Considering the current complex and changeable economic situation at home and abroad, relying on relevant policy signals, it is recommended to focus on the expected policy benefits direction in 2025, and recommend the new tobacco > bicycles = domestic sales of furniture, pay attention to emerging national goods, exports & overseas markets, and the papermaking sector.
According to the Wisdom Finance APP, Sinolink Securities released research reports stating that looking ahead to the light industry sector in 2025, the headwinds period of the new tobacco policy is coming to an end, and the industry is still in the early stages of development. There is still room for product penetration rate improvement, and the corresponding catalyst is expected to run through the entire year of 2025. In terms of domestic sales of furniture, since Q3 2024, the effects of consumption subsidies have been evident, and from Q4 2024, the performance of some companies is expected to stabilize. On this basis, high-quality furniture companies still possess characteristics of low valuation + high dividends, highlighting the cost-effectiveness. Considering the current complex and changeable economic situation at home and abroad, relying on relevant policy signals, it is recommended to focus on the expected policy benefits direction in 2025, and recommend the new tobacco > bicycles = domestic sales of furniture, pay attention to emerging national goods, exports & overseas markets, and the papermaking sector.
Sinolink Securities' main points are as follows:
The new tobacco sector: The trend of stricter overseas regulations is emerging, and the European and American compliant e-cigarette market is expected to expand.
Considering Trump's previous claim that he will 'save' flavored e-cigarettes, if subsequent flavor restrictions are relaxed and illegal product supervision is strengthened, based on certain assumptions and calculations, the market size of legal replaceable e-cigarettes in the mid-term is expected to grow by 63%-299% compared to 2023 in the United States. On the whole, the headwinds period of the new tobacco policy is coming to an end, and the industry is still in the early stages of development. There is still room for product penetration rate improvement, and the corresponding catalyst is expected to run through the entire year of 2025. It is recommended to focus on smoore intl (06969), which is deeply tied to the overseas tobacco leader and is expected to significantly benefit from the expansion of the overseas compliant market, with its new business contributions worth looking forward to.
The bicycles sector: Benefiting from subsidy policies + the implementation of new national standards, the industry has three major growth drivers in 2025.
1) The expectation of concentrated realization of channel restocking after the standard replacement in H1 2025; 2) Leading channels accelerating expansion, driving industry concentration with the rapid launch of new national standard products; 3) The policy of replacing old with new is expected to further boost demand in H1 2025. Overall, the performance recovery certainty of the sector in H1 2025 is relatively high, seizing the opportunity to layout traditional leaders and emerging dark horse companies.
Domestic furniture sector: In the short term, since 24Q3, the effect of consumption subsidies has indeed been evident, and some companies' performance is expected to stabilize from 24Q4 onwards. On this basis, high-quality furniture companies still have the characteristics of low valuation + high dividends, highlighting the cost performance. Looking ahead in the medium to long term, under the background of industry traffic growth pressure, there will be a significant increase in the requirements for enterprise category expansion + channel extension capabilities. At the same time, subsidy policies will further raise the competitive threshold, and the industry is expected to see accelerated consolidation of market share, leading to a potential increase in the valuation center of high-quality companies.
In terms of layout rhythm, considering the continuation of subsidy policies, the subsequent calculation of decoration volume and base factors, the fundamentals are expected to improve seasonally after 25Q2, seizing the opportunity of related fundamental improvements. In addition, attention should be paid to the concentrated reflection of 24Q4 consumption subsidy orders on the 25Q1 enterprise financial statements, driving short-term valuation repair trends in the sector. Overall, it is recommended to focus on high-quality domestic furniture leading companies with a higher proportion of C-end income and continuous retail capabilities: Jason Furniture (603816.SH), Suofeiya (002572.SZ), Zbom Home Collection (603801.SH), Man Wah Holdings (01999), Gongniu Group (603195.SH), and others.
Emerging national goods sector (personal care, pet, etc.): In 2024, the emerging national goods will jointly strive in terms of products and channels, continuously increasing brand momentum and market share.
Looking ahead, pet, personal care, and other emerging national goods still have opportunities for category innovation and growth. From an annual perspective, focus on the structural investment opportunities brought by performance realization pace exceeding expectations. It is recommended to pay particular attention to Guaibao Pets (301498.SZ), Yantai China Pet Foods (002891.SZ), Chongqing Baiya Sanitary Products (003006.SZ), Miniso (09869), and others.
Export & Overseas sectors: Looking forward to 2025, the sector presents both risks and opportunities.
Sinolink Securities stated that, on the one hand, the current interest rate cut in the USA is gradually showing its effect on real estate sales, and subsequently Chinese furniture exports are expected to benefit from the recovery in US real estate sales. On the other hand, tariff risks have not yet materialized, and according to multidimensional determinations, the overseas inventory replenishment cycle is basically ending. In this context, selectively choosing export companies with alpha, the integration of technology, labor, and trade (or overseas production capacity layout) as well as the degree of branding will be important dimensions in selecting export investment targets. It is recommended to focus on Hangzhou Huawang New Material Technology (301376.SZ), Ankon Home Collection (301061.SZ), Henglin Home Furnishings (603661.SH), Loctek Ergonomic Technology Corp. (300729.SZ), and others.
Paper sector: The prosperity of the sector is closely related to overall social retail consumption. The key to future profitability recovery lies in domestic consumption support and changes in the supply of various subcategories of paper.
Currently, paper types are still in the production period, and with expectations of improved demand on a month-on-month basis, overall sector profitability is expected to recover steadily in 2025. The subsequent differentiation in sub-sector landscapes will determine the profit center per ton and the elasticity of subsequent prices. Special paper companies with strong cost control capabilities, forward-looking wood pulp reserve capabilities, and leading layouts in specific sub-sectors (such as decorative base paper, glassine paper, thermal transfer paper, etc.) are expected to have stronger profitability. In addition, some leading companies face significant funding pressures, and attention should be paid to opportunities for improvement in cultural/white card paper sectors. It is recommended to focus on Hangzhou Huawang New Material Technology (605377.SH), Shandong Sun Paper (002078.SZ), Xianhe Co.,Ltd. (603733.SH), and others.
Risk warning
The policy implementation effect is lower than expected, with a sharp increase in raw material prices, significant exchange rate fluctuations, loss of major customers for contract manufacturers, increased trade frictions, and significant deviations in related calculations.
