1、Hanli.FLillian.LHangjie.CKevin.LIn-LineMORGAN STANLEY ASIA LIMITED+Hanli Fan,CFAEQUITY ANALYST+852 3963-1017Lillian LouEQUITY ANALYST+852 2848-6502Hangjie ChenEQUITY ANALYST+852 2848-7168Kevin Luo,CFAEQUITY ANALYST+852 2239-1527Morgan Stanley appreciates your support inthe 2020 Institutional Investo
2、r All-AsiaResearch Team Survey.Request your ballothere.China/Hong Kong ConsumerAsia PacificIndustryViewIndustry note:Potential Winners from PropertyCompletionsChina ConsumerChina Consumer|Asia Pacific Asia PacificPotential Winners from PropertyCompletions-Initiating on FourConsumer StocksChina prope
3、rty completions are heading into an upcycle.In theChina Consumer space,we initiate on four stocks that canbenefit from this trend.OW Oppein and Suofeiya,EWShangpin and Opple.We are bullish on the China property completion upcycle.Chinas NationalBureau of Statistics(NBS)recorded 16%yoy growth in prop
4、erty completions in4Q19,after 28 months of data in negative territory.We believe that 4Q19 wasthe inflection point,and the upturn will continue in 2020.Apartmentscompleted,forecast from 4Q19 to 2021,were the ones pre-sold in 2016 and2017.The upcycle is evidenced by higher growth in total property de
5、velopmentfunds,acceleration in leading indicators,and 20-25%yoy revenue growthforecasts for property developers in 2019-21,according to our China propertyteam.We expect a surge in property completions to act as the primary shareprice catalyst for related companies in 2020.Fundamental impacts vary by
6、 company product offerings.We split the propertycompletion-related companies business models into B2B(sells to propertydevelopers)and B2C(sells to consumers)businesses.We also consider the factthat pre-decorated apartments are taking share from concrete apartments.ForB2B business,fundamentals have i
7、mproved from 3Q19,ahead of propertycompletions.We believe that the fundamental upturn will continue in 2020,supported by a surge in construction activities.For B2C,we expect the weakdemand of 2019 to turn around in 2Q/3Q20,given that consumers should startpurchasing home durables after obtaining pro
8、perty.Market share dynamics,channel strategy,and expansion into other categoriesare company differentiators.Pre-decorated apartments and young consumersare structurally shifting the channel landscape of furnishing companies.Theproperty developer,online,and decoration channels are taking share from t
9、hetraditional offline retail channel.We believe first-mover companies that canquickly react to this shift in sales channel will significantly gain market share.OW Oppein and Suofeiya,EW Shangpin and Opple.We like all four companiesas they are the leading companies in their respective segments with s
10、trongcapability to benefit from the property completion tailwinds.We also see long-term growth potential.We prefer Oppein and Suofeiya given their better risk-reward profiles.Current valuations of Shangpin and Opple appear to price inshort-term growth outlook.Key risks:(1)Better/worse recovery in th
11、e propertymarket;(2)Better/worse market share gains from new channel strategy.Exhibit 1:Key metrics-ratings and price targetsCompanyAnalystTickerRating Market CapPTClose PriceUpside/(downside)US$mnRmbRmbOppeinHanli Fan603833.SSOW6,924139.0114.821%SuofeiyaHanli Fan002572.SZOW2,55324.020.418%OppleHanl
12、i Fan603515.SSEW2,81627.026.62%ShangpinHanli Fan300616.SZEW1,90270.073.5-5%Source:Refinitiv,Morgan Stanley Research.e=Morgan Stanley Researchestimates.Note:Closing prices in this report are as of the market close onFebruary 17,2020,unless otherwise indicated.Exhibit 2:Key metrics-valuations and fore
13、castsCompanyPT Implied20e P/E21e P/E20e P/E19e20e21eOppein21.518.026.018%20%20%Suofeiya15.413.618.012%14%13%Opple18.115.918.57%15%14%Shangpin22.119.121.015%18%16%TradingEarnings growthSource:Refinitiv,Morgan Stanley Research.e=Morgan Stanley Researchestimates.Morgan Stanley does and seeks to do busi
