Investment Rating - The report maintains a "Buy" rating for the company, expecting a target price of 4.68 HKD, with a projected relative return of over 20% within six months [12]. Core Views - The company reported a revenue of 8.5 billion HKD for FY25H1, a decrease of 7.4% year-on-year, with specific declines in various product categories [12]. - The Chinese market is experiencing weak consumer growth, with a notable drop in consumer confidence compared to last year [12]. - The company anticipates a gradual recovery in the home furnishings market due to increased government support and consumer stimulus measures [12]. - The overseas market shows signs of recovery, with North American sales increasing by approximately 18%, despite a 10% decrease in average selling prices due to structural changes [12]. Summary by Sections Financial Performance - FY25H1 net profit attributable to shareholders was 1.14 billion HKD, a slight increase of 0.3%, with a net profit margin of 13.7% compared to 12.7% in FY24H1 [12]. - Revenue projections for FY25-27 are adjusted to 17.8 billion HKD, 18.5 billion HKD, and 19.9 billion HKD, with net profits expected to be 2.28 billion HKD, 2.42 billion HKD, and 2.62 billion HKD respectively [12]. Market Analysis - The report highlights that the penetration rate of functional sofas in the Chinese market has increased from 7.2% to 9.7% and is expected to exceed 13% within five years [12]. - The company is focusing on enhancing store operations and expanding into lower-tier markets, with a net increase of 280 brand stores during the review period [12]. Strategic Initiatives - The company is actively participating in exhibitions to expand new channels and improve talent development within its sales team [12]. - There is a strong emphasis on product development and upgrading in response to recovering overseas market demand [12].

Investment Rating - The report maintains a "Buy" rating for the company [10][8]. Core Insights - The company reported FY2025H1 results with revenue and net profit of HKD 83.05 billion and HKD 11.39 billion, respectively, reflecting a year-on-year decline of 7% in revenue but a slight increase of 0.3% in net profit [2][6]. - Domestic sales are under pressure, but recent government subsidies are expected to provide a recovery, while export sales continue to show strong growth [6][7]. - The company is building high barriers in brand, product, and supply chain, enhancing competitiveness through design marketing and channel transformation, and is expected to continue gaining market share in the soft furniture industry [8][7]. Revenue Summary - Domestic sales decreased by 17% in H1, with offline and online sales down 15% and 22%, respectively [6][7]. - The company added 280 brand specialty stores, increasing the total to 7,516, focusing on expanding coverage in lower-tier markets and enhancing same-store sales performance [6][7]. - Export sales increased by 14%, with North America and Europe growing by 6% and 38%, respectively [7]. Profitability Analysis - Gross margin and net profit margin improved in FY2025H1, attributed to lower raw material costs and effective cost control [7][8]. - The average unit costs for various materials decreased, with leather and steel down by 5.3% and 8.3%, respectively [7]. - Advertising and marketing expenses decreased by 33%, and management expenses fell by 31%, contributing to overall profitability [7]. Future Outlook - The company anticipates a recovery in domestic sales driven by government subsidies and an improved product matrix [8]. - For FY2025-2026, the company expects net profits of HKD 24.5 billion and HKD 27.8 billion, with corresponding PE ratios of 7.9x and 7.0x [8][13].

