According to the Zhitong Finance APP, Guolian Minsheng Securities released a research report stating that the revenue of the light industry manufacturing sector in Q1 2025 is expected to increase by 0.75% year-on-year to 137.489 billion yuan, and for the entire year of 2024, it is expected to increase by 1.80% year-on-year to 610.748 billion yuan. The net profit attributable to the parent company in Q1 2025 is expected to decrease by 16.05% year-on-year to 6.443 billion yuan, and for the entire year of 2024, it is expected to decrease by 30.76% year-on-year to 21.110 billion yuan. Looking ahead to Q2 2025, after the normalization of national subsidies, home furnishing orders remain stable. After the China-U.S. negotiations, the tariff increase has temporarily dropped to 30%, and the future impact of tariffs may be limited. Meanwhile, the cost of paper companies is expected to remain low, and after the consolidation of metal packaging, there is hope for an increase in bargaining power. Paper packaging will benefit from the 3C national subsidies and the launch of new machines, while the entertainment sector is optimistic about the leading shares in niche tracks and product structure upgrades.

The main points of Guolian Minsheng Securities are as follows:

Overall Light Industry: Revenue remains stable, profitability diverges

In Q1 2025, the revenue of the light industry manufacturing sector is expected to increase by 0.75% year-on-year to 137.489 billion yuan, and for the entire year of 2024, it is expected to increase by 1.80% year-on-year to 610.748 billion yuan. The net profit attributable to the parent company in Q1 2025 is expected to decrease by 16.05% year-on-year to 6.443 billion yuan, and for the entire year of 2024, it is expected to decrease by 30.76% year-on-year to 21.110 billion yuan. In Q1 2025, the revenue of the paper-making sector is expected to decline year-on-year, while home furnishing and entertainment maintain single-digit growth, and the packaging and printing sector sees double-digit growth. Profitability varies across sectors: after the normalization of national subsidies, home furnishing orders remain stable, the effects of reforms are evident, the cost of pulp has improved month-on-month, and the upgrade of entertainment product structures drives profit growth.

Home Furnishing: National subsidies boost domestic sales, expecting further expansion of domestic demand policies

In Q1 2025/2024A, the revenue of the home furnishing sector is expected to increase by 6.18%/+1.02% year-on-year, and the net profit attributable to the parent company is expected to increase by 13.56%/-15.61% year-on-year. Exports continue to gain momentum, and under the uncertain tariff backdrop, there has been a temporary surge in exports in the industry; domestic sales have warmed up under the old-for-new policy, with soft furniture performing relatively better, while the bathroom industry continues to shrink and the impact of price wars persists. After the normalization of national subsidies, home furnishing orders remain stable, and the organizational restructuring of OPPEIN and Jason Furniture has shown significant results, with noticeable performance growth in Q1 2025. In light of the tariff changes, the importance of expanding domestic demand to stabilize the real estate market has increased, and there are expectations for continued strengthening of domestic demand policies.

Paper Making: Supply-demand pressure eases, profitability improves month-on-month

In Q1 2025/2024A, the revenue of the paper-making sector is expected to decrease by 11.95%/-0.72% year-on-year; the net profit attributable to the parent company is expected to decrease by 90.10%/-137.24% year-on-year. Under the support of costs and improved supply-demand conditions, paper prices are expected to slightly rebound month-on-month in Q1 2025; the rebound in paper prices, combined with the use of low-priced pulp in Q4 2024, is expected to drive an improvement in the industry's gross profit margin month-on-month. Looking ahead, the costs of paper companies are expected to remain low, and downstream demand is still supported by consumption policy stimuli, with paper prices likely to maintain a fluctuating trend.

Packaging: Steady demand for paper packaging, expectations for integration effects in metal packaging

In Q1 2025/2024A, the revenue of the packaging sector is expected to increase by 11.07%/+4.83% year-on-year; the net profit attributable to the parent company is expected to increase by 24.88%/-8.29% year-on-year. In the paper packaging sector, in Q1 2025, the shipment of smartphones in China is expected to increase by 3.3% year-on-year to 71.6 million units, with steady demand in the domestic downstream consumer electronics market; In terms of overseas business, Yutong Technology's global layout is expected to hedge against tariff risks. In the metal packaging sector, Oricain's acquisition of COFCO Packaging has landed, and we look forward to enhanced bargaining power for the industry after integration.

Cultural and Entertainment Products: High-quality domestic leading brands maintain a high growth trend

In Q1 2025/2024A, the revenue of the cultural and entertainment products sector increased by +2.42%/+7.64% year-on-year; net profit attributable to the parent company decreased by -6.95%/-8.81% year-on-year. Dengkang Oral and Baiya Co., Ltd. saw revenues increase by +19.36%/30.10% year-on-year in Q1 2025, with brand momentum driving continued high growth in revenue. The public sentiment incident involving Baiya Co., Ltd. is gradually being digested, and short-term operations may be disturbed, but as the company's reputation gradually recovers, the impact will weaken. Dengkang Oral's online medical research series of high-end products are selling well, and the optimization of product structure has significantly boosted gross margins. Looking ahead, the momentum of high-quality domestic leading brands is expected to continue.

Export Chain: Steady revenue, shipping costs and exchange rate fluctuations affect performance

In Q1 2025/2024A, the export chain sector's revenue increased by +13.80%/+20.51% year-on-year, and net profit attributable to the parent company increased by +5.53%/+3.72% year-on-year. In the face of tariff uncertainties, "export grabbing" may catalyze order performance in advance; the revenue of the light industry export chain in Q1 2025 still maintains a rapid growth rate. The acceleration of tariffs between China and the U.S. has prompted export enterprises to invest in overseas production capacity, leading to a slight decline in gross margins in Q1 2025 due to the ramp-up of overseas capacity, while exchange rate gains have driven a decrease in rates. It is expected that tariffs may have a certain negative impact on exports, but the impact may be limited after China-U.S. negotiations reduce tariffs and transfer costs.

Investment Recommendation: Maintain "Outperform Market" rating for the industry

Looking ahead to Q2 2025, after the normalization of national subsidies, home furnishing orders remain steady. Following China-U.S. negotiations, the tariff increase has temporarily dropped to 30%, and future tariff impacts may be limited, while paper companies' costs are expected to remain low. The integration of metal packaging is expected to enhance bargaining power, and paper packaging will benefit from 3C national subsidies and new product launches. The cultural and entertainment sector is optimistic about the leading shares in segmented tracks and product structure upgrades.

Target Aspects

Recommended focus: 1) Home furnishing leaders with strong comprehensive advantages benefiting from trade-in programs: Mu Si Co., Ltd. (001323.SZ), Jason Furniture (603816.SH), SFY (002572.SZ), Minhua Holdings (01999), etc.; 2) Leading paper companies with integrated wood pulp and paper: Sun Paper (002078.SZ), etc.; 4) Leading shares in the cultural and entertainment segmented track with share increases and product structure upgrades: Baiya Co., Ltd. (003006.SZ), Dengkang Oral (001328.SZ), etc.

Risk Warning

Risks of consumer spending willingness not meeting expectations; risks of significant raw material price increases; risks of increased tariff uncertainties