Sinolink: New consumption prosperity continues, traditional light industry internal differentiation incubates structural opportunities.

Sinolink released a research report stating that the domestic sales sector urgently needs furniture consumption subsidies to restart, and the medium to long term is awaiting stabilization of the real estate market and rise in consumer spending. During this process, the differentiation of relevant enterprises will become more apparent. In the paper sector, as downstream demand recovers in 25H2, pulp prices are expected to stabilize and rise, providing a solid foundation for the profitability improvement of paper companies. In the bicycle industry, under the dual drive of the new national standard and the policy of replacing old bikes with new ones, along with the optimization of the supply side structure, a clear trend of increasing volume, price, and profit is emerging. With the implementation of policies, there is a possibility of further optimization of the industry supply structure, with the continued prominence of leading companies. Sinolink's main points are as follows: Home Furnishings: Q2 custom home furnishings are under pressure, and the differentiation of soft furnishings is becoming more apparent. In terms of domestic sales, the revenue of domestic home furnishings in 25H1/25Q2 decreased by -0.83%/-2.89% year-on-year, with net profit attributable to the parent company decreasing by -2.95%/-7.63% year-on-year. The performance of most domestic home furnishing companies in 25Q2 continued to be under pressure, mainly due to the previous government subsidies effect and the interruption of subsidies in Q2. In terms of specific sectors, the performance of soft furnishing companies is relatively better than that of custom home furnishing companies. In terms of channels, the performance of various companies in retail channels is significantly different, with bulk channels facing overall pressure. In terms of exports, the revenue of overseas home furnishings in 25H1/25Q2 increased by +11.58%/+6.56% year-on-year, with net profit attributable to the parent company increasing by 5.38%/0.09% year-on-year. In Q2, overall overseas demand slowed down, coupled with the impact of tariffs, leading to a slight decrease in market sentiment. Leading companies showed operational resilience, with internal differentiation. Looking ahead, the domestic sales sector urgently needs furniture consumption subsidies to restart, and in the medium to long term, stabilization of the real estate market and recovery of consumer spending will be awaited. During this process, the differentiation of relevant enterprises will become more apparent, and leading home furnishing companies may gradually show their advantages in financial statements through measures such as category extension, channel empowerment, management deepening, and retail transformation. As for exports, the overall export sentiment of Chinese furniture in Q2 is declining, as the impact of tariffs gradually takes effect. It is urgent for the U.S. to cut interest rates, which may stimulate overall demand for American furniture. Internal differentiation in the export sector has also begun, with companies with high integration of technology, trade, and industry, leading overseas production capacity layout, and high brandization showing more prominent advantages. Paper Industry: The price of pulp has stabilized, and performance is expected to recover after the improvement of the supply-demand pattern. In 25H1, leading paper companies had planned to concentrate their capacity deployment, but with weak downstream demand causing a reduction in orders, the market has faced an overall oversupply situation. Most paper companies' profitability remained under pressure in 25Q2, with 13 paper companies seeing a year-on-year revenue growth rate of -12.5% to 761.3 billion yuan in 25H1, and net profit attributable to the parent company falling by -125.0% to -8.94 billion yuan. Looking ahead, foreign pulp mills are choosing to suspend production for maintenance and reduce production scale to improve profitability due to the continuous weakening of pulp prices and narrowing profit margins. The impact of the concentrated deployment of new domestic paper pulp capacity on pulp prices has become fully evident, and there is little room for further pulp price declines. With downstream demand recovering in 25H2, pulp prices are expected to stabilize and rise, providing a solid foundation for the profitability improvement of paper companies. It is recommended to focus on leading paper companies with integrated pulp costs, strong growth potential, and high dividends, as they are expected to benefit from the stabilization and rise in pulp prices. Light Industry Consumer Trends: Personal care sector is facing competition pressures, while the pet and toy industry maintains high prosperity. 1) Personal care products: The revenue growth rate in Q2 has slightly slowed down, with some pressure on market sentiment. The performance of brands varies, with companies in products like toothpaste and sanitary pads leveraging popular items and channels such as Douyin to rapidly increase revenue. However, profitability is weakened by brand investment, public opinion events (sanitary pads), and intense competition. 2) Toys: The prosperity of the industry is evident and the business model is expanding, with leading companies actively monetizing through IP cultivation and multiple dimensions, while accelerating investment in their own IP. 3) Pet food: The industry continues to show upward growth, with a clear optimization trend. Independent brands are performing well due to industry growth dividends and strategic optimization, facing some pressure from competition. Export growth performance is favorable, with overseas production capacity layout expected in the future, and medium-term advantages gradually emerging. Bicycles: H1 government subsidies have improved market sentiment, with promising upgrades in product structure and overseas growth. Looking back at 25H1, the industry has shown a clear trend of increasing volume, price, and profit under the dual drive of the new national standard and the policy of replacing old bikes with new ones, along with the optimization of the supply side structure. Leading companies have actively expanded in the mid to high-end price range through strategies such as high quality and price ratio and targeting young consumers to achieve incremental growth. Overall, the inventory levels in downstream channels is healthy, with the actual impact of the new national standard on sales switching expected to be better than previous estimates. With the implementation of policies, there is a possibility of further optimization of the industry supply structure, with the continued prominence of leading companies. Risk warning: Real estate completions below expectations; sharp rise in raw material prices; demand downstream falls short of expectations leading to unexpected price increases; loss of major customers by contract manufacturers; significant increase in U.S. tariffs.