Revenue Performance - Revenue for the first half of fiscal year 2025 was approximately HKD 8,305.373 million, a decrease of 7.1% year-on-year[9] - Revenue from the Chinese market decreased by 16.8% to approximately HKD 5,047.547 million, with sofa sales volume down 9.9% and average selling price down 4.0%[10] - North American sales volume increased by 18%, but average selling price decreased by 10.2%, resulting in a 5.7% increase in revenue to approximately HKD 2,153.816 million[11] - Revenue from Europe and other overseas markets grew by 37.7% to approximately HKD 732.697 million[11] - China market sales revenue decreased by 17.2% YoY to approximately 4,975,209 thousand HKD, with a RMB-denominated decrease of 16.8%[22] - North America sales revenue increased by 5.7% YoY to approximately 2,153,816 thousand HKD, despite a 10.2% decrease in average selling price[25] - Europe and other overseas markets (excluding Home Group) revenue grew by 37.7% YoY to approximately 732,697 thousand HKD[25] - Home Group revenue increased by 24.5% YoY to approximately 371,313 thousand HKD, driven by European market demand[25] - Total revenue and other income decreased by 7.4% YoY to approximately 8,471,446 thousand HKD, with an overall gross margin of 39.5%[26] - Sofa and matching products revenue decreased by 5.8% YoY to approximately 5,816,974 thousand HKD, with a 15.6% decline in China market revenue[34] - Bedding and matching products revenue dropped by 18.9% YoY to approximately 1,208,846 thousand HKD, mainly due to consumer downgrading in China[29] - Other products revenue decreased by 7.8% YoY to approximately 835,902 thousand HKD, primarily due to lower sales of iron frames and smart furniture in China[30] - Other business revenue increased by 12.1% YoY to approximately 72,338 thousand HKD, driven by higher property rental income[32] - Revenue for the period 3.2.2021-2.2.2024 is $2,000 million[159] - Revenue for the period 3.2.2024-2.2.2026 is $19.78 billion[161] - Revenue for the period 16.2.2022-15.2.2024 is $11.1 billion[178] - Revenue for the period 16.2.2024-15.2.2026 is $13,600 million[180] - Revenue for the period 16.2.2022-15.2.2025 is $13,600 million[189] - Revenue for the period 16.2.2026-15.2.2028 is $11.1 billion[194] - Revenue for the period 16.2.2022-15.2.2026 is $13,200 million[196] - Revenue for the period 3.2.2021-2.2.2025 is $1,200 million[169] - Revenue for the period 16.2.2025-15.2.2027 is $11.1 billion[185] - Revenue for the period 3.2.2025-2.2.2027 is $5.06 billion[168] Profitability and Margins - Gross profit margin increased by 0.4 percentage points to approximately 39.5%, and net profit margin increased by 1 percentage point to approximately 13.7%[9] - Profit attributable to equity holders of the company was approximately HKD 1,138.925 million, a slight increase of 0.3%[9] - Net profit attributable to equity holders increased by 0.3% to approximately HKD 1,138,925 thousand in the first half of fiscal year 2025, with a net profit margin of 13.7%[70] Market Performance - The company added 280 new stores, bringing the total number of stores to 7,516 by the end of the reporting period[10] - The company's store closure rate remained low at 4.8%[10] - The company plans to continue expanding overseas markets, particularly in North America and Europe, while focusing on domestic market recovery through initiatives like "trade-in" and "upgrade your home" campaigns[17] - The company continues to focus on expanding its global market presence, particularly in North America and Europe, leveraging its production capacity and cost advantages[83] - The company's smart home products are expected to gain further traction in the Chinese market as consumer preferences shift towards quality, brand, and value-for-money products[84] Expenses and Costs - Sales and distribution expenses decreased by 5.6% to approximately HKD 1,513,891 thousand in the first half of fiscal year 2025, with the percentage of revenue increasing from 17.9% to 18.2%[63] - Administrative and other expenses decreased by 30.8% to approximately HKD 311,617 thousand in the first half of fiscal year 2025, mainly due to the settlement of a lawsuit with a former supplier[66] - Financial costs decreased by 25.6% to approximately HKD 73,114 thousand in the first half of fiscal year 2025, primarily due to lower loan interest expenses[68] - Income tax expenses increased by 6.6% to approximately HKD 244,796 thousand in the first half of fiscal year 2025, with the tax rate increasing from 16.2% to 17.0%[69] - Net loss from other items decreased to approximately HKD 109,203 thousand in the first half of fiscal year 2025, compared to HKD 142,290 thousand in the same period last year, primarily due to credit loss provisions for other receivables[62] Dividends and Shareholder Information - The company maintained a dividend payout ratio of around 50%, declaring an interim dividend of 15 HK cents per share, with a payout ratio of 51.1%[12] - The company declared an interim dividend