The Zhitong Finance app learned that Cinda Securities released a research report saying that home furnishings, as a consumer product that balances the post-real estate cycle and the dual nature of mass consumption, have always believed that understanding the industry and enterprises requires more patience and confidence. Overseas leaders have gone through the cycle of real estate and the economic cycle. Although they have not completely escaped the influence of real estate, and experience and lessons learned from the growth process coexist, we have also seen that excellent enterprises continue to break the bottleneck of development and become world giants. China's consumer and stock housing markets are vast. Currently, the market share of the leading domestic home furnishing market is still low. We are optimistic about domestic enterprises with the potential to continue to grow the unit value of customers, and the period of adjustment to the external environment accelerates the implementation of long-term strategies. We continue to recommend Alpha European Home (603833.SH), etc., and high-quality racetrack leader Mousse Shares (001323.SZ), etc.

Report guide:

Cyclic reincarnation and value regeneration. This article explores two issues by sorting out the key development stages, changes in efficiency, and the impact of the real estate cycle in the US, Japan, and South Korea: ① whether, when, and how can enterprises decouple real estate; ② how to break through the global floor efficiency ceiling & dismantle the highly profitable direct-run store model.

▍ The main views of Cinda Securities are as follows:

In the era of stocks, overseas home furnishing leaders have risen to the top.

① It is difficult to completely decouple leading performance from real estate in the long-term downturn. In the stock market, there is a certain synchronicity between household income and housing sales; among them, retail companies represented by Edeli are relatively less affected by the real estate cycle, and the floor efficiency is more stable, and the Home Depot & Hanson companies with home improvement related businesses are more affected by the real estate cycle.

② However, leading companies can cross the cycle over a long period of time by adjusting their business layout in a timely manner to meet changes in consumption habits and channels.

③ Looking at the global horizontal comparison of Pingxiao, the upper limit of Pingxiao's efficiency in different countries is close; in terms of vertical comparison, most companies' Pingxiao declined slightly as their stores expanded, but after 2019, Home Depot relied on a strong supply chain and a multi-year pro business foundation to reinvigorate MRO, and Pingxiao broke the global ceiling.

Referring to international and domestic bases, expanding order value is still a top priority in consolidating store profits.

Although retail enterprises represented by Edeli are less affected by the long-term real estate cycle, the probability of such integrated home furnishing giants in China is small, mainly due to the perfect domestic supply chain clusters and developed e-commerce ecology, making the overall cost performance ratio of small to medium goods superior to offline; in Japan, due to the consistent taxes and fees of e-commerce and physical stores, and the overall low cost of offline rent, it is less difficult for traditional enterprises to build comprehensive advantages in products and services offline than at home. However, it is not ruled out that there will be relatively high-frequency professional faucets for small to medium parts such as mattresses and toilets.

Looking at the store UE model: ① In terms of revenue generation, ping efficiency is an important indicator reflecting store revenue generation. Although there are differences between the domestic store model and overseas, the current domestic leader's ping efficiency is close to a high global level, and it may be possible to draw on the development path of Hanson Rehaus and Home Depot Pro in the future. Moreover, the current retail integration of custom leaders is still mainly based on the number of incremental customers, and has not achieved a leap from DIY to PRO in terms of unit value compared to Home Depot. There is still a lot of room for improvement in future category integration.

② In terms of costs, compared to Edeli's profit model, the gross margin of direct management is close to that of China, but Edeli's rent advantage is obvious. Standard product service costs are low, and supporting its large direct-run stores can achieve a 17% operating profit margin.

Overall, under the actual environment in China, there is little probability that the operating costs of stores will be significantly reduced. In the future, the top priority for increasing store profits may still be on improving efficiency (mainly expanding order value).

Risk Factors:

Risk of fluctuations in the macroeconomic environment; risk of a sharp decline in real estate sales.