To describe this year's home furnishing industry in one word, "the fleeting year is unfavorable" could not be more appropriate.
The data shows that since the peak in February this year (December 10), the household goods index has fallen by 17.29%, and the Wonder A has risen by 4.66% during the same period. The household industry has underperformed the entire market by a large margin.
You should know that the home furnishing industry in 2020 will be vigorous, and the index will rise by more than 25% throughout the year. Some stocks such as Oupai Home Furnishing, Gujia Home Furnishing, Dream Baihe, etc. have doubled the market.
Just across a year, this kind of "reversing" phenomenon appeared.
This article will focus on three issues in the home furnishing industry:
1. Reasons for the market downturn this year
2. The biggest divergence in the current market towards the home furnishing industry
3. How to get out of trouble
Go against
This year, the stock prices of listed companies in the home furnishing industry have continued a deep correction for nearly a year.
As we all know, as a pre-cycle industry in the home furnishing industry, every move in the real estate industry affects the nerves of home furnishing companies.
In the past two years, the real estate market has continued to be in a slump under the background of economic slowdown and "housing is not speculation".
According to data from the Zhongzhi Institute: From January to November 2021, the transaction area of newly-built commercial housing in the key 50 cities increased slightly year on year, and the absolute scale was second only to the same period in 2016. However, the market cooled down significantly in the second half of the year, and the transaction scale fell to 2015 from July to November. ** level since the same period.
According to preliminary statistics, from January to November 2021, the average monthly transaction area of newly-built commercial residential buildings in 50 representative cities was about 33.15 million square meters, an increase of 8.0% year-on-year, of which July-November fell by more than 20% year-on-year.
In other words, the national commercial housing sales performed well in the first half of the year, and the decline in the second half of the year was obvious.
Recently, the Zhongzhi Institute released data: It is predicted that the sales area of commercial housing will drop by 6.8%-8.3% in 2022, and the average sales price will increase slightly by 2.0%-3.5%; the new construction on the supply side will also continue the adjustment trend, down 4.0% year-on-year -5.5%.
New home sales, an incremental market for the home furnishing industry, are experiencing problems. In theory, the correction of stock prices is natural. What is interesting is that judging from the performance of major listed home furnishing companies this year, the impact is not significant.
Financial report data shows that nine custom home furnishing companies including Opal Home Furnishing and 4 software home furnishing companies including Gujia Home Furnishing have generally achieved mid-to-high digit performance growth in the first three quarters of this year.
Why is there such a phenomenon of differentiation?
This is due to market sentiment fluctuations, that is, changes in the industry's valuation center.
Wind data show that the PE-TTM of the household goods index began to fall from 37.5 times at the beginning of April this year, and fell below 23 times the ** value at the end of October. At present, there has been a slight rebound, and it is only about 27 times, which is a long way from the 30 times when the stock price rose sharply last year.
In addition, compared with the vertical stretch, the current valuation of the home furnishing industry has been slower than the level of the stock market crash in April last year and is close to the historical ** level of the real estate in-depth adjustment period from the end of 2018 to the beginning of 2019.
The price-earnings ratio often represents market expectations. A low price-earnings ratio means that the market is not optimistic about the future prospects of the home furnishing industry. In addition to the above-mentioned slowdown in new home sales, there are also concerns about the rising prices of upstream raw materials in the home furnishing industry and the dispersion of downstream terminal traffic.
In terms of upstream raw materials, since the beginning of this year, whether it is plywood, particleboard, and wood-based panels that are necessary for custom-made furniture, or sponges and leathers that are purchased in large quantities for upholstered furniture, there have been significant price increases.
Among them, the price of particleboard, the main raw material for cabinets, wardrobes, and wooden cabinets, rose by 6.48% year-on-year in the first three quarters, and by 8.8% year-on-year in the third quarter. It also rose from 1200 yuan/sheet to 1600 yuan/sheet.
The transmission of raw material price increases to furniture companies is the general decline in gross profit margins. This is also the main reason why the growth of net profit attributable to the parent of major home furnishing companies in the first three quarters has not been as fast as the growth of revenue.
In terms of terminal diversion, after the epidemic, the full-decoration channels, integrated channels, Internet home improvement platforms, and community group purchases all have a diversion effect on the passenger flow of traditional home furnishing distribution channels. The situation of more and less porridge has also increased the difficulty of acquiring customers for home furnishing companies.
Under all kinds of pessimistic expectations, no matter how good the performance of the home furnishing industry is, it will not be able to stop the decline in stock prices.
Key disagreement
An important reason why the performance of the above-mentioned home furnishing companies run counter to the stock price trend is that the market generally regards home furnishing companies as cyclical stocks that are highly correlated with the ups and downs of first-hand commercial housing sales.
Guotai Junan’s previous research shows: “There is a significant lag phase between the income of the home furnishing industry and the growth rate of real estate sales area, and this lag period is about 9-12 months.” In other words, the decline in real estate sales that began in the second half of this year will not be transmitted to the home furnishing company's report side until the second half of next year.
In addition, the increase in the proportion of refined decoration with superimposed ToB attributes will form a squeezing effect on the C-end retail of the main sales channel of furniture companies.
The Oviyun report clearly mentioned that the increase in the proportion of hard-covered housing and public rental housing has had a huge impact on the supply structure of traditional housing. make a large impact.
Its data shows that the total supply of rough commercial housing and rough affordable housing has fallen sharply from 50% in 2016 to 28% in 2018, and is expected to continue to decline to 22% in 2020.
