CICC released a research report stating that MAN WAH HLDGS (01999) has acquired U.S. furniture manufacturer Gainline through its American subsidiary for a total consideration of approximately $58.7 million, gaining two major brands—Southern Motion and Fusion Furniture—along with production facilities. This acquisition is expected to significantly expand MAN WAH's distribution network and local manufacturing capabilities in the North American market, enhancing market share through supply chain synergies and improving resilience against trade uncertainties. CICC maintains an "Outperform" rating with an unchanged target price of HK$6.5. Key points are as follows:

**Recent Developments** On December 18, MAN WAH announced that its indirect wholly-owned subsidiary, MAN WAH USA Manufacturing, acquired 100% equity in Gainline Recline Intermediate Corp. for $32 million. Additionally, the company assumed $27.99 million of the target group’s outstanding bank debt. Post-closing, MAN WAH Hong Kong Trading provided an interest-free loan of $26.67 million to the acquired entity, with the remaining $1.32 million settled using the target group’s cash reserves. The total transaction value amounts to around $58.7 million.

**Acquisition Highlights** The target group primarily engages in the manufacturing and sales of upholstered furniture in the U.S., owning two established brands: Southern Motion (founded in 1996, specializing in functional sofas) and Fusion Furniture (founded in 2009, focusing on stationary furniture). It operates eight production facilities in northern Mississippi, spanning over 2 million square feet. Financial data shows revenue of $188 million for the fiscal year ending June 28, 2025, with a net loss of $9.69 million.

**Synergy Potential** The acquisition provides access to a distribution network covering 1,000+ furniture retailers and two mature brands, which CICC believes will accelerate MAN WAH’s market penetration in North America. Cost optimization is anticipated through synergies in raw material procurement and automation. Local production expansion also mitigates risks from international trade volatility.

**Strategic Benefits** CICC views the deal as strengthening MAN WAH’s local competitiveness in the U.S. market. Establishing a complete manufacturing and supply chain system enhances responsiveness, circumvents trade barriers, and serves as a strategic foothold for consolidating upstream-downstream resources and brand influence in North America.

**Earnings Forecast & Valuation** CICC keeps FY2026/FY2027 profit forecasts unchanged at HK$2.12 billion/HK$2.25 billion, with current shares trading at 8x FY2026/FY2027 P/E. The "Outperform" rating and HK$6.5 target price (implying 12x/11x FY2026/FY2027 P/E) suggest 47.7% upside potential.

**Risks**: Volatile raw material prices and overseas trade risks.