20181219-高盛-Customized_furniture__Setting_the_table_–_Initiate_Oppein_at_Neutral,_Shangpin_at_Sell__reiterate_Buy_on_Suofeiya_44页_1mb

China Consumer Durables Summary

Core Content

This report analyzes the customized furniture industry in China, focusing on three key players: Suofeiya, Oppein, and Guangzhou Shangpin. It highlights the long-term growth potential of the developers' channel and the structural opportunities for market consolidation in the face of short-term challenges such as the property downcycle and intensified competition in retail channels.

Main Points

1. Customized Furniture Industry Overview

• The industry is vast and fragmented, offering significant consolidation opportunities.
• Customized furniture manufacturers primarily sell through retail channels, but are increasingly focusing on developers' channels due to the slowdown in property demand and retail competition.
• According to All View Cloud (AVC), the furnished new property ratio in China was 23% in 1H18, and is expected to rise to 30% by 2020E due to favorable government policies and differentiated competition strategies from developers.

2. Developers' Channel Opportunity

• The developers' channel is considered a long-term growth avenue.
• Leading manufacturers such as Suofeiya and Oppein are expected to benefit from increased market share concentration due to their manufacturing and distribution advantages.
• Suofeiya and Oppein are key players in this segment, with Suofeiya being a major beneficiary due to its strong manufacturing capabilities and established distributor network.

3. Company-Specific Analysis

Suofeiya

• Rating: Buy
• Target Price (12-m): Rmb24.4
• Upside: 33%
• Revenue Growth (2019E-20E): 16% CAGR
• Net Profit Growth (2019E-20E): 19% CAGR
• Valuation: Currently trading at 15X 2019E P/E, below its 6-year median 12-m forward P/E of 27X.
• Strengths: Leading in manufacturing, strong distributor network, and growing developer business.
• Outlook: Expected to benefit from the structural growth in the customized furniture market, especially through developer partnerships and expanding product categories.

Oppein

• Rating: Neutral
• Target Price (12-m): Rmb82.0
• Downside: 6%
• Revenue Growth (2019E-20E): 13% CAGR
• Net Profit Growth (2019E-20E): 16% CAGR
• Valuation: Trading at 6% downside to the target price.
• Strengths: Largest player in kitchen cabinets, extensive and efficient distributor network, strong brand in the kitchen cabinet segment.
• Weaknesses: Expected margin compression due to increased competition and higher share of developer revenue.
• Outlook: Growth will be driven by product category expansion and channel diversification, but with moderate growth due to market headwinds.

Guangzhou Shangpin

• Rating: Sell
• Target Price (12-m): Rmb49.0
• Downside: 21%
• Revenue Growth (2019E-20E): 17% CAGR
• Net Profit Growth (2019E-20E): 18% CAGR
• Valuation: Trading at 21% downside to the target price.
• Strengths: Unique channel strategy with a high percentage of direct-owned stores and shopping mall-based locations.
• Weaknesses: Lower profitability due to operational costs, and outsourced products contribute to a low margin.
• Outlook: Revenue growth is expected to slow down due to the industry downcycle and pressure on new distributors.

Key Information

• The customized furniture market is expected to grow significantly due to favorable government policies and increased demand for furnished properties.
• Suofeiya and Oppein are positioned to benefit from market consolidation and developer channel expansion.
• Guangzhou Shangpin is facing valuation risks due to lower differentiation in its product offerings and higher operational costs.
• The report highlights the importance of manufacturing capabilities and distributor networks in driving growth and profitability in the customized furniture sector.
• The analysis includes revenue and profit growth expectations, valuation metrics, and investment ratings for each company.