The bottom of the phased boom has been seen, and the trend of “low before high after” in the home industry for 22 years has been maintained. In 2022, under the background of weak economic and real estate environment and multi-point spread of the national epidemic, the prosperity of the household industry was running at a low level. In terms of real estate, the completed residential area in March 22 was – 15.3% year-on-year, down 5.7 PCT month on month from January to February; In March, the residential sales area was – 23.2% year-on-year, down 9.4pct month on month from January to February In the home furnishing industry, in March, the furniture society was zero, with a year-on-year decrease of – 8.8%, down 2.8pct from January to February; In March, the income of furniture manufacturing industry of Industrial Enterprises above designated size was + 0.4%, down 6.5pct from January to February At present, we are still firmly optimistic. Although the epidemic may affect the industry data from April to may, there may still be pressure, we believe that the bottom of the phased industry boom is now, and the turning point in the future can be expected to rise.
Combined with historical review and quantitative analysis, the three logical highlights suggest that the recovery of the home sector is imminent. Logic 1: the demand can be replenished after the epidemic. Compared with 2020, the short-term impact of the epidemic on customization is greater than that of software. The growth rate after the epidemic has rebounded for four quarters. The revenue from customization and software in 20q2-21q1 is + 28% and + 43% year-on-year respectively. The epidemic acceleration has a significant industry concentration effect. We believe that as a necessary consumption in the decoration link, the impact of the epidemic will only be delayed and will not disappear. The backlog of household consumption demand due to the epidemic will be gradually released in the future. Logic 2: real estate sales are expected to improve. At the bottom recovery stage of the industry boom, we suggest to focus on real estate sales, and the impact on the home sector is expected to be reflected in two dimensions: Valuation repair and consumer confidence repair. Logic 3: raw material cost pressure is expected to slow down. According to our calculation, the peak pressure of raw materials is 2q21-4q21 and 1q22, which has been alleviated month on month; Under the neutral assumption, the cost of 2q22 of customization and software enterprises is expected to be + 4.3% and + 3.9% respectively year-on-year (1q22 + 4.5% and + 4.7% respectively). Considering that software enterprises have raised prices in 21 years and customization enterprises have also made small price adjustments in 4q21-2q22, it is expected that the improvement of raw material cost pressure of household enterprises in the second quarter is a high probability event.
Different views from the market: 1) the market believes that the impact of real estate sales on the performance of the household industry has a long time lag, and it takes more than two years from pre-sale, completion to decoration; We believe that since the prosperity of real estate sales will directly affect the wealth effect of consumers in the current period, during the weak macroeconomic environment (18 years of deleveraging and 21 years of real estate), the current demand for the household industry will also be reflected synchronously.
2) the market is worried that the epidemic will lead to the degradation of consumption in the household industry, which will affect the order recovery of brand enterprises; We believe that although the epidemic will affect the degradation of some consumption power, different from the degradation pressure of most single products, furniture has the consumption attributes of necessities, multiple categories and long chain in the link of home decoration. Therefore, we believe that the impact of the epidemic on household consumption degradation is more reflected in “spending less money to buy more and better products”. Under the background of the epidemic in 2020, household leaders have still achieved significant improvement in single value through package marketing and category integration, and there is still room for improvement in the future.
Grasp the bottom of real estate, orders and performance, and be optimistic about the recovery of the home sector in the second half of the year. We believe that, different from the synchronization of the bottom of real estate sales, the bottom of orders and the bottom of performance at the time point of recovery after the epidemic in 20 years, the epidemic began in mid March this year. It is expected that the bottom of real estate sales and the bottom of orders in 22 years will be ahead of the bottom of performance. The post epidemic recovery market is expected to be deduced in two stages: first, the valuation repair stage, similar to 1q19, is mainly driven by the recovery of real estate sales and orders, with an initial valuation of 16.2x (vs.
The current valuation is 15.8x), and the revenue growth rate of 4q18 / 1q19 / 2q19 is 15% / 10% / 14% respectively, corresponding to the increase of 43% in 1q19 sector. The valuation range of leading and second echelon is repaired to 25-30x and 15-20x respectively; Considering that the impact of the current epidemic on performance is still uncertain, it is expected that the valuation range of this round may be weaker than that in 19 years. The second is the performance support stage. Considering the epidemic time point of this year and the performance base effect of 2h21, it is expected that the recovery trend of enterprise performance will be more clear in the second half of the year, which is expected to drive the valuation of the sector further upward.
Invest in enterprises with the same store potential. Looking back on the real estate disturbance in the past 18 years and the epidemic disturbance in the past 20 years, we believe that each boom adjustment is an opportunity to accelerate the concentration of the industry, promote the leaders to speed up the channel expansion, improve the customer single value ability, expand online drainage and multi-channel cooperation, innovate the whole package and category integration, and achieve remarkable results. Recently, the valuation of the sector has been adjusted back to the bottom level of nearly five years, and the allocation value is obvious. It is recommended to invest in enterprises with the same store potential, and continue to recommend Oppein Home Group Inc(603833) , Jason Furniture (Hangzhou) Co.Ltd(603816) , Suofeiya Home Collection Co.Ltd(002572) , and it is recommended to pay attention to Minhua holdings, Xlinmen Furniture Co.Ltd(603008) , Zbom Home Collection Co.Ltd(603801) , Goldenhome Living Co.Ltd(603180) .
Risk factors: the risk of sharp rise in the price of raw materials; The risk of a large-scale outbreak of the epidemic.
