The industry trend in the third quarter is in line with our previous judgment. In the medium-term strategy, we have judged that the industry will continue to maintain good performance in the second half of the year, giving the industry an overweight rating. In terms of market performance, the furniture industry index in the third quarter of this year has outperformed the market. As of now, the furniture industry index rose by 28.85%. During the same period, the Shanghai and Shenzhen 300 index rose by 12.34%, outperforming 16.51%. Related stock performance: Sophia (46.50%) Yihua Wood (20.73%), Xilinmen (37.29%), and Meike (23.79%).
We believe that the furniture industry is facing four problems: (1) forest resources are in short supply. (2) Exports have weakened the pull effect on the industry. (3) Most of the manufacturers are concentrated in the manufacturing process and are subject to the terminal retail channel. (4) The industry has low concentration, chaotic competition and low quality standards.
We expect that the following clearer directions for predictability will be the focus of the future development of the furniture industry: (1) As the panel furniture seizes the market share of solid wood furniture, the upstream quality wood-based panel enterprises will have more pricing power; (2) Enterprises that control a large number of forest resources have stronger cost control capabilities and more profitability; (3) the industry is shifting from export to domestic sales, and domestic channels and brands are more prominent, and enterprises are more competitive; (4) differentiated competition, Technological innovation and model innovation will become important means for leading peers; (5) sub-sector industry reshuffle integration and increase concentration.
From the perspective of long-term value investment: (1) Due to the shortage of forest resources, the advantages of Daiya technology in the wood-based panel, the decoration of the original paper industry leader Qifeng shares, and the Yihua wood industry with a large amount of precious log resources Good investment value; (2) Domestic demand is the most important market in the future of the industry. Traditional enterprises from the single production type to the quality-oriented, channel-oriented brand retail transformation is more likely to be favored by consumers, get better market pricing power, custom furniture model leader Sophia is actively transforming and is the easiest to benefit from the e-commerce model. The early export to domestic sales and excellent brand building have a very good value investment property.
From the perspective of short-term performance growth: (1) Since the second half of last year, real estate has recovered, and real estate has lagged behind the sales of furniture. Furniture sales are expected to continue to recover in the second half of the year. Sofaa, Meike shares and Xilinmen performance are outstanding in domestic sales channels and brand building. Growth is guaranteed; (2) Benefiting from the continued recovery of US real estate, Yihua Wood, which has the largest share of US furniture exports, has a good order and has no doubts in performance growth.
Industry rating and company recommendation: The industry is in the process of upgrading the industrial structure, the relevant companies have shown long-term investment value, and the improvement of the internal and external operating environment provides external support for the industry's performance improvement this year. We believe that whether it is from long-term investment value or In terms of short-term performance growth, the furniture sector has already shown investment opportunities. With the arrival of the fourth quarter decoration season, the industry will continue to pick up and maintain the industry's “overweight†rating. In terms of individual stocks, we mainly recommend Yihua Wood, Xilinmen and Sofia.
Risk warning: (1) The tightening of property control has exceeded expectations; (2) The international economic downturn has affected furniture exports; (3) The price of raw materials has risen sharply.
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