According to a research report released by Orient Securities Company Limited (600958), although the home furnishing industry is currently facing short-term headwinds such as declining new home completions and ongoing price wars, signals including the systematic rise in the share of renovation demand from existing homes, solid financial foundations of leading players, and dividend returns that have caught up with major home appliance companies indicate that the industry is transitioning from "cyclical gaming" to "value re-rating." Three main investment lines are recommended: 1) Soft furnishing categories that are the first to benefit in the stock era, with attention on leading enterprises poised for the launch of a replacement cycle and rising category penetration; 2) Custom furniture leaders with advanced whole-decoration channel layouts and strong multi-category integration capabilities, which possess customer acquisition efficiency and higher average transaction value advantages in an era of fragmented traffic; 3) Value-oriented targets with high dividends and stable cash flows, which enjoy a certainty premium amid the valuation paradigm shift. The main views of Orient Securities are as follows:

The home furnishing industry is a typical post-real-estate-cycle durable consumer goods sector. It is currently shifting from "new home-driven" to "new home plus existing home dual-driven," with the share of renovation demand from existing homes having risen to approximately 44% and second-hand home transactions accounting for nearly 46%. The industry's demand curve is moving from high volatility toward low volatility and resilience. The industry is "large but not fast" in scale, with revenue of furniture manufacturing enterprises above designated size reaching approximately 612.5 billion yuan in 2025, yet profits continue to shrink while the number of enterprises has actually increased to 7,467. The low-level equilibrium landscape remains unchanged. At the category level, a K-shaped divergence has emerged: soft furnishings benefit from low replacement costs and are the first to stabilize in the existing-home era, while custom furniture remains under pressure due to its binding with renovation activities. On the supply side, the proportion of loss-making enterprises has risen to 34%, and the industry is accelerating its consolidation, creating room for leading players to gain share.

Three-stage evolution of the growth paradigm: beta receding, alpha taking the lead. The growth logic of the home furnishing industry from 2000 to the present can be divided into three stages: (1) Real estate dividend period (approximately 2001-2017): Real estate completions and penetration rates both surged, with beta absolutely dominant, and enterprises achieved 30%-40% high growth through "single-category store expansion"; (2) Channel transformation period (approximately 2018-2021): Total volume peaked, and bulk fine-decoration and category expansion became structural alpha sources, but exposure to real estate credit risks (such as Sofia's provision for Evergrande impairment) revealed the cost of aggressive expansion; (3) Stock competition period (2022 to present): Demand is under pressure and prices are declining, leading players are shifting toward "whole-home/whole-decoration plus efficiency transformation," whole-decoration penetration has risen to 24%, operating cash flows are ample, capital expenditures are converging, and dividend payout ratios have risen significantly to 75%-85%. The industry is undergoing a valuation paradigm shift from "real estate cyclical stock" to "consumer dividend stock."

Benchmarking against major home appliance companies, leaders possess the potential to navigate through cycles. The current CR5 of the home furnishing industry is approximately 10%, which is strikingly similar to the "large industry, small companies" landscape of the major home appliance industry fifteen years ago. Major home appliance leaders achieved cycle navigation through high concentration, global expansion, and stable dividends, and home furnishing leaders are showing similar signs: soft furnishing categories (Kuka, Sleemon) have taken the lead in stabilizing growth, with accelerating overseas revenue opening a second growth curve; custom furniture leaders, despite revenue pressures, have solid profit foundations and ample cash; Oppein and Sofia's dividend payout ratios have already matched those of major home appliance leaders (75%-85%). Although declining new home completions and price wars are still playing out, bottom-level industry consolidation is precisely the critical window for leaders to expand their advantages. Enterprises that can be the first to complete whole-decoration customer acquisition, category integration, and stable dividends are most likely to replicate the "large industry, large companies" path of major home appliance leaders.

Risk disclosure: The outlook for demand recovery remains uncertain, industry profitability could deteriorate sharply, small and medium-sized enterprises may accelerate their exit, and uncertainty in overseas markets is rising.