Huaxi: March retail sales have shown steady growth year-on-year, and we are optimistic about the continued recovery of domestic demand.

Huaxi released a research report stating that in the home furnishings sector, in the short term, under the combination of multiple policies, the trend of improvement in real estate data remains unchanged. The policy market is gradually transitioning to a realization market, and the policy of replacing old with new is expected to effectively stimulate the demand for new home furnishings. In the medium to long term, with the release of demand for second-hand houses, improvement houses, affordable housing, etc., the industry will maintain steady growth, and the industry attribute will gradually shift from a real estate post-cyclical attribute to a consumption attribute. Leading companies have prominent advantages in brand, channels, products, and production capacity, continuously grabbing market share from small and medium-sized enterprises, and their performance growth remains outstanding in the real estate chain. Huaxi's main points are as follows: Event The Statistics Bureau released social retail and real estate data for March 2025: 1) Regarding social retail, the total social retail sales from January to March 2025 increased by 4.6% year-on-year: furniture, cultural office supplies, cosmetics, jewelry, and online social retail increased by 18.1%, 21.7%, 3.2%, 6.9%, and 7.9% respectively; Overall social retail in March increased by 5.9% year-on-year, exceeding Wind's consensus expectation (+4.36%), with furniture, cultural office supplies, cosmetics, and jewelry increasing by 29.5%, 21.5%, 1.1%, and 10.6% respectively. 2) In terms of real estate, from January to March 2025, the year-on-year change in national residential new construction area, completed area, sales area, and completed investment in residential development were -23.9%, -14.7%, -2.0%, and -9.0% respectively; In March, the year-on-year change in national residential new construction area, completed area, sales area, and completed investment in residential development were 18.6%, -8.1%, -1.2%, and -8.8% respectively. Home Furnishings: Policies continue to strengthen, optimistic about real estate stabilization Retail end: From January to March 2024, the year-on-year changes in national residential new construction area, completed area, sales area, and completed investment in residential development were -23.9%, -14.7%, -2.0%, and -9.0%, with growth rates compared to January-February 2025 increasing by +5.0pct, +3.0pct, +1.4pct, and +0.2pct respectively. In March, China's CPI decreased by -0.1% year-on-year (monthly growth increased by 0.6%), with a monthly decrease of 0.4%. As stimulus policies continue to be implemented, consumption demand is expected to further recover. From the perspective of residential purchasing demand, in March, residential medium to long-term loans increased by 504.7 billion yuan, surpassing the previous year by 53.1 billion yuan, indicating a continuous recovery in credit demand. In terms of sales volume, the year-on-year change in national residential sales area in March was -1.2%, showing a moderate increase; Regarding prices, the month-on-month decrease in prices of second-hand houses in 100 cities in March was 0.59%, while the prices of new houses rose by 0.17%, driven by the entry of high-quality improvement projects. On the policy front, the government continues to release positive signals. In this year's government work report, "stabilizing the housing market" was included for the first time as part of the overall requirements, with a lengthy deployment of real estate policies. On March 16th, the Central Committee and the State Council issued the "Special Action Plan to Stimulate Consumption," which clearly stated the direction for optimizing housing provident fund policies: "Lower housing provident fund loan interest rates timely. Expand the usage scope of housing provident fund, support depositors in extracting funds to pay for housing down payments while applying for personal housing loans from the housing provident fund, increase support for rental extraction, and promote staggered deposits for flexible employment personnel." Many places have already optimized housing provident fund loan policies, which are expected to promote the release of housing demand to some extent. In terms of home furnishings retail, the "Special Action Plan to Stimulate Consumption" further emphasizes increasing support for trading in old for new, promoting the greening and smart upgrades of automobiles, household appliances, and home decoration. With the expectation of a recovery in real estate and the industry's greening and smart upgrades, the home furnishings sector is expected to perform well. Significant recovery in optional consumer goods, domestic brands continue to exert strength In March, the growth rates of furniture, cultural office supplies, cosmetics, and jewelry were 29.5%, 21.5%, 1.1%, and 10.6% respectively, compared to 17.8%, -0.3%, -3.3%, and 5.2% in January-February 2025. Retail sales of cultural office supplies continued to grow significantly year-on-year; Cosmetics continued to show moderate growth; The popularity of national brands drove the growth of jewelry retail; Online social retail increased by 7.9% from January to March, performing better than the overall market, and the online consumption rate continues to increase steadily. The "Special Action Plan to Stimulate Consumption" proposes to tap into the domestic and international incremental markets for national trendy goods. Combining the trend of declining market share of foreign brands in recent years, it is expected that domestic consumer goods will continue to rise. Risk Warning 1) Significant fluctuations in raw material prices; 2) Economic recovery falling short of expectations; 3) Increasing industry competition.