What are the "long bull stocks" in the home furnishing industry?

Affected by the decline in residential consumption growth and the decline in real estate sales growth, listed companies in the home sector generally fell by more than 30% in 2018, and individual companies even fell by more than 50%, becoming one of the sectors of the A-share market that fell*.
Among the stocks that fell, there were also a number of leading companies in the * segment that had maintained relatively rapid growth in the past.
Among these companies, the valuations of many companies have fallen to near historical lows, and there are long-term investment buying opportunities amidst market pessimism.
In the development history of the developed* home furnishing industries in the United States, Japan, South Korea, etc.
, several dozen "long bull stocks" such as Home Depot, Ideli, and Hansen have emerged, as well as global industry leaders such as IKEA and Serta.
From the perspective of the internal logic of the development of the home furnishing industry, it is almost inevitable that the continuous increase in concentration will lead to the emergence of industry giants.
At present, the process of branding and increasing concentration in the industry has just begun, and leading companies are beginning to take shape.
The long-term strategic direction is still at the stage of preliminary attempts and running-in.
At present, companies will also face the test of severe economic and industrial environment.
In the author's opinion, in the upcoming 2019, for the leading companies in the home furnishing industry, there will be both dangers and opportunities.
"Change" in the furniture industrySince the third quarter of 2018, the macro economy has been affected by multiple internal and external factors, the economic environment is relatively severe, and the data on household consumption has dropped significantly.
As a durable household product, residents will reduce or postpone consumption, which will have a direct impact on product sales.
According to calculations by some brokerage firms, the overall national real estate sales area may experience a negative growth of 5%-10% in 2019, and the negative effects will further manifest.
   At the same time, the increase in the proportion of full renovations in the downstream real estate industry has also squeezed the bargaining and payment capabilities of the household industry.
The data shows that the average house in our country is fully furnished   The proportion is less than 10%, and developed* such as Japan, France, the United States, Germany and other hard-covered houses accounted for more than 80%.
According to the goals set out in the 13th Five-Year Plan for the construction industry, the proportion of fully furnished houses nationwide will reach 30% in 2020, and the proportion will continue to increase rapidly in the future.
In the choice of decoration products, real estate companies will have more say.
   Increasing competition has also brought many uncertainties to the development of the home furnishing industry.
Custom home furnishing has been in a "double high" state of high growth and high profitability in the past few years, attracting many challengers and crossovers in other fields.
In the next 1-2 years, competition in the home furnishing industry may further intensify.
The development opportunities of leading home furnishing companies    Although the uncertainty of the furniture industry has increased sharply, leading home furnishing companies will directly benefit as the market structure changes.
Home furnishing retail chains represented by Red Star Macalline and Juran Home are accelerating their penetration into third- and fourth-tier cities, and the penetration of channels will accelerate the opening and expansion of leading home furnishing companies.
Judging from the information disclosed by listed home furnishing companies, even if the economic environment is facing more challenges in 2018, leading home furnishing companies still maintain a relatively fast store opening speed.
   In the long-term development process, the brand reputation established by leading companies has also made it difficult for small and medium-sized brands to catch up.
Oupai cabinets, Sophia wardrobes, Gujia home furnishings, Xilinmen mattresses, Chivas sofas, most of the home furnishing company brands have been accumulated through years of operation.
It is difficult for the form of household products to undergo innovative changes, and the way consumers receive information is becoming more and more fragmented, which makes it difficult for small and medium-sized companies to achieve counterattacks within a few years.
In addition, in the current relatively severe macroeconomic environment, the space for SMEs to survive is getting smaller and smaller.
Especially since 2017, many small and medium-sized companies in the home furnishing industry have accelerated their exit from the market under the strict inspection of government supervision such as environmental protection, fire protection and taxation.
Coupled with the sinking of the channels of branded home furnishing chain companies, which squeezed traditional channels such as furniture cities in various places, the concentration of various sub-sectors of the home furnishing industry has begun to accelerate.
      In terms of large-scale manufacturing and supply chain integration, the furniture industry has higher and higher barriers.
The home furnishing industry has relatively intensive production capital and labor, high transportation and warehousing costs, plus many home furnishing products SKUs (stock-keeping units), large-scale production, regional layout of production capacity, and supply chain integration and upstream collaborative sales of products.
