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PM Summary: Initiating on two customized furniture manufacturers; long-term opportunity from developer’s
channel3
Developers’ channel - The long-term growth avenue6
Oppein: A kitchen cabinet leader and expanding into other segments, valuation seems fair, initiate at
Neutral10
Guangzhou Shangpin: High valuation not justied by differentiated business model, initiate at Sell25
Suofeiya - Attractive valuation for an industry leader, reiterate Buy38
Disclosure Appendix41
19 December 2018 2
Goldman SachsChina Consumer Durables
Table of Contents
PM Summary: Initiating on two customized furniture manufacturers;
long-term opportunity from developer’s channel
Customized furniture manufacturers primarily sell through retail channels in China.
Recently they have been paying more attention to the developer’s channel amid
property demand slowdown and intensifying competition in retail channels. According to
AVC, only 23% of new properties sold were furbished in China in 1H18. Per the 13th
Five-Year Plan, the ratio is expected to rise to 30% in 2020E driven by a combination of
favorable government policies and differentiated competition strategies especially from
leading real estate developers. In our view, such penetration avenues will present a
signicant revenue opportunity and primarily benet leading furniture manufacturers
with better nancial and distributor resources. We expect Suofeiya and Oppein, the two
key players in the segment, to be the major beneciaries of the trend given their
continuous investment in manufacturing capabilities and established distributor
network.
Suofeiya (Buy; 12-m TP: Rmb24.4)
We continue to favor Suofeiya as a major beneciary of a structural growth in
customized furniture industry, due to its leading manufacturing capabilities and
distributor network. Although, industry is facing headwinds from a short-term property
downcycle (
for details, refer to China Real Estate: Slower property investment in 2019;
consolidation to accelerate, published on November 23, 2018)
and intensied
competition, we expect Suofeiya to mitigate the growth headwinds by launching more
quality products and improving competitiveness of its distributors by both providing
more nancial support and replacing less efcient distributors. Moreover, we expect
developers’ channel to contribute more to revenue growth in coming years as the
company continues cooperating with large developers and investing in manufacturing
facilities. We expect revenue/net prot CAGR of 19%/16% in 2019E-20E.
With the
stock currently trading at 15X 2019E P/E (vs. its 6-year median 12-m forward P/E
of 27X), we reiterate Buy on the stock.
Oppein (Neutral; 12-m TP: Rmb82.0)
Oppein - At a glance
The largest player in China kitchen cabinet market by revenue size:
The
1.
company derived Rmb5.4bn revenue from kitchen cabinet business in 2017, greater
than the sum of No.2-No.4 listed players. Recently Oppein has been leveraging its
strong brand in kitchen cabinet segment to expand into other product categories
such as wardrobe, wooden door, etc.
One of the strongest distributor networks characterized by both extensive 2.
reach and efciency
. By 1H18, the company had 6,711 stores across different
product categories and tiers of cities, the largest among all competitors. The
company has the highest per store sales for kitchen cabinet and has been ramping
up quickly in the wardrobe segment as of 1H18.
19 December 20183
Goldman SachsChina Consumer Durables
A leader in developer’s market
. Oppein derived Rmb964mn from the developer’s
3.
channel in 2017, highest among its listed competitors. The company has been
partnered with leading developers for a long time and has developed an experienced
network distributors for developers to expand the business and alleviate cash ow
risks.
Investment thesis
We expect Oppein’s revenue to be driven by both new product category penetration and
channel expansion. We expect Oppein to leverage its strong brand and distributor
network in kitchen cabinet segment to drive up sales in other products such as
wardrobes. On the other hand, we expect Oppein to continue its expansion in both
retail and developer’s channel, utilizing its strong distributor network. However, we
expect the margins to gradually trend down due to higher competition and increasing
share of developer revenue. Factoring in the above, we expect revenue/net prot CAGR
of 16%/13% in 2019E-20E. Our 12-m target price is derived by applying a 12X exit
multiple to 2021E EBITDA and discounting back to 2018E at 9% COE. With 6%
downside to our TP, we initiate on Oppein with a Neutral rating.
Guangzhou Shangpin (Sell; 12-m TP: Rmb49.0)
Shangpin - At a glance
A Leading customized furniture manufacturer with a unique channel strategy:
1.
We expect Shangpin to derive c. 39% of its total revenue in 2018E from
directly-owned stores, vs. only 2%-3% for Suofeiya and Oppein. Due to the
opex-intensive nature of its channel strategy, Shangpin has had much lower
protability compared to Suofeiya and Oppein. However, since late 2017, Shangpin
has started focusing on an aggressive franchise-driven strategy, recruiting multiple
distributors in each city (vs. only 1 or 2 for Suofeiya and Oppein) to drive up revenue
growth.
Shopping mall based store location + online marketing strategy:
Shangpin has
2.
over 50% of its stores in shopping malls (vs. 20% for Suofeiya), which, in our view,
helps it to avoid high competition in furniture malls. The company utilizes online
marketing strategy including its own website and other platforms such as Baidu and
Taobao to funnel customer trafc to its shopping mall stores.
Higher contribution from outsourced products:
Shangpin is expected to derive c.
3.
20% of revenue from sales of outsourced products in 2018E based on our
estimates. (vs. 4% for Suofeiya in 2018E)
Investment thesis
We expect Shangpin’s revenue growth to be driven by increasing franchise store
openings and growth of outsourced products, however, at a declining pace. We expect
more store closures and slower per store sales growth as newly recruited distributors
face more pressure during the industry downcycle in 2019E. On the other hand, we
expect the sales growth of outsourced products to decelerate along with the sales from
its customized furniture segment. On the margin side, we expect GPM to trend down
19 December 20184
Goldman SachsChina Consumer Durables。。。以上简介无排版格式，详细内容请下载查看