of HK$0.15 per share, unchanged from the previous year[86] - The company's Chairman, Mr. Wong Man Li, holds a 62.30% stake in the company through controlled corporation interests[88] - The company's issued share capital as of September 30, 2024, was 3,877,745,600 shares[90] - Man Wah Holdings Limited's issued share capital as of September 30, 2024, is 3,877,745,600 shares[99] - Man Wah Investment Limited holds 2,415,782,400 shares, representing 62.30% of the company's issued share capital[96] - Mr. Wong Man Li holds 800 shares in Man Wah Investment Limited, representing 80% of the associated company's equity[92] - Ms. Hui Hui Qing holds 200 shares in Man Wah Investment Limited, representing 20% of the associated company's equity[92] - No further share options were granted under the 2010 and 2020 Share Option Plans after their expiration/termination[102] - The company adopted a Share Award Plan on June 24, 2024, but no awards were granted during the review period[102] - 23,600 share options granted on January 17, 2020, remain unexercised with an exercise price of HKD 6.53[102] - 18,400 share options granted on January 17, 2020, remain unexercised with an exercise price of HKD 6.53[102] - 39,200 share options granted on January 17, 2020, remain unexercised with an exercise price of HKD 6.53[102] - 22,400 share options granted on January 28, 2019, remain unexercised with an exercise price of HKD 3.91[122] Legal and Financial Settlements - The company settled a lawsuit with a former supplier, paying a compensation of USD 8,250 thousand (approximately HKD 64,420 thousand) and reversing a provision of USD 10,693 thousand (approximately HKD 83,826 thousand)[76] Investments and Acquisitions - The company did not make any significant investments, acquisitions, or disposals of subsidiaries, associates, or joint ventures in the first half of fiscal year 2025, but continues to seek opportunities for acquisitions in the furniture industry[80] Employee Information - The company had 27,246 employees as of September 30, 2024, a decrease from 29,837 employees on March 31, 2024[81] - Total employee costs for the first half of fiscal year 2025 were approximately HK$1,490,404 thousand, compared to HK$1,479,784 thousand in the same period of fiscal year 2024[81] Product Development and Market Trends - The company's "Zero Wall, Zero Gravity" functional sofa product underwent its second technical iteration in 2024, enhancing its position in the smart home market[83] - The functional sofa penetration rate in the Chinese market increased from 7.2% in 2023 to 9.7% in 2024, with Euromonitor predicting it could exceed 13% within five years[84] Cash and Financial Position - Cash and bank balances (excluding restricted bank balances) stood at approximately HKD 4,283,927 thousand as of September 30, 2024, with good working capital turnover[71] - Short-term and long-term bank borrowings were approximately HKD 4,614,287 thousand and HKD 917 thousand, respectively, as of September 30, 2024, with weighted average interest rates of 5.07% for floating rates and 2.46% for fixed rates[73] Share Transactions - The company did not engage in any purchase, sale, or redemption of its listed securities during the review period[87]

Investment Rating - The report maintains a "Buy" rating for the company with a target price of HKD 6.30 [2][4]. Core Views - Despite facing macro challenges, the company has managed to improve profit margins and maintain stable dividends [2]. - The company is expected to continue expanding its market presence, particularly in the overseas markets, while addressing trade challenges through strategic manufacturing locations [2][4]. Financial Overview - For FY2025, the company reported total revenue of HKD 84.7 billion, a decrease of 7.4% year-on-year, with main revenue declining by 7.1% [2]. - The gross profit margin improved to 39.5%, benefiting from a reduction in raw material costs [2]. - The net profit attributable to shareholders was HKD 11.4 billion, with a net profit margin of 51.5% [2]. - The company plans to increase its store count in China by 500-600 stores [2]. Market Performance - The Chinese market saw a decline in revenue by 17.2%, while North American revenue increased by 5.7% [2]. - The company continues to lead in global functional sofa sales, with a significant increase in overseas market revenue [2]. - The average selling price (ASP) in the Chinese market decreased by 10%, impacting overall revenue [2]. Product Performance - Sofa sales in China decreased by 5.8%, while bedding sales grew by 26.6% [2]. - The company is focusing on new product development and enhancing its sales team to drive growth [2]. Future Outlook - The report anticipates that the decline in the Chinese market will narrow in the second half of the fiscal year, supported by government subsidies [2]. - The company is well-positioned to capitalize on long-term growth opportunities in the functional sofa market, which currently has low penetration in China [2].

