market research report : furniture market in china 2014 - sample

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Furniture Market – China

November 2014

2

Executive Summary

Market

Drivers & Challenges

Government

Competitive Landscape

Global furniture market is growing at a CAGR of ‘r1’% and is expected to reach USD ‘m1’ bn by 2018

Chinese furniture market is the largest in the world, growing at a CAGR of ‘r2’%

China is also the largest exporter of furniture in the world, commanding a share of ‘r3’% in the global furniture market

‘n1’ furniture dominates the market, followed by furniture made from ‘n2’ and ‘n3’

National Standards for Furniture Market

New-for-Old Furniture Subsidy Program 2013

Drivers

Healthy Economy and Rising Income

Real Estate Boom

Accelerating Urbanization and Changing Lifestyle

Furniture Expositions

Strong Distribution Network

Strong Demographics

Major Players

Company 1 Company 2 Company 3

Company 4 Company 5 Company 6

Trends Shift in Raw Material Sourcing

Increased Localization of Business Model

Innovation in Product Designs

Challenges

Huge Importer of Raw Materials

Risk of a Housing Bubble

Intense Competition and Rising Operating Costs

Credibility Crisis

FURNITURE MARKET IN CHINA 2014.PPT

3 FURNITURE MARKET IN CHINA 2014.PPT

•Macro-Economic Indicators

•Introduction

•Market Overview

Global

China

•EXIM Data

•Drivers & Challenges

•Government Initiatives

•Trends

•Competitive Landscape

•Mergers and Acquisitions

•Strategic Recommendations

•Appendix

4

Economic Indicators (1/3)

Current Account Balance

Exchange Rate: Half Yearly

y5

y4

y3

y2

y1

2015e

t

2013e

s

2014e

r q

2010

p

USD bn

2011

u

2012

y4

y5

y3

y6

y2

y1

5/1/14 4/1/14 3/1/14 2/1/14 1/1/14

c3

USD/CNY

b3

a2

c2

b2

a1

c1 b1 a3

a5

c5

b5 a4

c4

b4

Period Low Period High Period Average


5

Introduction

• Furniture refers to movable objects which support activities such as sitting (such as chairs and sofas),

sleeping (such as beds), keeping objects at convenient heights (such as desks and tables) and storing objects

(such as closets and shelves)

• The most used material for creating furniture is wood, followed by metal and plastic

Furniture products are used for various purposes and have become an integral part of life

Characteristics of Furniture Industry


6

Global furniture industry derives strength and business opportunities from growing furniture sector in ‘c1’

• The furniture market has exhibited steady

improvement over the years owing to the rising living

standards, increasing disposable incomes, economic

growth and urbanization

• Globally, ‘c1’, ‘c2’ and ‘c3’ are the top manufacturers

and exporters of furniture

• ‘n1’ is the largest furniture company in the world,

commanding a market share of about ‘r6’% of the

entire furniture market

• While furniture from ‘c1’ is known to be more

affordable, ‘c3’ is traditionally regarded as the source

of furniture made from high quality wood and having

greater aesthetic appeal

• Of late, furniture industries of emerging countries

such as ‘c4’ and ‘c5’ have been growing rapidly,

chiefly due to lower cost of production, weaker

currency and expansion of their respective

manufacturing activities

Global Furniture – Market Size and Growth Global Furniture Market – Overview

Global Furniture – Market Share (2013)

y4

y3

y2

y1

USD bn r1%

2013

u

2014e

t

2015e

s

2016e

r q

2017e

p

2018e

r5%

r4%

r3%

r2%

Others

Country 3

Country 2

Country 1


7

China is the world’s largest furniture market, exhibiting strong growth potential through 2018

• China is the world's largest furniture manufacturing

base, representing about ‘r5’% of the global furniture

volume

• In ‘y1’, China had surpassed ‘c1’ to become the

world’s largest furniture exporter

• The advancement of the furniture market of China is

closely monitored and assisted by ‘n1’

It is a trade association run by volunteers from institutions,

enterprises, social organizations and individuals from

furniture market background

It safeguards the interests of furniture companies and

promotes standards that regulate the furniture market

It updates furniture companies about the benchmark

practices in the manufacturing, marketing and

management of high quality furniture products

Domestic Furniture Market – Overview

y5

y4

y3

y2

y1

USD bn

r1%

2018e

u

2017e

t

2016e

s

2015e

r

2014e

q

2013

p

Domestic Furniture – Market Structure (2013)

