China Consumer Durables: Customized furniture: Oppein & Suofeiya 2Q prelim results miss, continued demand and margin pressure

Research evidence excerpt

China Consumer Durables: Customized furniture: Oppein & Suofeiya 2Q prelim results miss, continued demand and margin pressure

Goldman Sachs China Consumer Durables

Key upside risks: 1) Loosening on government property policies/actions; 2)

faster-than-expected growth in emerging channels; 3) successful expansion of product

portfolio.

Suofeiya Home Collection Co. (002572.SZ)

Investment Thesis: Suofeiya plans to become a full-suite home furniture provider by

expanding into other products such as customized kitchen cabinets and wooden doors.

In addition to its traditional offline distributor channel, the company is also expanding to

the developer channel and most recently the fast-growing furnishing channel. However,

the planned strategy change has not yet translated into faster revenue growth vs.

industry leader Oppein due to the challenging demand environment and still early

channel/product expansion strategy. We see largely balanced risk/reward for the stock

at current valuations. We acknowledge the potential for Suofeiya to become one of the

key consolidators in China’s customized furniture market, leveraging its distribution

network and manufacturing advantage. That said, currently we see limited upside as 1)

benefits of the channel/product expansion strategy are yet to be seen; 2) customized

furniture demand is still heavily reliant on the property market for which we hold a

conservative view. We are Neutral rated on Suofeiya.

Valuation: Our 12-m target price of Rmb9.5 is based on a 12X exit multiple applied to

our 2028E EPS discounted back to 2027E using a 9.8% cost of equity.

Key risks: 1) Better-/worse-than-expected property market impacting demand; 2)

Product/channel expansion above/below expectations; 3) More/less intense