Investment Rating - The report maintains a "Buy" rating for the company, indicating an expected price increase of over 15% in the next 6-12 months [2][12]. Core Insights - The company reported a revenue of HKD 8.31 billion for the first half of FY25, a year-on-year decrease of 7.1%, while the net profit attributable to shareholders was HKD 1.14 billion, reflecting a slight increase of 0.3% year-on-year [3]. - The company continues to maintain a favorable dividend payout ratio of 51.1%, with a dividend of HKD 0.15 per share [3]. - Domestic sales faced pressure due to a downturn in the real estate market and weak consumer spending, while overseas sales, particularly in Europe and other regions, showed significant growth [3]. Financial Performance Summary - For FY25H1, domestic sales decreased by 17.2%, while North America and Europe saw increases of 5.7% and 37.7%, respectively [3]. - The company’s gross profit margin improved to 39.5%, up 0.4 percentage points year-on-year, primarily due to a decrease in raw material costs [3]. - The net profit margin increased by 1.0 percentage point to 13.7% in FY25H1 [3]. Future Outlook - The domestic furniture consumption subsidy policy is expected to improve sales, with furniture retail sales showing a year-on-year increase of 0.4% and 7.4% in September and October, respectively [3]. - The U.S. market is anticipated to benefit from interest rate cuts, which may boost the real estate sector, while the company’s overseas production capacity and manageable tariff risks position it well for continued growth [3]. - Earnings per share (EPS) forecasts for FY25, FY26, and FY27 are projected at HKD 0.59, HKD 0.64, and HKD 0.70, respectively, with corresponding price-to-earnings (P/E) ratios of 8X, 7X, and 7X [3][6].

Investment Rating - The investment rating for the company is "Buy" (maintained) [8] Core Views - The company reported a revenue of HK$8.305 billion for H1 of the fiscal year 24/25, representing a year-on-year increase of 7.08%, with a net profit of HK$1.139 billion, showing a slight increase of 0.3% [2] - The gross margin improved to 39.5%, up by 0.4 percentage points year-on-year, while the net margin increased to 13.7%, up by 1.0 percentage points, indicating a significant enhancement in profitability [2][6] - The company has a dividend payout ratio of 51.1%, with a current dividend yield of 6-7% [2] Domestic Sales - Revenue from the Chinese market was HK$4.975 billion, down 17.2% year-on-year (excluding real estate), primarily due to declining consumer confidence [3] - Offline store revenue decreased by 14.9% to HK$3.487 billion, despite an increase of 280 stores to a total of 7,516, focusing on lower-tier markets and new cities [3] - Online sales fell by 21.6% to HK$1.007 billion, with efforts to enhance brand influence through live streaming and collaborations with key influencers [3] International Sales - Revenue from the North American market reached HK$2.154 billion, up 5.7%, with sales volume increasing by 18% despite a price drop of 10.2% [4] - Revenue from Europe and other overseas markets surged by 37.7% to HK$733 million, driven by a decrease in raw material costs [4] Product Categories - Revenue from sofas and accessories was HK$5.817 billion, down 5.83%, with total sales volume of 908,000 units, a 3.0% increase year-on-year [5] - Domestic sofa revenue decreased by 15.6%, while export sales volume increased by 22.8% [5] - Revenue from bedding (entirely domestic) fell by 18.95% to HK$1.209 billion due to insufficient domestic consumption [5] Financial Metrics - The gross margin was 39.5%, up 0.4 percentage points, primarily due to declining raw material prices [6] - The total expense ratio decreased to 22.91%, down 1.1 percentage points year-on-year [6] - The net profit margin improved to 13.7%, exceeding expectations [6] Earnings Forecast and Valuation - The company is expected to achieve revenues of HK$17.647 billion, HK$18.698 billion, and HK$19.826 billion over the next three fiscal years, with a projected decline of 4% in the first year [7]

