Oppein Home Chairman Admits Misjudgment as H1 Net Profit Halves, Operating Cash Flow Plunges 94%

September 16 — Oupai Home (603833.SH) disclosed its investor relations activity record for September 15. Combined with its interim performance briefing on September 7, the company held two investor meetings within half a month, delivering a highly consistent message: the custom home furnishing leader is undergoing the most severe deep adjustment in its more than 30-year history.

In the first half of the year, Oupai Home reported operating revenue of RMB 5.95 billion, down 27.79% year-on-year; net profit attributable to shareholders of RMB 442 million, down 56.62%; and operating cash flow plummeting 94.45% to less than RMB 100 million. Chairman and President Yao Liang-song admitted to misjudging the market at the start of the year but declined to provide a clear timeline for when profits would stabilize.

Oupai Home is facing an unprecedented stress test. Yao described the current industry environment as "stormy seas" and "raging winds and rain," acknowledging that reforms in its core business fell short of expectations and that deployment plans were disrupted by the extreme market conditions. "We are very afraid of dying," he said. "We are exhausting all wisdom to reform."

Profit Decline Far Exceeds Revenue; No Clear Bottoming Point

According to the interim report, Oupai Home's operating revenue for the period was RMB 5.95 billion, down 27.79% year-on-year; net profit attributable to shareholders was RMB 442 million, down 56.62%; and net profit excluding non-recurring items was RMB 361 million, down 61.71%.

The profit decline far outpaced revenue. Oupai Home attributed this to:

• A significant drop in core product revenue, leading to a notable shift in product mix compared to the same period last year
• Reduced revenue scale weakening the fixed-cost dilution effect in manufacturing, passively raising unit production costs
• Rigid cost structures

In the first half, Oupai Home's selling expenses were RMB 768 million, down 8.19%; administrative expenses were RMB 577 million, down 4.04%. Both declined far less than revenue, causing expense ratios to rise passively. R&D expenses were RMB 303 million, down 29.35%, the only expense category matching the revenue decline.

Meanwhile, financial expenses reached RMB 45.493 million, up 116.60%. CFO Zhao Li-li stated that the company engaged in foreign exchange derivative hedging, and periodic exchange rate fluctuations caused changes in financial expenses at the reporting level, which would not materially impact operating profit.

During the September 15 investor relations event, Oupai Home further acknowledged: "In the revenue contraction phase, insufficient allocation of fixed costs and pressure on expense control are challenges common across the industry." It added that "cost reduction and efficiency improvement measures are being promoted and are gradually showing results, but in the short term, they are insufficient to fully offset the impact of declining demand."

Regarding investors' most pressing question — "when will profits stabilize" — Oupai Home did not provide a timeline, only stating that it "depends on the recovery of end-market demand."

Operating Cash Flow Plunges 94.45%

More concerning for investors is the cash flow situation. In the first half, net cash flow from operating activities dropped from RMB 1.667 billion in the same period last year to RMB 92 million, a decline of 94.45%.

Oupai Home attributed the cash flow decline to three temporary factors:

1. Year-on-year revenue decline, reducing operating collections
2. A high base from the same period last year, when national policies drove higher pre-order receipts
3. Concentrated maturity and payment of notes payable in the current period, increasing cash outflows for procurement

As countermeasures, Oupai Home stated it would continue to strengthen working capital and cash flow management, strictly control capital expenditures, maintain reasonable liquidity, implement credit access and dynamic credit limits for大宗客户 on the receivables side, optimize dealer structure, implement dynamic inventory controls, and streamline SKUs through front-end process controls to reduce operational risk.

Net cash flow from financing activities was RMB -2.546 billion, down 3,607.01%, mainly due to the payment of 2025 interim and annual cash dividends. In the first half, Oupai Home distributed approximately RMB 1.5 billion in cash dividends, equivalent to 3.39 times the current net profit attributable to shareholders.

Maintaining high dividend payouts amid sharply reduced profits has materially consumed the company's capital reserves. According to the company's previously disclosed 2024–2026 dividend plan, the minimum annual dividend of RMB 1.5 billion applies for the final year (2026). The company stated that future dividend plans will be studied based on year-end and full-year profit conditions and investor demands.

At the end of the period, Oupai Home's cash and cash equivalents stood at RMB 4.723 billion, up 60.05% from the beginning of the year, of which RMB 3.479 billion was restricted; trading financial assets were RMB 2.698 billion, down 55.14%, due to the redemption of some wealth management products; non-current assets due within one year were RMB 5.251 billion, up 86.51%.

As of the end of June, the total of these three items was approximately RMB 12.672 billion. Oupai Home emphasized in its interim report that its book cash and trading financial assets are ample, net cash is sufficient, and overall liquidity is safe and controllable. However, it is noteworthy that short-term borrowings during the same period were approximately RMB 5.094 billion, while cash and cash equivalents on the books were only RMB 794 million.