Management has become the advantage and barrier of national home furnishing companies.
   In 2019, the sales area of ​​new homes may experience a decline, but in the long run, the proportion of existing home renovations will become higher and higher.
In 2018, the proportion of first-tier cities has reached 50%, and the country has reached 35%.
It is expected that the country will reach it in 2020.
38.
5%.
The gradual increase in the proportion of stock house decoration will weaken the impact of new house sales cycles on home furnishing companies.
Opportunities and challenges in the subdivision of the home furnishing industry Opportunities and challenges in the subdivision of the home furnishing industry 1.
Customized home 1.
   Customized home The penetration rate of custom home furnishings in China is about 20-30%, and some developed* have reached more than 60%.
It should be said There is still a lot of room for development.
Opal, Sophia, Shangpin Home Delivery and some second-tier brand companies have achieved rapid growth in the past few years.
   Since 2018, software home furnishings, finished home furnishings, decoration companies, home textile companies and even flooring companies have entered the custom home furnishing industry across borders.
In addition to the vast industry space and huge profits, the main reason is that the customized home furnishing production equipment and technology are relatively mature, and the products are relatively homogeneous.
Consumer brand reliance on low- and mid-end products is not strong, resulting in more radical capacity expansion and price wars.
This momentum seems to have just begun.
In addition, downstream decoration companies and real estate companies' full decoration's penetration of custom home furnishing traffic and the improvement of their right to speak also squeeze the bargaining power and repayment ability of custom home furnishing companies under the original 2C model.
   Companies with high barriers to custom home furnishing are not common, such as mid-to-high-end cabinets, Oupai Home Furnishing, which has a certain brand premium, and Shangpin Home Delivery, a whole-house custom company that occupies the brand's first-mover advantage and flow-end layout.
Fierce competition is inevitable.
However, as long as the leading companies rely on their competitive advantages and capital strength to cross the competition cycle and gradually expand their market share, they can finally share the generous market profits of the customized home furnishing industry.
2.
Software home         2.
Software Home Furnishing    Software Home Furnishing companies are represented by Gujia Home Furnishing, Man Wah Holdings and Xilinmen.
Compared with custom home furnishings, the competitive landscape of software home furnishings is relatively better, and it is not greatly affected by the full renovation policy, and there are fewer new entrants and crossovers.
The reasons for this situation are that the traditional sofas have relatively intensive labor and more product styles, which are relatively difficult for manufacturing and supply chain management; second, consumers are likely to form a certain brand awareness for functional sofas and mattresses.
And dependence; third, the sofa product display type is relatively strong, and the location and flow requirements in the retail mall are relatively high.
   It is also more difficult for sofa and mattress brand companies to form an advantage, and they still have to face continuous competition from domestic and foreign brand companies.
Advantageous companies can gradually expand their territory based on their scale advantages, supply chain integration advantages, and store operating efficiency advantages.
In comparison, Man Wah Holdings' position in the functional sofa industry may have a significant advantage.
3.
Finished home furnishings 3.
Finished home furnishings    Finished home furnishings are represented by Meike Home Furnishing and Qumei Home Furnishing.
Mid-to-high-end finished home furnishings can gain brand reputation through long-term operations and form certain barriers.
However, due to the product's emphasis on design and high degree of personalization, it cannot form a * competitive advantage relative to its peers, and the increase in concentration is relatively slow.
Another point is that there are many finished home SKUs, and it is difficult to improve the efficiency of asset turnover and store operation efficiency, which will also directly affect the expansion speed of the enterprise.
As for customized home furnishing and sofa manufacturing companies, due to the pre-payment model of customized products, the asset utilization efficiency is relatively high, the capital required for expansion is relatively light, and the liabilities can be used to continuously carry out external acquisitions.
   In my opinion, whether it is custom home furnishings, soft furnishings, finished home furnishings or other types of home furnishing companies, they will face the severe test of the macroeconomic and industry environment in 2019, and there may be a long-term bottom of the industry.
Among them, the segments with relatively good competitive landscape and companies with good balance sheets are more likely to survive the "winter.
" Once the economy begins to recover from the bottom or competitors gradually clear out, companies with significant competitive advantages and capital strength will most likely usher in a long road of rising valuations and performance.