Investment Rating - The report maintains a "Buy" rating for the company [5][8]. Core Views - The company reported FY2025H1 revenue of HKD 8.305 billion, a year-on-year increase of 7.1%, and a net profit attributable to shareholders of HKD 1.139 billion, up 0.3% year-on-year. Domestic sales remain under pressure, while international sales continue to show robust growth [2][5]. Summary by Sections Domestic Sales - Domestic sales revenue reached HKD 4.975 billion, a decline of 17.2% year-on-year. Offline channel revenue was HKD 3.487 billion (down 14.9% year-on-year), and online channel revenue was HKD 1.007 billion (down 21.6% year-on-year). The gross margin was 40.2%, a decrease of 1.0 percentage points, primarily due to a decline in average selling price (ASP). Sofa sales in the domestic market generated HKD 3.286 billion (down 15.6% year-on-year), while mattress sales were HKD 1.209 billion (down 18.9% year-on-year). The company plans to continue expanding its store network and enhance online and new retail channels [3]. International Sales - International sales revenue was HKD 2.887 billion, an increase of 12.3% year-on-year. North America generated HKD 2.154 billion (up 5.7% year-on-year), with a shipment volume increase of 18%. The European market saw revenue of HKD 733 million, a significant increase of 37.7% year-on-year, with a shipment volume increase of 45%. The gross margin in North America improved to 40.7% (up 4.8 percentage points), while Europe achieved a gross margin of 30.8% (up 3.4 percentage points) [4]. Dividend and Operational Efficiency - The company maintained a high dividend payout ratio of 51.1%. As of FY2025H1, inventory turnover days were 65 days (up 7 days year-on-year), accounts receivable turnover days were 39 days (up 7 days), and accounts payable turnover days were 27 days (down 2 days), indicating stable operational efficiency [5]. Profit Forecast - The company forecasts net profits attributable to shareholders of HKD 2.3 billion, HKD 2.48 billion, and HKD 2.67 billion for FY2025, FY2026, and FY2027, respectively, with corresponding P/E ratios of 7.9X, 7.3X, and 6.8X [5].

Financial Performance - Total revenue for the six months ended September 30, 2024, was HKD 8,471,446, a decrease of 7.4% compared to HKD 9,151,563 for the same period in 2023[4] - Gross profit for the period was HKD 3,280,649, down 6.0% from HKD 3,491,920 in the previous year[4] - Operating profit increased slightly to HKD 1,512,011, compared to HKD 1,509,417 in the prior year, reflecting a marginal growth of 0.1%[4] - Net profit for the period was HKD 1,194,555, a slight increase of 0.9% from HKD 1,184,579 in the same period last year[6] - Basic earnings per share for the period was HKD 29.37, up from HKD 29.05 in the previous year, indicating a growth of 1.1%[7] - Total revenue for the six months ended September 30, 2023, was HKD 8,937,569, a decrease from HKD 8,305,373 in the same period of 2022[25] - The company reported a net profit before tax of HKD 1,414,295 for the six months ended September 30, 2023[25] - Profit attributable to equity holders increased by approximately 0.3% from about 1,136,042 thousand HKD to about 1,138,925 thousand HKD, with a net profit margin of approximately 13.7%[81] Revenue Breakdown - Total revenue for the six months ended September 30, 2024, was HKD 8,305,373,000, with external sales from the sofa and related products segment amounting to HKD 5,816,974,000[23] - The segment performance for the sofa and related products generated a profit of HKD 1,187,298,000, while the bedding and related products segment contributed HKD 252,847,000[23] - Revenue from the China market (including Hong Kong and Macau) was HKD 6,069,863, representing a decline of 16.2% compared to HKD 5,047,547 in the previous period[30] - North America revenue increased to HKD 2,037,448, up 5.4% from HKD 2,153,816 in the previous period[30] - The company plans to expand its market presence in Europe, with revenue from this region increasing to HKD 548,199, up 38.8% from HKD 761,361[30] - Sales revenue in the Chinese market was approximately HKD 4,975,209 thousand, a decrease of about 17.2% year-on-year[52] - Sofa and related products generated revenue of approximately HKD 5,816,974, a decrease of about 5.8% from HKD 6,176,703 in the same period last year[59] - Bedding and related products revenue fell by approximately 18.9% to HKD 1,208,846, down from HKD 1,491,422 due to significant consumer downgrade in the Chinese market[61] - Home Group business revenue increased by approximately 24.5% to HKD 371,313, up from HKD 298,214, driven by increased demand in the European market[63] Assets and Liabilities - Non-current assets increased to HKD 12,116,697 from HKD 11,702,909, representing a growth of 3.5%[8] - Current assets rose to HKD 8,917,619, an increase of 10.0% compared to HKD 8,104,611 as of March 31, 2024[8] - Total assets reached HKD 21,034,316, up 6.1% from HKD 19,807,520[8] - The company reported a significant increase in cash and bank balances to HKD 