Core Wardrobe Revenue Falls 34.5%; Net Store Closures Reach 442 in Half Year

Wardrobe and matching furniture products, Oupai Home's core business contributing nearly half of total revenue, generated RMB 2.776 billion in the first half, a decline of 34.51% — significantly higher than the overall revenue decline of 27.79%.

CFO Zhao Li-li explained at the briefing that despite the revenue decline, the gross margin for the wardrobe category rose 1.71 percentage points year-on-year to 43.1%, offsetting some downward pressure on revenue, thanks to lean production, production line automation, and supply chain optimization. However, the sharp drop in revenue indicates that the company's core profit source is rapidly shrinking.

Channel contraction is evident. According to the September 15 investor relations record, as of the end of June, Oupai Home had a total of 6,903 stores, a net decrease of 442 from the end of 2025, mainly due to adjustments in dealer business plans and optimization of recruitment and management policies.

Yao revealed at the September 7 briefing that dealers in Guiyang, Changsha, and other cities had "basically given up city-wide operations," shrinking to just one store. In Shanghai, the former general distributor's market share had fallen to 20%, with the remaining 80% taken over by other operators.

Yao admitted that "the stormy seas have dealt a huge shock to agents, and some cannot withstand it." The transition from single-category to whole-home and then to integrated decoration "are all high-difficulty moves." With "raging winds and rain outside" and severe industry contraction, "even people of good quality find it hard; they can only barely survive."

Oupai Home stated it has further improved dealer准入, dynamic evaluation, and exit mechanisms, implemented tiered credit for key dealers, and established early warning systems for delivery, customer complaints, and capital anomalies. However, against the backdrop of continuous industry contraction, the shift from "scale expansion" to "quality improvement" in channels is itself a passive choice under weak demand.

To cope with consumption downgrading, Oupai Home launched the mid-to-low-end brand Fiskar this year, offering a special套餐 at RMB 499 per square meter to tap into the刚性 demand market. Yao revealed that in August, Fiskar orders accounted for 8% of total orders, with month-on-month growth exceeding 40%.

At the same time, Yao acknowledged that the Fiskar brand has the "thinnest profit margins" and will inevitably divert some business from the main brand. "Oupai (originally) sold RMB 1 million, Fiskar sold RMB 100,000; Oupai might drop from RMB 1 million to RMB 980,000, but RMB 980,000 plus RMB 100,000 is still better."

Yao Admits "Misjudgment"

Facing difficulties, Oupai Home pins its hopes on reform. During the period, the joint venture reform pilot expanded from 7 to 9 locations, with a partnership mechanism at its core and full delegation of operational authority. Yao commented that reforms in marginal business segments had achieved notable results: "If not for the reforms, they might have died last year." However, reforms in the core business "did not meet expectations."

He reflected that the initial judgment for reform was "being prepared to move forward in wind and rain," but what actually came was "raging winds and rain" and "stormy seas." "There was a gap from our early judgment, a relatively large gap. It could be said to be a misjudgment on our part," completely disrupting the company's preparations in manufacturing and marketing.

Yao also said, "Under reform, at least we have not collapsed. In the stormy seas, our big ship has not fallen apart." Although reforms in the core business did not meet expectations, the team's fighting spirit has been maintained.

Industry data confirms the intensity of the storm. According to the National Bureau of Statistics, from January to June, revenue of furniture enterprises above designated size fell 8.6% year-on-year, while total profit fell 52.7%, with profit declines far exceeding revenue, compressing industry profit margins to recent lows. Residential completed floor area fell 25.3%, and new starts fell 24.1%.

Multiple indirect indicators also reflect Oupai Home's contraction:

• Total assets fell to RMB 31.98 billion, down 9.33% from the beginning of the period
• Net assets attributable to shareholders fell from RMB 18.772 billion to RMB 18.442 billion, down 1.76%
• Taxes payable fell from RMB 410 million to RMB 138 million, down 66.43%

Yao emphasized at the briefing, "We are very afraid of dying" and "we are exhausting all wisdom to reform." The founder, who has led Oupai for more than 30 years, said that all reforms since the company's founding combined "have not been as great as the changes in the past two years."

Investors hoped the company would provide answers on "when profits will stabilize" and "when the industry will stabilize," but management's wording was cautious. The company only stated that "the magnitude of industry adjustment in the first half exceeded the company's expectations at the beginning of the year, and market uncertainty objectively exists," maintaining a "cautiously optimistic" attitude and "no侥幸心理."

CFO Zhao Li-li was more explicit at the earlier briefing, stating that "full-year performance may decline year-on-year." Yao's expression was more direct: "I really dare not predict whether the second half will be better than the first half, or how much better." He only believed that "the second half will probably be slightly better than the first half."

By Pang Jingtao, The Paper