Domestic Furniture – Market Size and Growth

r4%

r3% r2%

Others

Segment 2

Segment 1


8

East-coast provinces are the top furniture producing bases in China

a1

a3

a5

a2

a4

a6

Furniture Production Bases in China

• Furniture productions bases are primarily located

along the East-coastal region in China

• In 2013, the top five furniture producing provinces

were ‘a1’, ‘a2’, ‘a3’, ‘a4’, ‘a5’ and ‘a6’ provinces

• ‘a1’ is the largest furniture manufacturing province in

China

Total Furniture Output in China

y5

y4

y3

y2

y1

2012

r

2011

q

2010

p

USD bn r1%

2013

s


9

Rise in furniture production in China…

• China has witnessed a compound annual growth rate of ‘r1’% in exports in the last ‘n1’ years, owing to a large manufacturing base of furniture, skilled labor and price competitiveness

• Primary export destinations include ‘c1’, ‘c2’, ‘c3’, ‘c4’ and ‘c5’

• The most exported products are ‘p1’

Exports Total Exports (Value)


r7%

r6%

r5% r4%

r3%

r2%

y5

y4

y3

y2

y1

USD bn

2013

s

2012

r

2011

q

2010

p

Exports – Country-Wise Segmentation (2011-12) Exports – Country-Wise Segmentation (2012-13)

Note: Figures are for the respective calendar years

r13%

r12%

r11% r10%

r9%

r8%

Others

Country 5

Country 4

Country 3

Country 2

Country 1

Others

Country 5

Country 4

Country 3

Country 2

Country 1

Note: Total Exports includes exports to Hong Kong SAR and Macau SAR

10

…has resulted in eventual rise in exports


r4%

r3% r2%

r1%

r4%

r3% r2%

r1%

Product Segmentation 2011-12

Product Segmentation 2012-13

HS code Particulars

HS Codes for Furniture Products

HS 9404

HS 9403

HS 9402

HS 9401

HS 9404

HS 9403

HS 9402

HS 9401

11

Drivers & Challenges – Summary

Drivers

Healthy Economy and Rising Income

Real Estate Boom

Furniture Expositions

Accelerating Urbanization and Changing Lifestyle

Strong Distribution Network

Strong Demographics

Challenges

Huge Importer of Raw Materials

Risk of a Housing Bubble

Intense Competition and Rising Operating Costs

Credibility Crisis


12

All domestic and international players are subject to a host of national standards in the Chinese furniture industry

Standard No. Standard Name

• Government has adopted various standards, specifying product classification, technical requirement, test methods,

inspection rules and marking issues, among others

• All local and imported furniture products must be in compliance with the national standards

Note: The list is not exhaustive


13

Trends – Summary

Key Trends

Shift in Raw Material Sourcing

Innovation in Product Designs

Increased Localization of Business Model


14 FURNITURE MARKET IN CHINA 2014.PPT

Competitive Rivalry • x

Bargaining Power of Suppliers • x

Bargaining Power of Buyers • x

Threat of Substitutes • x

Threat of New Entrants • x

Impact i4

Impact i2

Impact i1

Impact i3

Impact i5

Porter’s Five Forces Analysis

15

Competitive Benchmarking (1/5)

Public Trading Comparable (FY 2013)

Company 1 Company 2 Company 3 Company 4 Company 5

Market Capitalization (USD mn)

Share Price (USD)

EV/EBITDA (x)

EV/Revenue (x)

PE Ratio

Note: Top 5 Public companies based on the Market Capitalization; Market Capitalization, Share Price and PE ratio is as of 29/09/2014


16

Key Ratios of Top 3 Companies – Operational Basis (FY 2013) (1/3)

Competitive Benchmarking (2/5)

y1

y5

y4

y2

y3

a2

b2 c3 c2

Company 1 Company 2

a3

b3

b1

Company 3

%

c1

a1

• Company 2 recorded gross margin of ‘a2’%, higher than both Company 1 and Company 3 which recorded gross margin of ‘a1’% and ‘a3’% respectively

• Company 1 recorded operating margin of ‘b1’%, higher than both Company 2 and Company 3 which recorded operating margin of ‘b2’% and ‘b3’% respectively

• Company 2 recorded net margin of ‘c2’%, higher than that of Company 3 which recorded net margin of ‘c3’% but lower than that of Company 1 which recorded net margin of ‘c1’%


Gross Margin Net Margin Operating Margin

17

Key People

Products and Services

Company Information Locations – China

Corporate Address

Tel No.

