launched in September 2023, won the title in the Douyin Mall Double Eleven Good Things Festival seat category list and has become a highly sought after good item. At the same time, Yongyi is also at the top of the Douyin Ergonomic Chair livestream popularity list. Flow550 fundamentally solves the problem of lumbar suspension in a dynamic sitting position, improving lumbar support performance by 100% in any sitting position. On the offline side, offices have been set up around large and medium-sized cities to accelerate channel system construction while continuing to develop direct business for major customers. It has provided products and services to major customers and benchmark customers such as the Hangzhou G20 Summit, China Development Bank, Bank of Communications, SPD Bank, Poly Group, Huawei, Gree, BYD, Xiaomi, Baidu, NetEase, Nongfu Spring, and Bull Group.

Investment advice: We expect net profit to be RMB 308 million, RMB 361 million, and RMB 418 million respectively for 23-25, -8%, +17%, and +16%, respectively. PE for 24-25 is 10.5x and 9.1x, respectively. The first coverage gave it a “Highly Recommended” investment rating.

Risk warning: raw material price fluctuations, international trade friction risk, exchange rate fluctuation risk, inventory consumption falling short of expectations.