14、ness withcompanies covered in Morgan Stanley Research.As aresult,investors should be aware that the firm may have aconflict of interest that could affect the objectivity ofMorgan Stanley Research.Investors should considerMorgan Stanley Research as only a single factor in makingtheir investment decis
15、ion.For analyst certification and other important disclosures,refer to the Disclosure Section,located at the end of thisreport.+=Analysts employed by non-U.S.affiliates are not registered withFINRA,may not be associated persons of the member and may notbe subject to FINRA restrictions on communicati
16、ons with a subjectcompany,public appearances and trading securities held by aresearch analyst account.1February 18,2020 09:00 PM GMT Key ChartsExhibit 3:Property new starts,sales,completions GFA monthly yoygrowth(3MMA)-30%-20%-10%0%10%20%30%40%Started yoy%(3MMA)Sold yoy%(3MMA)Completed yoy%(3MMA)Sou
17、rce:National Bureau of Statistics of China(NBS),Morgan Stanley Research.Exhibit 4:Pre-decorated apartments nationwide penetration(left)andpre-decorated apartments penetration by city tier in 2018(right)12%20%28%32%86%50%8%88%80%73%68%14%50%92%0%10%20%30%40%50%60%70%80%90%100%20162017201820191st tier
18、2nd tier3rd tierand belowPre-decoratedConcreteSource:Zhilian,Morgan Stanley Research.Exhibit 5:Construction process and corresponding property completion-related companies in each stageSource:Morgan Stanley Research.Exhibit 6:Revenue contribution estimates from domestic propertydevelopers channel(B2
19、B),domestic retail channel(B2C)and overseaschannel89%89%15%13%9%10%75%85%90%100%11%10%0%10%20%30%40%50%60%70%80%90%100%KibingBNBMOppleOppeinSuofeiyaShangpinChina B2B channelChina B2C channelOverseasSource:Company data,Morgan Stanley Research.Note:Opples B2B channel also includes offices and publicbu
20、ildings.Exhibit 7:Revenue growth in 2019/20e9%13%17%6%10%5%32%14%20%13%14%12%0%5%10%15%20%25%30%35%BNBMKibingOppeinSuofeiyaShangpinOpple2019e2020eSource:Company data,Morgan Stanley Research.e=Morgan Stanley Research estimates.2 Potential Winners from Property CompletionsIn this note,we initiate on O
21、ppein,Suofeiya,Shangpin,Opple in the China Consumerspace.Please refer to China Consumer and China Industrials:Potential Winners from PropertyCompletions for our analysis on:(1)property completions,and(2)property completion-related segments.3 Oppein(603833.SS):High-Quality Name to Benefit from Proper
22、tyUpcycleWe initiate coverage of Oppein with an OW rating and aRmb139.0 price target,implying 21%upside.We expectOppein to benefit from the property completion upcycle in2020 and 2021.We think the company can achieve long-term growth by expanding its current product portfolio andentering into new sa
23、les channels,resulting in a better-than-industry growth profile.Oppein is the largest kitchen cabinet manufacturer in Chinain terms of revenue.By leveraging on its strong brand,Oppein has expanded from kitchen cabinet segment intoother product categories such as wardrobes,wooden doors,etc.It targets
24、 to provide whole-house customized furnitureto consumers.We expect property completions to surge in 2020 and2021.Monthly growth in Chinas residential propertycompletions returned to positive territory in Sep19 after 29months of declines,recovering to+17%yoy in 4Q19.Weexpect the turnaround to sustain
25、 in 2020 and 2021,evidenced by leading indicators such as property sales andproperty new starts.Home furnishings companies(includingfurniture and lighting)such as Oppein,as propertydownstream,will benefit from this trend in both theproperty developers(B2B)and retail(B2C)channels.Themagnitude of the