Fax No.

Website

Year of Incorporation

Ticker Symbol

Stock Exchange

Public: Company 1 (1/4)

Category Products/Services

Headquarters

Name Designation


H1

18

Financial Snapshot Key Ratios

Financial Summary

• The company earned a net profit of USD ‘d’ in FY 2013, as compared to net profit of USD 48.4 mn in FY 2012

• The company reported total income of USD ‘s’ mn in FY 2013, registering an increase of ‘r1’% over FY 2012

• The company reported an operating margin of ‘r2’% in FY 2013, an increase of ‘r3’ percentage points over FY 2012

• The company reported debt to equity ratio of ‘n1’ in FY 2013, a decrease of ‘r4’% over FY 2012

Profit / Loss

Total Income

y6

y5

y4 y1

y3

y2

Profit USD mn

Total Income USD mn

2013

d

s

2012

c

r

2011

b

q

2010

a

p

Improved Decline

Particulars y-o-y change

(2013-12) 2013 2012 2011 2010

Profitability Ratios

Operating Margin

Net Margin

Profit Before Tax Margin

Return on Equity

Return on Capital Employed

Return on Working Capital

Return on Assets

Return on Fixed Assets

Cost Ratios Operating costs (% of Sales)

Administration costs (% of Sales)

Interest costs (% of Sales)

Liquidity Ratios Current Ratio

Cash Ratio

Leverage Ratios Debt to Equity Ratio

Debt to Capital Ratio

Interest Coverage Ratio

Efficiency Ratios Fixed Asset Turnover

Asset Turnover

Current Asset Turnover

Working Capital Turnover

Capital Employed Turnover

Indicators Value (29/09/2014) Market Capitalization (USD mn)

Total Enterprise Value (USD mn)

EPS (USD)

PE Ratio (Absolute)


Key Financial Performance Indicators


19

Key Business Segments Key Geographic Segments

Business Highlights

y3

y2

y1

2013

q2%

p4%

2012

q1%

p3%

2011

p2%

2010

p1%

Segment 2 Segment 1

y6

y5

y4

y3

y2

y1

2013

p1%

The company operates through single reportable

segment, namely ‘Segment 1’

Segment 1

Description News

Overview

• Company 1 was listed in ‘b1’ in ‘n1’

• The company holds prominent roles in several national industry bodies, such as Vice

President of ‘o1’, ‘o2’ and ‘o3’

Operations

• Company 1 owns ‘n2’ forestry bases and ‘n3’ manufacturing units

• The company operates over ‘n4’ retail outlets across the world

• It manufactures ‘i1’ through the subsidiary ‘c1’


Note: Business Segments and Geographic Segments are based on total revenues


20

T O

W S

Public: Company 1 – SWOT Analysis (4/4)


21

Company Information Locations – China

Corporate Address

Tel No.

Fax No.

Website

Year of Incorporation

Products and Services

Category Products/Services

Key People

Private: Company 2 (1/3)

Headquarters

Name Designation


H1

22

Description News

Overview

• Company 2 is part of the Taiwan-based ‘g1’

• The company was founded in the year ‘n1’

• Its line of business includes ‘a1’

• The company sells its own products under the brand ‘b1’ and is also a supplier for

American furniture brand ‘b2’

Operations

• ‘g1’ has manufacturing facilities in ‘c1’, ‘c2’ and ‘c3’ and sells its products in ‘c1’, ‘c4’, ‘c5’,

‘c6’ and ‘c7’, among other countries

• Company 2 employs ‘n1’ people and is based in ‘a1’, ‘c1’

• In FY 2013, the company generated revenues of USD ‘n2’

Business Highlights

Private: Company 2 (2/3)


23

Private: Company 2 – SWOT Analysis (3/3)


T O

W S

24

Mergers and Acquisitions (1/2)

Announced Date Closed Date Transaction Type Target Buyer/Investors Sellers Deal Size (USD mn)

Note: Data for the years 2014, 2013 and 2012


25

Thank you for the attention

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