CEO to increase holdings by RMB150-220mn, maintain BUY
On 26 July, Jason Furniture announced CEO Li Donglai is to increase his holdings in the company by RMB150-220mn through centralized bidding transactions on the secondary market, within three months from the day after the announcement. As demand remains to be rallied, we trim domestic revenue forecast and estimate 2024/2025/2026 attributable NP at RMB2,092/2,321/2,581mn (previous: RMB2,285/2,580/2,878mn), with EPS of RMB2.55/2.82/3.14. Given its outstanding management capabilities, as well as edges in retail operations, supply chain management, and warehousing & distribution services, we value the stock at 14x 2024E PE, vs its peers’ average of 9x on Wind consensus. Our target price is RMB35.70 (previous: RMB50.04). BUY.
The largest holdings increase since 2021 demonstrates confidence
Per the announcement, Director and CEO Li Donglai is to increase his holdings in the company within three months by RMB150-220mn without setting a price range for the increase. As of the announcement date (26 July), Mr. Li directly and indirectly held 2.36% of the company’s shares. The executives have raised their holdings three times during 2021-2023, with actual increases of RMB59.89/5.15/45.36mn, while the planned amount this time far exceeds the previous three, showing management’s confidence in development.
Domestic: awaiting rally on 816 promotions and trade-in policy
1) Industry-wise, the NDRC and the Ministry of Finance jointly issued several measures to support large-scale equipment renewals and consumer goods trade-ins, including support for old home renovations and partial modifications of kitchens/bathrooms, with clearly defined funding sources, which is to boost home furnishing demand. 2) Company-wise, the ongoing 816 promotion features three new benefits including year-round pricing, 90-day unconditional returns for upholstered furniture, and 7-day fast delivery for some products. The company continues to drive retail transformation, optimizing store structure and enhancing operational capabilities. We look out for a further business improvement in 2H24.
Overseas: bullish on LT growth potential amid capacity expansion
For foreign business, home furnishing export demand has generally outstripped domestic demand since 2024. Additionally, the company continues to expand overseas capacity. As per its 2023 annual report, the operation of its overseas manufacturing bases steadily improved in 2023, with the Vietnam base doubling its profits. We think the ongoing construction and ramp-up of its overseas capacity could mitigate trade risks. We are bullish on the upholstered furniture leader’s overseas expansion in the long term.
Risks: slow demand recovery; falling property sales; trade cooperation risks.