26、recovery will depend on the productofferings.Comprehensive channel coverage allows Oppein to benefitfrom the surge in property completions.Oppein has one ofthe strongest sales networks in Chinas furniture industry.We expect Oppein to continue its expansion in both thedevelopers and retail channels,u
27、tilizing its strong brandimage and channel management capability.It is also tappinginto innovation channels such as decoration companychannels.We expect Oppeins quick reaction to the shift insales channel to support the companys ability to gainmarket share.Avg daily trading value(mn)Fiscal Year Endi
28、ng12/1812/19e12/20e12/21eModelWare EPS(Rmb)3.774.465.346.39Consensus EPS(Rmb)3.864.405.226.14Revenue,net(Rmb mn)11,50913,47316,17419,020EBITDA(Rmb mn)2,0662,4633,1033,731ModelWare net inc(Rmb mn)1,5721,8602,2272,665P/E20.526.221.518.0P/BV4.35.44.43.6RNOA(%)41.335.127.226.9ROE(%)25.224.624.524.3EV/EB
29、ITDA14.018.814.511.8Div yld(%)1.30.60.80.9FCF yld ratio(%)(1.0)0.72.03.2Leverage(EOP)(%)(31.3)(28.6)(30.7)(35.4)Company descriptionReuters:603833.SS/Bloomberg:603833 CHChina/Hong Kong ConsumerPrice targetRmb139.0Up/downside to price target(%)21%Shr price,closeRmb114.852-Week RangeRmb131.6-88.9Sh out
30、,dil,curr(mn)417Oppein Home Group Inc.is a leading player in Chinas customized kitchencabinets and wardrobes industry.The company also manufactures woodendoors,bathroom products,and other home decoration products.Its saleschannels include direct sales,franchise model,and the property developerchanne
31、l.Mkt cap,curr(mn)Rmb47,844EV,curr(mn)Rmb47,844Rmb1,390Unless otherwise noted,all metrics are based on Morgan StanleyModelWare framework=Consensus data is provided by Thomson Reuters Estimatese=Morgan Stanley Research estimatesWe use a target 2020e P/E of 26x to arrive at a price targetof Rmb139.0.W
32、e expect Oppeins revenue to grow20%/18%yoy in 2020/21e,recovering from 17%yoy in 2019edue to a surge in the property completion cycle.Weforecast 20%/20%yoy EPS growth in 2020/21e.Our targetP/E implies a 1.3x PEG ratio,which is in-line with the targetPEG ratio that we use for other home furnishings n
33、ames inour coverage.Key risks:(1)Better/worse-than-expected recovery in theproperty market;(2)Better/worse-than-expected marketshare gains from new channel strategy.4 Oppein:Valuation and Bull/Bear Case Methodology-P/EOur price target of Rmb139.0 is our base case value and is derived from P/E valuat
34、ion,consistent with the methodology that we use for the rest of our consumer discretionarycoverage.We use a target 2020e P/E of 26.0 x.We expect Oppeins EPS to grow20%/20%yoy in 2020/21e.Our target P/E multiple implies a 1.3x PEG ratio,which is in-line with the target PEG ratio that we use across ou
35、r home furnishings coverage.Home furnishings companies experienced over 30%EPS growth before 1H18,andvaluations were around 30 x P/E.However,they experienced significant de-rating in 2H18due to headwinds from the property market,leading to significant deceleration in EPSgrowth.Valuation is a reflect
36、ion of investors outlook on companies earnings growth.Inour view,historical average is not a good reference for our base case valuation giventhat we do not expect EPS to return to historical levels.Therefore,we use PEG ratio toset our target P/E as the valuation of the home furnishings companies is
37、closely relatedto EPS growth.Bull/Bear case scenariosBull case value Rmb176.3:In our bull case,we assume Oppeins 2020/21e EPS are10%/20%higher than our base case assumptions.This implies 32%/31%yoy EPS growthin 2020/21e.Under our bull case,we assume that tailwinds from property completionsare better
38、 than our base case assumption and Oppein gains market share,relying on asuccessful channel strategy.Under our bull case,we assume EPS growth significantlyimproves to 32%yoy in 2020e,similar to the peak growth before 1Q19.Due to aExhibit 8:Oppein historical average NTM P/E band since IPO in Mar1725.
