Oppein Home Group Inc. (SSE: 603833) disclosed its investor relations activity records for September 15 on September 16. Combined with the interim results briefing held on September 7, management conveyed a consistent message across two investor communications within half a month: the custom home furnishing leader is undergoing its most severe period of deep adjustment in over three decades of operation.

In the first half of the year, Oppein Home reported operating revenue of RMB 5.95 billion, down 27.79% year-on-year, with net profit attributable to shareholders of RMB 442 million, down 56.62%, and operating cash flow plummeting 94.45% to less than RMB 100 million. Chairman and President Yao Liangsong candidly admitted misjudging the market at the start of the year, yet consistently refrained from providing a clear timeline for when profits would stabilize.

Where to begin

Oppein Home is undergoing an unprecedented stress test. Yao described the current industry environment with phrases like "turbulent waves" and "violent storms," conceding that reforms in its main business fell short of expectations and that deployments were disrupted by extreme market conditions. He stated bluntly, "We are very afraid of failure" and "we are constantly exhausting our wisdom to drive reform."

The profit decline far outpaced revenue contraction, and the stabilization point remains unclear. The interim report showed revenue of RMB 5.95 billion, down 27.79%; net profit attributable to shareholders of RMB 442 million, down 56.62%; and non-GAAP net profit of RMB 361 million, down 61.71%. The profit drop significantly exceeded revenue decline. Oppein Home attributed this to notable year-on-year declines in core product revenue, which markedly altered the product mix; reduced revenue scale weakening the dilution effect of fixed manufacturing costs, passively raising unit production costs; and the rigid nature of expenses.

In the first half, selling expenses totaled RMB 768 million, down 8.19%, while administrative expenses reached RMB 577 million, down 4.04%—both declines far smaller than the revenue drop, leading to passively elevated expense ratios. R&D expenses fell 29.35% to RMB 303 million, the only line item matching the revenue decline rate. Meanwhile, financial expenses rose 116.60% to RMB 45.493 million. CFO Zhao Lili explained that the company conducted forex derivative hedging operations, and exchange rate fluctuations caused reporting-level financial expense changes—a period-specific variance with no substantive impact on operating profit.

During the September 15 investor event, Oppein Home further acknowledged: "During the revenue contraction phase, insufficient fixed cost absorption and heightened expense control pressure are challenges commonly faced across the industry. We are continuously advancing cost reduction and efficiency initiatives, with measures gradually taking effect, though not yet sufficient in the short term to fully offset demand headwinds." Regarding investors' key concern about when profits would stabilize, the company offered no timetable, stating only that "it depends on the recovery of end-market demand."

Operating cash flow collapse of 94.45%

More concerning to investors was the cash flow situation. Net cash generated from operating activities dropped from RMB 1.667 billion in the prior-year period to RMB 92 million, a 94.45% plunge. Oppein Home attributed the decline to three period-specific factors: reduced revenue leading to lower collections; elevated prior-year prepaid orders driven by national policies, which raised the comparison base; and concentrated maturities of bills payable in the current period, increasing cash outflows for procurement.

For mitigation, the company stated it would continue strengthening working capital and cash flow management, strictly control capital expenditures, maintain reasonable liquidity, implement credit qualification checks and dynamic credit lines for bulk customers on the receivables side, optimize distributor structures, and enforce dynamic inventory controls with streamlined SKUs through end-to-end front-loaded management to reduce operational risk.

Net cash flow from financing activities was -RMB 2.546 billion, down 3607.01% year-on-year, primarily due to dividend payments for the 2025 interim and annual periods. Oppein Home distributed approximately RMB 1.5 billion in cash dividends in the first half—equivalent to 3.39 times its current net profit. Maintaining high dividend payouts amid sharply reduced profits has materially depleted the company's capital reserves. According to its previously disclosed 2024-2026 dividend plan, the company committed to no less than RMB 1.5 billion annually, with this year being the final year. The company noted that future dividend schemes will be studied in conjunction with year-end and full-year profit performance and investor demands.

At period-end, cash balances stood at RMB 4.723 billion, up 60.05% from the start of the year, with restricted portions of RMB 3.479 billion; trading financial assets were RMB 2.698 billion, down 55.14% due to redemptions of certain wealth management products; and non-current assets due within one year reached RMB 5.251 billion, up 86.51%. Combined, these three items totaled approximately RMB 12.672 billion at the end of June. In its interim report, Oppein Home emphasized that its book cash and trading financial assets remain ample, with sufficient net cash and overall liquidity safely controllable. However, it is noteworthy that short-term borrowings stood at approximately RMB 5.094 billion during the same period, while cash and cash equivalents on the books were only RMB 794 million.

