CICC Light Industry's Outlook for 2025: The economy stabilizes and waits for prosperity.

CICC released a research report stating that in 2024, there will be a significant differentiation in the performance of the light industry both domestically and internationally. Domestic sales will be under pressure due to weak demand, while performance will be rapidly improved in exports due to the drive to replenish channel inventory. Looking ahead to 2025, there may continue to be differentiation between domestic and international sales. Domestic sales are expected to significantly improve with policy support, while exports may face slower growth due to high base effects and uncertainties regarding tariffs. The recommendation for 2025 investments in the light industry is to focus on leading companies in the domestic market cycle and new business growth, as well as to explore high-growth export enterprises with low tariff risks, while also paying attention to opportunities driven by events such as AI glasses and mergers and acquisitions. The main viewpoints of CICC are as follows: Home furnishings: Industry demand improvement driven by policies. In 2025, the demand for second-hand homes and existing home renovations is expected to effectively offset the decline in demand for new homes, and with the catalysis of policies promoting upgrading old homes, industry demand is expected to significantly recover. The trend of category and channel integration remains an industry trend, and leading companies with the capability to operate multiple categories and channels are expected to enjoy more industry benefits, thereby increasing their market share. Household light industry: Industry growth driven by new trends and technologies. The household light industry demand has high resilience, and in 2025, effective demand is expected to further recover. Under the trends of IP creativity, AI technology, and other consumer trends, sub-categories are expected to accelerate development, with leading companies optimizing product structures, expanding channels, and strengthening brand awareness to achieve higher quality growth, and continuous increase in market share. Packaging: Focus on the growth of sub-category demand and supply reshaping opportunities. Overall industry demand is expected to weakly recover in 2025, with sub-categories such as consumer electronics packaging and environmental packaging showing relatively good performance driven by policies promoting upgrading old items and environmental protection. Leading companies will continue to strengthen cost advantages and increase market share through mergers and acquisitions. Light industry exports: Continued recovery in demand, with attention to tariff impacts. Under the trend of overseas CPI and declining interest rates, external demand is expected to continue to grow steadily. Categories in the real estate post-cycle (such as home furnishings, power tools) with higher demand elasticity to interest rates are more sensitive, but export orders are still affected by downstream channel inventory levels. Moreover, tariffs have become a focus in the industry; tariffs may accelerate differentiation among leading companies, and recommend high-growth enterprises with relatively low tariff risks. Profit forecast and valuation: Looking ahead to 2025, four investment themes are preferred: 1) Leading companies in the domestic market cycle, such as home furnishings leaders Jason Furniture, MAN WAH HLDGS, De Rucci Healthy Sleep, Oppein Home Group Inc., Suofeiya Home Collection, Zbom Home Collection, and packaging leader ShenZhen YUTO Packaging Technology. 2) Companies showing clear improvement in operations or on the second growth curve, such as Winner Medical, SMOORE INTL, RLX Technology, Inc., Shanghai M&G Stationery Inc., CTIHK, among others. 3) Low tariff risk/high growth export enterprises, such as HHC Changzhou Corp., Zhejiang Natural Outdoor Goods Inc., Shandong Yuma Sun-shading Technology Corp., TECHTRONIC IND, CHERVON, CoCreation Grass, Guangzhou Haoyang Electronic, Joy Kie Corporation, among others. 4) Companies with event-driven catalysts, such as Mingyue Optical Lens, ORG Technology, among others. Risk warnings: Increased industry competition; changes in international trade policies and exchange rates; significant fluctuations in raw material prices.