Dream Lily (603313) Company Dynamic Comment: Proposed Acquisition of American Furniture Retailer’s Overseas OBM Business Accelerates Growth

Dream Lily (603313) Company Dynamic Comment: Proposed Acquisition of American Furniture Retailer’s Overseas OBM Business Accelerates Growth

Event: 南宁桑拿 September 19, the company’s Mor Furniture For Less, Inc.

After signing the letter of intent to acquire, the company intends to acquire 80% -85% of the common shares and all derivative securities of the target company by paying cash. After the completion of the acquisition, the target company will become a subsidiary of Dream Lily Holdings.

The acquisition price will be based on the target company’s valuation of US $ 68.4 million (approximately RMB 4).

800 million) negotiated.

The target company ‘s operating income in the most recent fiscal year accounted for 50% of Meng Lily ‘s revenue for the same period (ie RMB 15).

300 million), or constitute a major asset reorganization.

Strong business synergy, Mor Furniture For Less will help Dream Lily enhance overseas OBM business.

Established in San Diego in 1977, Mor 杭州夜网 Furniture For Less is one of the largest family-owned furniture retail businesses on the west coast of the United States.

The company sells products including sofas, beds, mattresses, tables, lockers, kitchen cabinets, bookcases, TV cabinets and home accessories, etc. The product range is complete, covering the scenes of living rooms, bedrooms, restaurants, children’s rooms, etc., can be for consumersProvide a good one-stop shopping experience.

The mattress brands currently on sale include Serta, Sherwood, Tempur & Searly, Stearns & Foster, Restonic, King Kerr and the company’s own brand Sleep Mor.

As of now, the company has a total of 50 stores in California, Washington, Oregon, Idawa, Nevada, Arizona, and New Mexico, including 36 showrooms, 11 warehousing stores, and 3 outlets.

The company’s business can form a good synergy with Meng Lily, and its sales channel resources will help Meng Lily increase sales of independent brands in the United States, and accelerate OBM transformation.

The brand goes overseas + overseas production capacity layout, and realizes a strategy to counter the risks of royal trade friction and domestic land fluctuation risks.

The company started with ODM export and has a thorough understanding of the needs of overseas markets.

Relying on the rich experience accumulated in deepening the overseas market, the company has made solid progress on the OBM transformation road. The core brand “Mlily” has been sold in dozens of countries and regions around the world.

In addition, the company acquired Spanish local brands Maxcolchon, COMOTEX, etc., and its products are sold in Spain, Portugal and France.

In terms of production capacity, the company opened an earlier production layout. Currently it has self-built factories in the United States, Serbia, and Thailand. The production capacity can fully cover exports to the United States and can support the company’s further expansion of overseas business.

Through the combination of mergers and acquisitions and self-construction, the company’s layout at the production and sales end has begun to outline, providing the company with normalization in trade frictions and providing good defense in the environment of changing domestic land cycles.

The short-term RMB exchange rate and low raw materials guarantee profitability, and long-term bullishness on the domestic market volume.

As of September 23, the central parity of the USD against the RMB was 7.
.

0734, at a historical high of more than 10 years.

The company’s overseas business revenue accounted for 83% in 2018, and the depreciation of the RMB will help the company’s overseas sales and increase in gross profit margin.

At the same time, the prices of main raw materials MDI / TDI / polyether have remained low since the beginning of this year, ensuring the company’s profitability.

In the long run, the current penetration and acceptance of memory foam products in developing countries will continue. As the leader of memory foam mattresses, the company guides consumer education through innovative channels such as “zero pressure room” and promotes the benefit of the industry outbreak.

Investment suggestion: The acquisition of Mor Furniture for Less will help the company to increase the sales of independent brands in North America. At the same time, the export will penetrate through the comparative advantage of the Sino-US trade friction.Slightly slower, but there is plenty of room for future growth.

Assuming Mor furniture is consolidated at the beginning of 2020, the EPS for 2019-2021 is expected to be 1.

01/1.

30/1.

58, corresponding PE is 17/13 / 11x, maintaining the “strongly recommended” level.

Risk reminders: Overseas production capacity climbs less than expected, overseas production costs rise; raw material prices rise; production capacity is released less than expected; RMB exchange rate changes.