Core wardrobe category revenue down 34.5% with 442 net store closures in half a year

Wardrobe and matching furniture products form the core of Oppein Home's business, contributing nearly half of revenue. First-half revenue reached RMB 2.776 billion, a 34.51% year-on-year decline—significantly steeper than the company's overall 27.79% revenue drop. CFO Zhao Lili explained at the briefing that despite the revenue decline, wardrobe gross margin rose 1.71 percentage points year-on-year to 43.1%, partially offsetting downside pressure, thanks to lean production, production line automation, and supply chain optimization. Yet the cliff-like revenue decline signals that the company's most critical profit engine is rapidly shrinking.

Channel contraction is visibly evident. The September 15 investor records showed total stores at 6,903 as of end-June, a net decrease of 442 from end-2025, primarily due to distributor business plan adjustments and optimized recruitment and management policies. Yao revealed at the September 7 briefing that distributors in cities like Guiyang and Changsha "have essentially abandoned operations across entire cities," shrinking to single-store presence. In Shanghai, the former general distributor's market share has fallen to 20%, with the remaining 80% handed to other operators. Yao acknowledged that market turbulence has delivered a massive shock to distributors, with some unable to withstand the pressure.

Transitions from single-category to whole-home and then to turnkey solutions are "high-difficulty maneuvers." With external storms compounded by severe industry contraction, "even people of good caliber find it extremely difficult—survival is the best they can hope for." Oppein Home stated it has further refined distributor admission, dynamic evaluation, and exit mechanisms, implemented tiered credit lines for key distributors, and established early-warning systems for delivery, customer complaints, and capital anomalies. However, amid continued contraction in industry volume, the shift from "scale expansion" to "quality improvement" in channels is itself a passive choice driven by weak demand.

To address consumption downgrades, Oppein Home launched the Fiscar brand, positioned in the mid-to-low-end segment, this year, using a special package priced at RMB 499 per square meter to tap into essential demand and capture market share. Yao revealed that in August, Fiscar orders accounted for 8% of total orders, with month-on-month growth exceeding 40%. At the same time, he conceded that the Fiscar brand has the "thinnest margins" and inevitably diverts some business from the main brand. "If Oppein originally sold RMB 1 million and Fiscar sold RMB 100,000, Oppein might drop from RMB 1 million to RMB 980,000—but RMB 980,000 plus RMB 100,000 is still better."

Yao admits 'judgment errors'

Facing these challenges, Oppein Home pins its hopes on reform. During the period, the pilot scope for joint venture business reform expanded from 7 to 9 entities from the start of the year, centered on a partner mechanism with full decentralization of operational authority. Yao assessed that reforms in peripheral business segments have shown clear results—"without reform, we might have nearly died last year"—but reforms in the main business "did not meet expectations." He reflected that the initial reform judgment was "being prepared to advance through rain," but what actually arrived was "violent storms and turbulent waves," which "differed from our early assessment—the gap was considerable, and it could be called a misjudgment on our part," completely disrupting the company's manufacturing and marketing preparations.

Yao also stated, "Under reform, at least we have not collapsed. Amid the turbulent waves, our ship has not fallen apart," and despite main-business reforms falling short of expectations, team combat effectiveness has been maintained.

Industry data confirms the storm's intensity. According to the National Bureau of Statistics, from January to June, revenue of above-scale furniture enterprises fell 8.6% year-on-year, with total profits down 52.7%—profit declines far exceeding revenue, compressing industry margins to recent lows. Residential building completion area dropped 25.3%, and new construction starts fell 24.1%.

Multiple indirect metrics also reflect Oppein Home's contraction. Total assets declined to RMB 31.98 billion, down 9.33% from the start of the period; net assets attributable to shareholders fell from RMB 18.772 billion to RMB 18.442 billion, down 1.76%; and taxes payable dropped from RMB 410 million to RMB 138 million, a 66.43% decrease.

Yao emphasized at the briefing that "we are very afraid of failure" and "we are constantly exhausting our wisdom to drive reform." The founder, who has steered Oppein Home for over three decades, said that all reforms combined since the company's founding "do not match the magnitude of change seen in the past two years."

Investors hoped for definitive answers on "when profits will stabilize" and "when the industry will stabilize," but management's language remained highly cautious. The company stated only that "the first-half industry adjustment exceeded the company's expectations at the start of the year, and market uncertainty objectively exists," maintaining "cautious optimism" and "harboring no fluke mentality" about the future. Zhao Lili offered more clarity at the earlier briefing, stating, "Full-year results may see a year-on-year decline." Yao's phrasing was more direct: "Whether the second half will be better than the first, or by how much, I truly cannot predict," though he believes "the second half will probably be slightly better than the first half."

Reported by Pang Jingtao