Company Report
ROYALE FURNITURE(01198.HK)
Growth derive from improved management and logistics
Royale Furniture Holdings Ltd., Royale or the company as follows, designs, manufactures and sells a wide range of home furniture. Royale is one of the best sale panel-based furniture producers in China. Operating 1538 Franchise outlets and 100 self-operating shops, Royale recorded sales of 1H10. The future earnings growth come from the synergy of premium brand image, wide spread distribution and sales network, improved
Buy
(Initial Coverage)
TP:HK$ 2.50
Current price:HK$1.83
China Merchants Securities (HK)
HKD 545mn (+53.8% yoy) and net profit of HKD 60mn (+174.2% yoy) in Ying LIANG
0755-83295342 ly@cmschina.com.cn
management and logistics, in our view. We expect net profit to maintain 07 Sep 2010 13.6%, 32% and 33.1% growth over 2010-2012. We derive the TP of HKD 2.50 from PE valuation, representing 7.2x2011PE. Premium brand image of "Royal Furniture" Leveraging the positive effects
Key data HSI Index HSCEI Index S/O(mn) S/O (HK)(mn) Mkt cap (HK) (mn) BVPS(HKD) Major share holder Free float Industry 21401.79 11956.23 560 560 1019 1.37 Holding (%) 49.75
as the exclusive supplier of home furniture for the Beijing 2008 Olympic Games, the company's "Royal Furniture" brand continues to project a premium brand image benefiting its other products. Subsequent to the Beijing 2008 Olympic Games, Royale has won the contract as the exclusive supplier of furniture products to the 26th Summer Universiade to be held at Shenzhen in 2011. Operating analysis In 1H10, sales from China and overseas accounted for
98% and 2% of sales respectively. Historically (2007-2009) Royale gross profit
Share performance margin and net profit margin were higher than its peers, according to our % 1m 6m analysis. Absolute return -16 34
Relative return -15 34
12m 87 91
Future strategies
Royale plans to add 200 franchise outlets and 5~10

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