4,283,927, compared to HKD 3,273,830, reflecting a growth of 31.0%[8] - The company’s total equity increased to HKD 13,772,744 from HKD 13,075,669, marking a growth of 5.3%[11] - Trade receivables and notes receivable net amount as of September 30, 2024, is HKD 1,896,227, an increase from HKD 1,746,892 as of March 31, 2024[40] - Total accounts payable and notes payable as of September 30, 2024, is HKD 811,624, up from HKD 710,214 as of March 31, 2024[43] Expenses and Costs - The cost of goods sold decreased by approximately 7.7% to HKD 5,024,724, down from HKD 5,445,649, with raw material costs declining more than revenue[67] - Sales and distribution expenses decreased by approximately 5.6% from about 1,604,156 thousand HKD in the first half of fiscal year 2024 to about 1,513,891 thousand HKD in the first half of fiscal year 2025, accounting for approximately 18.2% of revenue[74] - Advertising, marketing, and brand building expenses decreased by approximately 33.1% from about 308,418 thousand HKD to about 206,422 thousand HKD, representing about 2.5% of revenue, mainly due to reduced consumer spending in the Chinese market[74] - Administrative and other expenses decreased by approximately 30.8% from about 450,051 thousand HKD to about 311,617 thousand HKD, with administrative expenses accounting for about 3.8% of revenue[77] - Financial costs decreased by approximately 25.6% from about 98,266 thousand HKD to about 73,114 thousand HKD, primarily related to loan interest expenses[79] Legal and Tax Matters - The company has a provision for legal claims amounting to HKD 174,037 as of March 31, 2024, related to a lawsuit from a former supplier[43] - The company settled a legal claim with a former supplier for USD 8,250, equivalent to HKD 64,420, and reversed a provision of USD 10,693, equivalent to HKD 83,826[44] - The effective corporate tax rate in the U.S. is 21% as of September 30, 2023, with state income tax estimated between 0% to 9%[34] - The Macau subsidiary is subject to a 12% income tax on taxable income as of September 30, 2023[34] - The Hong Kong subsidiary is subject to a 16.5% profits tax on taxable income as of September 30, 2023[34] - Income tax expenses increased by approximately 6.6% from about 229,716 thousand HKD to about 244,796 thousand HKD, with the tax rate increasing from approximately 16.2% to 17.0% of profit before tax[80] Corporate Governance and Structure - The company has adhered to the corporate governance code, with a review of its governance practices conducted regularly[109] - The roles of the chairman and CEO are held by the same individual, which the board believes does not impair the balance of power and accountability[111] - The company has adopted the standard code of conduct for directors' securities transactions and confirmed compliance for the six-month period ending September 30, 2024[112] Employee and Market Strategy - The group had 27,246 employees as of September 30, 2024, down from 29,837 employees on March 31, 2024[93] - The group emphasizes the importance of employee training and development, maintaining a competitive compensation structure to motivate staff[93] - The group aims to enhance its market share in the domestic market as it recovers from a consumption downturn, focusing on brand and product competitiveness[99] - The group is focusing on R&D and technological innovation, having launched a "zero wall, zero gravity" sofa product, with a second technical iteration planned for 2024[96] - The penetration rate of functional sofas in the Chinese market increased from 7.2% to 9.7% year-on-year, with a forecast to exceed 13% within five years[98] - The North American market remains the primary consumer market for functional sofas, with continued order growth and significant expansion opportunities in Europe and other export markets[97] Dividends and Shareholder Matters - The company declared an interim dividend of HKD 0.15 per share for the six months ended September 30, 2024, compared to HKD 0.15 per share for the same period in 2023[38] - The board has declared an interim dividend of HKD 0.15 per share, payable on December 13, 2024[100] - The company will suspend share transfer registration from December 12 to December 13, 2024, for shareholders eligible to receive the interim dividend[105] Miscellaneous - The company has not made any significant investments or acquisitions in the first half of the fiscal year 2025 but continues to seek opportunities to acquire furniture companies[92] - There were no purchases, sales, or redemptions of the company's listed securities during the review period[101] - The audit committee consists of four independent non-executive directors, and the interim financial information has been reviewed by the auditors[102] - No significant events have been disclosed after the review period[103]

