Industry adjustment is optimistic about the sinking of branded furniture companies

The medium and long-term determining factor of furniture consumption is the income of residents, and the short-term is subject to the growth of real estate sales.

In terms of international comparison, the per capita furniture consumption of highly developed countries, medium-developed countries and developing countries is quite different. From the perspective of China, the rapid growth of residents' income in the past 10 years led to a compound growth rate of furniture consumption of 27.5%, which entered the middle of growth; regression analysis showed that there was a significant linear relationship between the two in the medium and long term.

The impact of real estate sales growth on furniture consumption is different according to the development cycle of the furniture industry. Real estate has a significant impact on furniture consumption in developed countries; and the impact on Chinese furniture industry in the middle of growth is relatively small. .

In the next five years, China's furniture industry is still in the middle of growth. In 2012, the growth rate of real estate sales was lower than the potential growth rate.

The proportion of furniture consumption in revenue will rise from the current 0.5% to 1% in 2020, and the compound growth rate in the next five years will be 22%-24%. In the short-term, real estate sales growth in 2012 is less than 5%. The superimposed effect of low growth rate of real estate sales in 2011-2012 will lower the growth rate of furniture consumption to 18%-20%.

Industry adjustments are conducive to brand enterprises that are counter-trending and sinking.

In the next 1-2 years, the real estate regulation and control policy will make the growth rate of the furniture industry lower than the central growth rate, which is 18%-20% according to our above forecast. In the downturn of the industry, for the unbranded enterprises, due to the lack of risk transfer mechanism, its original meager profit will continue to be thin. In 2008, the net profit margin of the industry downturn was only 3%.

In 2012, the net profit margin of the entire industry will fall from the current 5% to 4%. Furniture consumption has shown an obvious trend of consumption upgrading, creating a huge space for the growth of brand furniture. During the industry adjustment period, the ranks of dealers are constantly improving. It is more difficult for manufacturers without brands and brands to attract investment. Brand furniture companies have sufficient resources and funds to expand channels.

In addition, the growth rate of real estate sales in unrestricted cities has remained relatively stable, and the mid-range positioning enterprises with more successful sinking channels will be able to effectively diversify risks and perform relatively well.

For example, in the past few years, the mid-end positioning brand enterprises represented by Quanyou, Pocket Pearl, Dynasty, and Shuanghu have mainly attacked the third- and fourth-tier markets, and have developed steadily in recent years. Quanyou Furniture currently has more than 3,000 specialty stores nationwide, 90% of which are distributed in the second, third and fourth tier cities.

Dynasty furniture has 2,000 stores in more than 400 cities across the country. There are only 200 direct stores in the city, and more than 90% of the stores are not restricted to the city; it can effectively offset the impact of the purchase restriction.

Investment strategy and key companies. In 2012, the overall growth rate of the industry was 18%-20%, which was lower than its potential growth rate. We gave a “Neutral” investment rating. However, they are optimistic about two types of brand enterprises: those with the ability to expand against the trend and those with more successful channel sinking.

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