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Furniture Market China

November 2014

Executive Summary
Market

Drivers &
Challenges

Trends
Government

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
Drivers
Healthy Economy and Rising Income
Real Estate Boom
Accelerating Urbanization and Changing Lifestyle
Furniture Expositions
Strong Distribution Network
Strong Demographics

Challenges
Huge Importer of Raw Materials
Risk of a Housing Bubble
Intense Competition and Rising Operating
Costs
Credibility Crisis

Shift in Raw Material Sourcing

Increased Localization of Business Model
Innovation in Product Designs
National Standards for Furniture Market
New-for-Old Furniture Subsidy Program 2013
Major Players

Competitive
Landscape

Company 1

Company 2

Company 3

Company 4

Company 5

Company 6

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
FURNITURE MARKET IN CHINA 2014.PPT

Economic Indicators (1/3)

Current Account Balance
USD bn
u

y5
y4

y3

2011

2012

y2
y1
2010

2013e

2014e

2015e

Exchange Rate: Half Yearly

USD/CNY

Period Average

Period High

c4

y6

c3

y5

a4

y4
y3
y2
y1

Period Low

b3

c2
c1
b1
a1

1/1/14

c5
b4

b2

b5
a5

a3

a2

2/1/14

3/1/14

FURNITURE MARKET IN CHINA 2014.PPT

4/1/14

5/1/14

Furniture products are used for various purposes and have

become an integral part of life
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

Characteristics of Furniture Industry

FURNITURE MARKET IN CHINA 2014.PPT

Global furniture industry derives strength and business

opportunities from growing furniture sector in c1
Global Furniture Market Size and Growth

Global Furniture Market Overview

The furniture market has exhibited steady
improvement over the years owing to the rising living
standards, increasing disposable incomes, economic
growth and urbanization

y4

Globally, c1, c2 and c3 are the top manufacturers

and exporters of furniture

y2

n1 is the largest furniture company in the world,

commanding a market share of about r6% of the
entire furniture market

USD bn

r1%
p

2013

2014e

2015e

2016e

2017e

2018e

y3

y1

Global Furniture Market Share (2013)

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

Country 1
r2%

Country 2

r5%

FURNITURE MARKET IN CHINA 2014.PPT

Country 3
Others
r3%

r4%

China is the worlds largest furniture market, exhibiting

strong growth potential through 2018
Domestic Furniture Market Size and Growth

Domestic Furniture Market Overview

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
worlds 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

USD bn
y5

r1%

y4
y3

2013

2014e

y2
y1
2015e

2016e

2017e

2018e

Domestic Furniture Market Structure (2013)

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

Segment 1

r4%

Segment 2
Others

r3%

FURNITURE MARKET IN CHINA 2014.PPT

r2%

East-coast provinces are the top furniture producing bases

in China
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

USD bn
r1%

y5
y4

a1

a2

y3

a3

a4

y2

a5

a6

y1
2010

2011

2012

2013
FURNITURE MARKET IN CHINA 2014.PPT

Rise in furniture production in China

Exports

Total Exports (Value)

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

USD bn
y5
y4
y3

2012

2013

y2
y1
2010

2011

Note: Figures are for the respective calendar years

Exports Country-Wise Segmentation (2012-13)

Exports Country-Wise Segmentation (2011-12)

Country 1
r2%

Country 1

Country 2

r8%

Country 3

Country 3

Country 4

r7%

Country 4

r13%

Country 5
r3%
r5% r4%
r6%

Country 2

Country 5
r11% r9%
r10%
r12%

Others

Others

Note: Total Exports includes exports to Hong Kong SAR and Macau SAR
FURNITURE MARKET IN CHINA 2014.PPT

has resulted in eventual rise in exports

HS Codes for Furniture Products

HS code

Product Segmentation 2012-13

HS 9401

r4%

Particulars

HS 9402
r1%

HS 9403
HS 9404

r3%

r2%

Product Segmentation 2011-12

HS 9401

r4%

HS 9402
r1%

HS 9403
HS 9404

r3%

FURNITURE MARKET IN CHINA 2014.PPT

r2%

10

Drivers & Challenges Summary

Drivers

Challenges

Healthy Economy and Rising Income

Huge Importer of Raw Materials

Real Estate Boom

Risk of a Housing Bubble

Furniture Expositions

Intense Competition and Rising

Operating Costs

Accelerating Urbanization and

Changing Lifestyle

Credibility Crisis

Strong Distribution Network

Strong Demographics

FURNITURE MARKET IN CHINA 2014.PPT

11

All domestic and international players are subject to a host

of national standards in the Chinese furniture industry
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
Standard No.

Standard Name

Note: The list is not exhaustive

FURNITURE MARKET IN CHINA 2014.PPT

12

Trends Summary

Shift in Raw Material

Sourcing

Key
Trends
Innovation in Product
Designs

Increased Localization of
Business Model

FURNITURE MARKET IN CHINA 2014.PPT

13

Porters Five Forces Analysis

Threat of New Entrants
x

Impact
i1

Impact
i4
Bargaining Power of Suppliers
x

Competitive Rivalry

Impact
i5

Threat of Substitutes
x

FURNITURE MARKET IN CHINA 2014.PPT

Impact
i2
Bargaining Power of Buyers
x

Impact
i3

14

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
FURNITURE MARKET IN CHINA 2014.PPT

15

Competitive Benchmarking (2/5)

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

y3

Net Margin

a2

y5
y4

Operating Margin

a1
b1

a3

c1

b2

c2

y2

b3

c3

y1
Company 1

Company 2

Company 3

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%

FURNITURE MARKET IN CHINA 2014.PPT

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Public: Company 1 (1/4)

Company Information

Locations China

Corporate Address
Tel No.
Fax No.

Website
Year of Incorporation
Ticker Symbol
Stock Exchange

Products and Services

Category

Headquarters
Products/Services

H1

Key People
Name

FURNITURE MARKET IN CHINA 2014.PPT

Designation

17

Public: Company 1 (2/4)

Financial Snapshot

Key Ratios

Total Income
USD mn

Profit / Loss

y3
y2
y1

Profit
USD mn

Total Income

2010

2011

y6
y5

y4
2012

2013

Financial Summary

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

Key Financial Performance Indicators

Market Capitalization (USD mn)
Total Enterprise Value (USD mn)
EPS (USD)
PE Ratio (Absolute)

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

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

Indicators

Particulars

Value (29/09/2014)

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
Improved

FURNITURE MARKET IN CHINA 2014.PPT

Decline

18

Public: Company 1 (3/4)

Key Business Segments

Key Geographic Segments

Segment 1

Segment 1

y6

y5
y4
y3
y2
y1

p1%

The company operates

through single reportable
segment, namely Segment
1

y3

y2

Segment 2
p3%

p4%

p1%

p2%

q1%

q2%

2010

2011

2012

2013

y1
2013

Business Highlights
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
FURNITURE MARKET IN CHINA 2014.PPT

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Public: Company 1 SWOT Analysis (4/4)

FURNITURE MARKET IN CHINA 2014.PPT

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Private: Company 2 (1/3)

Company Information

Locations China

Corporate Address
Tel No.
Fax No.

Website
Year of Incorporation

Products and Services

Category

Headquarters
Products/Services

H1

Key People
Name

FURNITURE MARKET IN CHINA 2014.PPT

Designation

21

Private: Company 2 (2/3)

Business Highlights
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

FURNITURE MARKET IN CHINA 2014.PPT

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Private: Company 2 SWOT Analysis (3/3)

FURNITURE MARKET IN CHINA 2014.PPT

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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

FURNITURE MARKET IN CHINA 2014.PPT

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