Investment Rating - The report assigns a positive investment rating to Minhua Holdings, highlighting its leading position in the functional sofa market and growth potential in the Chinese market [2]. Core Insights - Minhua Holdings has a market share of 53% in the Chinese functional sofa market as of the end of 2023, with a revenue of HKD 18.41 billion for the fiscal year 2024, reflecting a year-on-year growth of 6.1% [2][3]. - The company's net profit for the same fiscal year reached HKD 2.3 billion, marking a significant increase of 20.2% year-on-year [2][3]. - The report emphasizes the shift in consumer purchasing behavior from new home furnishing needs to a pursuit of quality of life, which benefits the functional sofa segment [1][15]. Summary by Sections Market Position and Strategy - Minhua Holdings is a leading player in the functional sofa sector, established in 1992 and headquartered in Hong Kong, with branches in key global economic regions [2]. - The company has adapted its strategy post-trade war by focusing on the Chinese market, increasing sales expenses, and establishing production bases in various locations to reduce costs [5][6]. Financial Performance - The revenue contribution from the Chinese market exceeded 65% in the fiscal year 2024, with a market penetration rate for functional sofas rising from 7.2% to 9.7% year-on-year [3]. - The company's gross margin has improved, reaching 39% in fiscal year 2024, attributed to cost optimization and favorable raw material prices [8][9]. Consumer Trends - The consumer demographic is increasingly younger, with over 75% of customers being under 35 years old, indicating a shift towards design and functionality in product offerings [15][16]. - The report notes that the functional sofa market in China is still in a growth phase, with significant room for expansion compared to Western markets [16]. Cash Flow and Dividends - Minhua Holdings has shown a notable increase in operating cash flow, with net operating cash flow and free cash flow reaching HKD 2.55 billion and HKD 990 million, respectively, for fiscal year 2024 [17]. - The company maintains a robust dividend policy, distributing approximately 50% of its net profit to shareholders, with a historical average dividend payout ratio of 52.2% [18][19]. Valuation - The report indicates that Minhua Holdings' price-to-book (PB) ratio is at a historical low, primarily due to the overall low valuation of the Hong Kong stock market and the furniture industry [21].

Investment Rating - The report maintains an "Outperform" rating for the company [4] Core Views - The company achieved total revenue of HKD 18.8 billion in FY2024, representing a year-on-year growth of 5.7%, and a net profit attributable to shareholders of HKD 2.3 billion, which is a 20.2% increase year-on-year [1][5] - The company is a leader in the furniture sector, particularly in functional sofas, which have maintained the highest global sales for six consecutive years [6] - The report forecasts net profits for FY2025 to FY2027 to be HKD 2.57 billion, HKD 2.79 billion, and HKD 2.96 billion respectively, with growth rates of 11.6%, 8.6%, and 6.0% [4][5] Financial Summary - FY2024 main business revenue was HKD 18.41 billion, with a year-on-year increase of 6.1% [5] - The gross profit margin for FY2024 was 39.4%, an increase of 0.9 percentage points year-on-year, primarily due to a decrease in raw material prices [6] - The company’s net profit margin for FY2024 was 12.5%, up by 1.5 percentage points year-on-year [6] - The report provides a valuation range for FY2025 of HKD 8.61 to HKD 9.94 based on a PE ratio of 13 to 15 times [4][8] Business Segmentation - The company's revenue from sofa and related products was HKD 12.66 billion, with a year-on-year increase of 2.9% [6] - Revenue from bedding and related products was HKD 2.99 billion, up 9.6% year-on-year, while other products saw a significant increase of 28.4% to HKD 1.82 billion [6] - Sales in Europe and other overseas markets for sofas and related products reached HKD 0.852 billion, marking a 10.5% year-on-year growth [6] Market Comparison - The report compares the company's valuation with peers, indicating that the average PE for comparable companies is around 12.4 times [8]