Correspondingly, the total supply of hard-covered commercial housing and fully-furnished affordable housing has rapidly increased from less than 9% in 2016 to 31% in 2018 and is expected to increase to 39% in 2020.
However, many professional organizations believe that the home furnishing industry’s reliance on the sales of new houses will be reduced, and the refurbishment of “old second-hand houses” is the basic market for its future. Under this trend, the home furnishing industry will become a “weak cycle”. Transformation of consumer stocks.
Soochow Securities and Guotai Junan hold this view. Soochow Securities said in a research report released in October that the market currently has excessive concerns about the policy of real estate regulation, and the proportion of existing housing renovation demand, furniture consumption upgrades, and just-needed housing purchases Driven by factors such as promotion, the furniture industry will usher in a medium and long-term steady growth.
The main basis is:
1) It is predicted that in the next ten years (2021-2030), the annual compound growth rate of the demand for renovation and decoration of stock houses is about 9%, which will account for more than 2/3 of the overall decoration demand;
2) The ratio of "furniture/home appliance retail sales" in China is only 0.98, compared with 1.78 in the United States, there is still room for double growth in my country;
3) Under the policy of housing no speculation, the proportion of owner-occupied houses will increase, and consumers' demand for personalized high-quality furniture will promote further consumption upgrades in the home furnishing industry.
According to a research report released by Guotai Junan in the same period, the flow of offline new homes will gradually decline in terms of absolute value and proportion, and it is expected to drop to 32.5% by 2025, and the proportions of hardcover and heavy decoration are expected to increase to 26.6% respectively. , 40.9%.
It is not difficult to see that both parties mentioned the pillar status of re-decoration in the future. This also indicates that although the expansion of the share of refined decoration has taken away the volume of the C-end rough house retail market, re-decoration will become a new source of water for the home furnishing industry.
After one trades up, the outlook of the home furnishing industry may not be as pessimistic as the market expected.
At the end of October, Sofia responded to investors’ questions and said that the company is not under downward pressure on real estate and is not expected to be very much next year. At the same time, he mentioned the replacement effect of re-decoration.
But there is no doubt that the current market clearly assigns home furnishing stocks to the side of strong cyclical real estate stocks.
Solution
The various difficulties encountered by the home furnishing industry have given birth to pessimistic expectations in the market. Can relevant companies solve these difficulties to change market expectations?
The good news is that major home furnishing companies have made targeted responses.
First, in response to the consumption of profit caused by the increase in raw material prices, major home furnishing companies have announced product price increases since the second half of the year.
Among them, Oupai Home Furnishing announced in July that it would adjust the price of homemade products by 1%. According to channel feedback, the price increase did not bring adverse effects. According to recent media reports, a number of sofas, furniture, bathroom, and ceramic tile companies have increased their prices by 5%-10%.
Although the price increase in the home furnishing industry has not brought immediate effects on the market like mustard and other consumer products, the financial effect is the same in theory. The protective effect of product price increases on gross profit margin will be fed back as early as the fourth quarter or the first half of next year. Performance.
Therefore, the price increase of raw materials is no longer the main contradiction of the home furnishing industry.
Second, there are more ways for home furnishing companies to respond flexibly to the diversion impact on the B-end of fine decoration.
On the one hand, fine decoration does not mean that branded furniture companies are excluded. On the contrary, under the background of real estate price restrictions, real estate developers have to obtain new house premiums through "branded furniture", which is inseparable from the participation of branded furniture companies. One of the proofs is that the revenue of the "bulk business" of the head customized furniture brand Opai Home furnishing tops the list.
On the other hand, the "complete installation channel" is becoming a new C-end growth point for home furnishing brands. The so-called "complete installation" refers to the "basket of products and services" that provides household building materials and hardware such as cabinets, wardrobes, bathrooms, wooden doors, and personalized design solutions. This attribute has achieved rapid growth in recent years because it perfectly matches consumers' demands for one-stop service.
Take custom furniture companies as an example. Since 2018, major custom furniture companies have deployed their own installation channels through brand cooperation with home improvement companies and self-built methods, and they have now entered a harvest period.
According to financial report data, as of the first three quarters of this year, Oupai Home Furnishing has deployed 700 self-contained large-scale home furnishing stores, accounting for nearly 10% of the company’s total number of stores; during the same period, Sophia’s self-contained channels achieved 313 million yuan, a four-fold increase over the entire year of last year. ; In the first half of the year, Shangpin Home Delivery's integrated channel revenue (full-caliber, including furniture accessories) totaled approximately 492 million, and its revenue accounted for approximately 20%.
In addition, the complete installation channels of the waist and tail companies including Gold Cabinet, Zhibang Home Furnishing, Haolaike, and Piano have all expanded in different degrees.
On the whole, the development of the whole-installation channel is expected to weaken the impact of the expansion of the share of fine decoration on home furnishing enterprises.
Third, in response to the pressure of declining sales of new homes, home furnishing companies are hedging by expanding the refurbishment business of old homes, but the problem is that the current renovation market is still dominated by new homes, and it is not known when refurbishment will be replaced. The switching phase of this decoration structure increases the difficulty of layout in the home furnishing industry.
Looking at the long-term trend, the advent of the re-decoration era is inevitable. When home furnishing stocks reduce their dependence on new home sales, it will become a consumer stock index with a weak housing cycle. The turning point is when the home furnishing industry can smooth out the fluctuations caused by the real estate cycle.