39、0 x30.4x19.6x10152025303540Apr-17Jun-17Aug-17Oct-17Dec-17Feb-18Apr-18Jun-18Aug-18Oct-18Dec-18Feb-19Apr-19Jun-19Aug-19Oct-19Dec-19Feb-20P/E(X)-NTMOppeinAverage+1SD-1SDSource:Refinitiv,Morgan Stanley Research.5recovery in growth sentiment,we assign an average P/E ratio from the peak period(Jun17 to Ju
40、n18),at 30 x,as our bull case target P/E.Bear case value Rmb72.1:In our bear case,we assume Oppeins 2020/21e EPS are10%/20%lower than our base case assumptions.This implies 8%/6%yoy EPS growth in2020/21e.Under our bear case,we assume the recovery in property completions isworse than our base case as
41、sumption and the related companies do not benefit fromthis completion cycle.Oppeins market share will be stable or decline.Under our bearcase,we assume EPS growth significantly decelerates to 8%yoy in 2020e,similar to thedowncycle in 4Q18.We assign Oppeins bottom valuation in 4Q18,at 15x,as our bear
42、case target P/E.Exhibit 9:Oppein:Base/bull/bear case scenariosRmbmn2017A2018A2019E2020E2021ERevenue9,71011,50913,47316,17419,020Growth%19%17%20%18%GP3,3524,4175,1026,1007,184Growth%32%16%20%18%OP1,4191,7291,9732,4252,899Growth%22%14%23%20%EBITDA1,7442,1342,6613,2783,939Growth%22%25%23%20%Earnings to
43、 shareholders1,3001,5721,8602,2272,665Growth%21%18%20%20%EPS3.213.774.465.346.39Growth%17%18%20%20%PE valuation2020E EPS(Rmb)5.3Target P/E26.0 xTarget Price(Rmb/shr)139.0Close price(Rmb/shr)114.8Upside/(downside)21%Bull2017A2018A2019E2020E2021E%higher than base case0%0%10%20%EPS(Rmb/shr)3.774.465.88
44、7.67Growth%18%32%31%Bull case target P/E30.0 xBull case implied value(Rmb/shr)176.3Close price(Rmb/shr)114.8Upside/(downside)54%Bear2017A2018A2019E2020E2021E%lower than base case0%0%10%20%EPS(Rmb/shr)3.774.464.815.11Growth%18%8%6%Bear case target P/E15.0 xBear case implied value(Rmb/shr)72.1Close pr
45、ice(Rmb/shr)114.8Upside/(downside)-37%Source:Morgan Stanley Research.e=Morgan Stanley Research estimates.6Risk Reward Oppein Home Group Inc.(603833.SS)Rmb139.00We use P/E-based valuation methodology,consistent with the rest of our consumerdiscretionary coverage.Our price target of Rmb139.0 is based
46、on a 2020e P/E of 26.0 x.Weexpect Oppeins EPS to grow 20%/20%yoy in 2020/21e.Our target P/E multiple implies a1.3x PEG ratio,in-line with the target PEG ratio that we use across our home furnishingscoverage.Morgan Stanley EstimatesMeanConsensus Price Target DistributionRmb104.00Rmb156.80Source:Thoms
47、on Reuters,Morgan Stanley ResearchMS RatingWe expect a surge in propertycompletions in 2020 and 2021,which wouldbenefit all downstream segments,includinghome furniture.As the largest kitchen cabinet company inChina in terms of revenue,we expect Oppeinto benefit from the property completionupcycle,le
48、veraging on its strong salesnetwork and brand image.Product category expansion and newchannel strategies should support its long-term growth profile.We are OW on Oppein relative to ourcoverage because we expect Oppein will bewell positioned to record higher-than-peersgrowth.Consensus Rating Distribu
49、tion90%Overweight10%Equal-weight0%UnderweightSource:Thomson Reuters,Morgan Stanley ResearchRisk Reward ThemesMacroeconomics:PositiveShare Gain:PositiveView descriptions of Risk Rewards Themes,hereRmb176.3030.0 x 2020e bull case EPSWe assume Oppeins 2020/21e EPSare10%/20%higher than our base caseassu
50、mptions.This implies 32%/31%yoy EPSgrowth in 2020/21e.Under our bull case,EPS growth significantly improves to 32%yoy in 2020e,similar to the peak growthbefore 1Q19.Due to a recovery in growthsentiment,we assign average P/E ratio fromthe peak period(Jun17 to Jun18),at 30 x,asour bull case target P/E
