The industry trend in the third quarter was in line with our earlier judgment. In our mid-term strategy, we judged that the industry will continue to maintain good performance in the second half of the year and gave the industry an overweight rating. In terms of market performance, the furniture industry index outperformed the broader market in the third quarter of this year.As of now, the furniture industry index has risen by 28.85%, and the Shanghai and Shenzhen 300 index has risen by 12.34% over the same period, outperforming 16.51 percentage points , Yihua Wood (20.73%), Xilinmen (37.29%), Meike (23.79%).
We believe that the furniture industry is facing four problems: (1) The shortage of forest resources. (2) The pull effect of exports on the industry is weakened. (3) The vast majority of manufacturers are concentrated in the manufacturing process and are subject to terminal retail channels. (4) Low industry concentration, chaotic competition, and low quality standards.
We expect that the following more predictable directions will be the focus of the furniture industry's future development:
(1) As panel furniture seizes the market share of solid wood furniture, upstream high-quality artificial board companies will have more pricing power;
(2) Enterprises that control a large amount of forest resources have stronger cost control capabilities and more profitability;
(3) The industry is shifting from export to domestic sales, and the advantages of domestic channels and brands highlight the competitiveness of enterprises;
(4) Differentiated competition, technological innovation and model innovation will become important means of leading peers;
(5) Reorganization and reshuffling of sub-sectors to increase concentration.
From the perspective of long-term value investment: (1) Due to the shortage of forest resources, Daya Technology, which has outstanding advantages in wood-based panels, Qifeng Shares, a leader in decorative base paper in the pan-family industry chain, and Yihua Wood, which has a large number of precious log resources, have a comparative advantage. Good investment value;
(2) Domestic demand is the most important market for the industry in the future.The transformation of traditional enterprises from a single production type to a brand retail that focuses on quality and channels is more likely to be favored by consumers and obtain better market pricing power. Sofia, a leader in customized furniture models, is actively The transformation, the most easily benefited e-commerce model is Xilinmen, the earlier export to domestic sales, and the excellent brand building of Meike shares have very good value investment attributes.
From the perspective of short-term performance growth: (1) Real estate has recovered since the second half of last year, and real estate has had a lagging effect on furniture sales. Furniture domestic sales are expected to continue to recover in the second half of the year. Sofia, Meike, Xilinmen performance with perfect domestic sales channels and outstanding brand construction Growth is guaranteed;
(2) Benefiting from the continued recovery of US real estate, Yihua Wood, which has the largest share of US furniture exports, is in good order and has no worries in performance growth.
Industry rating and company recommendation: The industry is in the process of industrial structure upgrade and the related companies have shown long-term investment value, and the improvement of the internal and external operating environment of the industry has provided external support for the industry's performance improvement this year.We believe that whether it is from long-term investment value or From the perspective of short-term performance growth, the furniture sector has shown investment opportunities. With the advent of the peak decoration season in the fourth quarter, the industry will continue to pick up and maintain the industry's "overweight" rating. For individual stocks, we mainly recommend Yihua Wood, Xilinmen and Sofia.
Risk warning: (1) The tightening of real estate regulation exceeds expectations; (2) The downturn in the international economy affects furniture exports; (3) The price of raw materials has increased significantly. (Editor: Peter)
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