China' s home furnishing industry is experiencing the largest wave of capitalization of leading companies in history, and companies involved in the concept of smart homes are also on the verge of capitalization.

Following the low tide of 2018~2019, the home furnishing industry started to go public again. Last year, 18 pan-home furnishing companies were successfully listed, and so far this year, 40 home furnishing companies have submitted forms, 7 companies have been listed, and 32 companies are queuing for IPO.

The total scale of the home furnishing industry in the broad sense exceeds 4 trillion yuan, which is one of the few in the entire large consumer sector.

According to incomplete statistics, the number of home furnishing companies above designated size is as high as more than 6,500, and the entire industry is still relatively fragmented, and there is a lot of room for improvement in concentration.

The home furnishing industry has seen a listing boom in 2011, 2014, and 2017. Each round of listing boom is accompanied by changes in the industry and an increase in concentration. For example, in 2017, capital was enthusiastic about the customization of the whole house. Companies such as Oppein, Homekoo and other companies took advantage of the trend to go public, and together with Sogal, which went public in 2011, formed a "three-legged" situation of whole house customization.

But as of now, the A-share home furnishing industry has not yet created a large company with a market value of more than 100 billion yuan and a revenue of more than 20 billion yuan. At present, the market value of the industry leader Oppein is in the order of 80 billion yuan, and its annual revenue in 2020 will be 14.7 billion yuan. Kuka Home, which ranked second, had a revenue of 12.6 billion yuan last year and a market value of only more than 40 billion yuan.

The desire for scale concentration, the pursuit of smart home outlets, and the confidence in the market climate have made many home furnishing companies judge that now is the golden age of listing.

"Little Dragon Head" rushes to scale

From last year to July this year, nearly 60 home furnishing companies launched an impact on the capital market. In the past few decades, there were only about 60 A-share listed companies in the home furnishing industry.

"Behind the wave of capitalization, in the various subdivisions of the home furnishing industry, there have not been large companies that really lead the way. Most traditional subdivisions are in the stage of 'big industry, small business', and at this time everyone intends to "use capital seizes the market". A home furnishing company in Shenzhen who had just submitted the prospectus told China Business News.

In 2020, a total of 18 companies in the pan-furniture industry have successfully gone public. In the first half of this year, 7 more companies have passed IPOs, including many traditional leading companies in the home furnishing sector.

Aupu Furniture, which has been established for 28 years, is the industry leader in integrated ceiling bath heaters. In 2020, it will achieve a total operating income of 1.59 billion yuan and a net profit of only 189 million yuan. According to the calculation of the Prospective Industry Research Institute, the market size of my country' s integrated ceiling industry is about 24 billion yuan. Rough calculations, the market share of Aupu Furniture is about 6%.

Dongpeng Ceramics, which has a history of 46 years, is the leader of domestic ceramic sanitary wares. It returned to the a listing last year. The listed company Dongpeng Holdings has a revenue of 7.15 billion yuan in 2020. According to data from TF Securities, in 2019, there were 1,522 building and sanitary ceramics enterprises above designated size in the country, with main business income of 387.8 billion yuan. Taking into account the enterprises below the designated size, the total revenue of the building and sanitary ceramics industry reached 601 billion yuan. According to a rough calculation of this overall scale, the market share of Dongpeng Ceramics is only between 1% and 2%.

Huisen Furniture, which was successfully listed on the Hong Kong stock market last year, is China' s largest exporter of panel furniture, but its market share is only about 4%. Last year it achieved revenue of 3.9 billion yuan.

"Big industries, small companies" means that the industry has sufficient room for reshuffle. Some small companies have overcapacity at the low end and severe homogeneity competition, while leading companies are expected to obtain more resources and create a cluster effect through capital blessing.

At the end of June, DeRUCCI Health Sleep Co., Ltd. issued a pre-disclosure prospectus, intending to be listed on the main board of the Shenzhen Stock Exchange, raising about 1.9 billion yuan. In early July, Arte Mundi Group Co., Ltd. also issued a prospectus for the initial public offering of shares, and plans to be listed on the Shanghai Stock Exchange to raise 615 million yuan.

As a leading company in the wood flooring industry, Arte Mundi' s revenue in 2020 is only 1.028 billion yuan, a very small share in the entire market.

Therefore, many leading traditional home furnishing companies stated in the prospectus that the purpose of fundraising is to expand production capacity and upgrade technology.

The concept of technological intelligence is currently very hot

Among the new batch of IPO household companies this year, there is another category that has rarely appeared in the past. These companies have small financing scale and obvious intelligence characteristics, and they intend to take advantage of this round of capital boom to catch the air of science and technology and the Internet of Things.

For example, Tubatu, who is currently waiting in line for the IPO, claims to "snatch the first share of the Internet in the A-share industry."

