Jason Furniture (Hangzhou) Co.Ltd(603816) (603816)
Event: the company plans to invest 1.037 billion yuan to build a production base in Monterey, Mexico, which mainly produces high-end soft sofas, high-end functional sofas, high-end mattresses and other products. The project is expected to start in the first half of 2022, with a construction period of 36 months. The phase I project is expected to be put into operation in the middle of 2023. When the overall project reaches the outline, it is expected to realize an income of about 3.019 billion yuan.
Increase overseas production capacity layout and enhance export competitiveness. In recent years, the trade war and mattress anti-dumping policy have significantly increased the tariff cost of the company’s export to the United States, especially the two rounds of mattress anti-dumping, which makes the factory of subsidiary Xibao in Malaysia unable to continue to export to the United States. At present, the company’s production capacity in Vietnam can only cover about 40% of its business to the United States, and most export products are still exported to the United States from China with high tariffs. The company’s new production capacity in Mexico is expected to effectively avoid tariffs, increase the depth and breadth of radiation to the North American mattress and sofa Market, improve the response ability to the North American market and further enhance the competitiveness of export business.
The short-term profit elasticity of export is large, the competitiveness is improved, and the long-term certainty is increased. Under the pressure of transportation capacity, freight and tariff, the company’s export sales still achieved high revenue growth in the first three quarters of this year, and the current orders on hand are full, showing a strong toughness of the export business. Since September, the sea freight has been significantly corrected. The distance between China and the United States has dropped by more than 30%. With the end of the Christmas preparation period, the sea freight is expected to continue to decline. Superimposed on the possible tariff reduction and raw material price drop, the company’s export business may have greater profit elasticity in the short term. In the long run, the overseas production capacity is gradually implemented and the competitiveness is improved. The company is expected to continue to achieve steady growth in the export market.
The big home strategy was smoothly promoted, and the logic of category coordinated development continued to be fulfilled. The company actively broadens the price band of sofa categories, and expands other high potential categories with the help of brand and channel advantages. This year, the low-end sofa brand tianxipai and high-end functional sofas have achieved rapid growth. At the same time, the linkage rate of bed products, integrated products and customized products has continued to improve, and the big home strategy has been promoted smoothly. The company continues to optimize the organizational structure and promote the construction of regional retail center and channel informatization to improve channel efficiency; In this year, the product middle and Taiwan business department was established to strengthen the product strength. In the future, the company has great room for improvement in channel and store efficiency.
Profit forecast and investment rating: we believe that the current brand value of soft furniture is greater than the channel price, Jason Furniture (Hangzhou) Co.Ltd(603816) as the industry leader, it is expected to continuously increase the company’s share by virtue of brand advantages. It is estimated that the net profit attributable to the parent company from 2021 to 2023 will be RMB 1.731 billion, RMB 2.142 billion and RMB 2.672 billion respectively, and the EPS will be RMB 284, RMB 3.52 and RMB 4.39 respectively. At present, the corresponding PE of the stock price is 24.62, 19.89 and 15.95 times respectively. We maintain the “recommended” rating.
Risk tip: the epidemic situation exceeded expectations, the price rise of raw materials exceeded expectations, and the implementation of furniture subsidy policy in the countryside was less than expected