Affected by the "home economy" of the foreign epidemic, cross-border home furnishing e-commerce has exploded since last year. Taking advantage of this boom, ZIEL Furniture and Aosom Furniture, which are mainly engaged in cross-border home furnishing sales, have applied for A-share listing.

In addition, Qunhe Technology, which focuses on the "first share of home improvement 3D cloud design", has submitted a prospectus to go public in the United States, and companies such as Eoroom Furniture and ORVIBO, which focus on whole-house smart homes, have chosen to IPO in A shares.

Judging from the experience of listed companies last year, companies that stand on the edge of intelligence and technology are more popular.

The reason why smart homes are enthusiastically favored by capital is that this market has a low penetration rate, but it is considered to have a very good prospect. An industry insider engaged in smart home solutions said that the current smart home penetration rate is less than 10%, and the whole house is less than 5%, and the sales growth rate of smart homes in 2021 alone will be more than 30%. The Chinese market expects In the future, it can reach a scale of about 540 billion yuan.

In addition, the maturity and implementation of technical means, and the establishment of standardized connections have alleviated the current situation of the industry with many players and mixed agreements, and further clarified the industry' s prospects.

Real estate and home appliance top players have entered the game

The home furnishing industry has once again set off a wave of listings for many reasons. In addition to the development needs of the company itself, the fundamentals of the industry are also improving.

As a downstream industry that has a strong correlation with the real estate industry, the boom in real estate sales has a profound impact on the home furnishing industry. In the first half of this year, the national commercial housing sales reached a new high.

According to the National Bureau of Statistics, the sales area of commercial housing in the first half of the year increased by 27.7%, reaching 886 million square meters. In terms of second-hand housing, according to calculations by the Beike Research Institute, the transaction volume of second-hand housing in the top 50 cities in the first half of 2021 will increase by about 60% year-on-year.

Therefore, since the beginning of this year, home furnishing retail has performed well, and home furnishing consumer demand has been continuously released.

Since the third quarter of last year, affected by the "home economy" of the foreign epidemic, our country' s foreign trade exports have accelerated, and the popularity of household export orders has greatly exceeded market expectations.

Hua Xiaowei, deputy director of the Hongta Securities Research Institute and chief analyst of light industry and food and beverage, believes that benefiting from the continuous recovery of domestic and foreign demand, the inflection point of the home furnishing industry in 2021 and the trend of continuous growth are very clear and there is a lot of room for improvement.

According to the National Bureau of Statistics, in the first half of this year, household retail sales increased by 30% year-on-year, and household exports increased by 44.5% year-on-year.

A relevant person in a company that has been preparing to go public for more than three years and is currently applying for a GEM IPO told China Business News that this year’ s series of positive news have been superimposed. According to the industry’ s general judgment, it is currently the golden period for home furnishing companies to go public, and they are expected to be able to get a higher price valuation.

In addition, compared with the real estate industry entering a period of meager profit, the profits of the home furnishing industry are generally higher, and the gross profit margin of leading companies is around 35%. Therefore, more and more real estate companies are also deploying home furnishings.

On July 6 this year, Shell Looking for Real Estate announced that it had reached an agreement with SD Home Improvement to acquire 100% of SD' s shares for a total consideration of no more than RMB 8 billion. The transaction is expected to be completed in the first half of 2022.

Real estate leader Country Garden has established a home furnishing company Modernjj, which has invested 7.7 billion yuan to build 4 smart home production bases, located in Guangdong, Henan, Anhui, and Sichuan. In addition, Country Garden has set up bathroom manufacturing bases in Chaozhou, Guangdong and Yangzhou, Jiangsu to produce smart bathroom, integrated bathroom and integrated kitchen products.

In addition to Country Garden, other real estate companies such as Vanke, Poly, Greenland, China Resources, Shimao, etc. are also accelerating the integration of the home furnishing industry.

The leading household appliances are naturally unwilling to let go of the home circuit. Recently, Midea Group stated that it intends to spin off Midea Optoelectronics to be listed on the Shenzhen Stock Exchange and has submitted application materials. Meizhi Optoelectronics will vigorously develop the four core businesses of smart lighting, smart control, smart security and smart ceiling.

After Huang Guangyu' s return, Gome also announced this year to accelerate its efforts in smart homes. In April, it launched a new BIM smart home improvement platform-Dressing Home APP. In June this year, it will build "Home·Life" in more than 3,400 offline stores across the country. The experience hall is involved in the field of intelligent systems such as overall cabinets, smart home appliances, and whole-house water purification.

Also because there are more and more entrants from other tracks, most of the top home furnishing companies hope to obtain capital assistance through listing to cope with the increasingly fierce competition.