The Zhitong Finance App learned that Shen Wan Hongyuan released a 2024 spring investment strategy for the home appliance industry, stating that on March 22, the National Standing Committee once again emphasized optimizing real estate policies and promoting the stable and healthy development of the real estate market. Since this year, “purchase restrictions, loan restrictions, and sales restrictions” policies in major cities have continued to be loosened. It can be seen that the real estate policy trend has been drastically reversed. The white power and kitchen appliances sector has strong post-real estate attributes, and is expected to benefit from real estate policy catalysis to bring about valuation repairs, while the white power sector has both “undervalued and high dividends”, and the stock price safety margin is both highly flexible and balanced.

From an export perspective, driven by overseas customer inventory replenishment and the development of new markets, China's home appliance export boom continues to improve, export orders continue to grow, and sector valuations are particularly cost-effective after experiencing a correction. Furthermore, the white power boom exceeded expectations, driving demand for upstream core components to exceed expectations.

Shen Wan Hongyuan's main views are as follows:

Demand improved significantly, and valuations bottomed out and rebounded

In the white power sector, according to industry online data, the cumulative domestic sales volume of air conditioners in 2023 was 99.6 million units, +13.8% compared with the same period (historical caliber adjustment). The boom was high due to factors such as hot weather and channel inventory replenishment. A new cold year began in late Q3, and the pace of domestic sales and shipments was adjusted. Sales in the kitchen appliance sector and the dual-line range hood market are all picking up. According to data from Aowei Cloud Network, the cumulative offline sales volume of range hoods in January-February was +2.3%, and online sales were +7.2% year-on-year, and sales in both markets achieved positive growth.

Dishwasher sales increased slightly year-on-year, and the average offline price is still strong. According to data from Aowei Cloud Network, the cumulative retail sales of offline dishwashers in January-February increased slightly by 0.3% year-on-year, and online retail sales increased by +2.1% year-on-year. Average online/offline prices were +20.4%/+6.8% to 4,340 yuan/8052 yuan in January, and -11.2%/+0.5% year over year to 3,705 yuan/7,345 yuan in February. Overall offline prices are still strong.

In the small household appliance sector, sales in the dual-line market declined, and the resilience of the category just needed was highlighted

According to Tmall data, as of December '23, online sales volume/volume were +8%/+13% year on year, showing a sharp rise in volume and price; among them, Q3/Q4 sales volume was +13%/+12% year on year, respectively, and prosperity accelerated. Health pot category According to Tmall data, the health pot category on the Tmall platform achieved sales volume of 11.933 million units from January to September '23, an increase of 11.7% over the previous year, achieving sales of 1,798 billion yuan, or +0.7% year-on-year. Compared with other small kitchen categories, major sales showed strong resilience.

The valuation of the sector was slightly repaired at the beginning of the year, and it is still highly cost-effective

In 2020, benefiting from the pandemic, the home appliance sector saw a sharp rise in valuation. Affected by the sharp rise in raw material prices in 21-22, the pressure on corporate costs increased, demand for superimposed terminals was weak, and the valuation of the home appliance sector experienced a sharp correction. Demand for air conditioners was strong in the summer of '23, and the home appliance sector, represented by white electricity, performed steadily; against the backdrop of high dividends and production schedule data exceeding expectations, the valuation of the white electronics sector was repaired at the beginning of '24, but the current valuation is still at the bottom of recent years, and the cost performance ratio of the sector configuration is prominent.

As of 2023Q4, the total market value of heavy public fund holdings was 2667.2 billion yuan, and the total market value of heavy home appliances was 71.9 billion yuan. Heavy household appliance stocks accounted for 2.70%, up 0.13 pct from Q3. Among them, Active Fund's white electricity standards were overallocated by 0.61%, black electricity was overallocated by 0.14%, kitchen and bathroom were under-equipped by 0.06%, small household appliances were overequipped by 0.01%, components were overconfigured by 0.44%, and lighting was under-configured by 0.06%; the white power sector configuration continued to pick up, and components continued to be overequipped.

Key investment points: Since 2023, real estate relaxation policies have been introduced at an accelerated pace, and the value of home appliance allocation has been highlighted. The following three main investment lines are worth paying attention to:

1) Real estate+dividend chain: On March 22, the National Standing Committee once again emphasized optimizing real estate policies and promoting the steady and healthy development of the real estate market. Since this year, “purchase restrictions, loan restrictions, and sales restrictions” policies in major cities have continued to be loosened. It can be seen that the real estate policy trend has been drastically reversed. The white electricity and kitchen appliances sector has strong post-real estate attributes, which are expected to benefit from real estate policy catalytic valuation repairs, and the white electronics sector has both “undervalued and high dividends”, taking into account both “undervaluation and high dividends” and a large balance of stock price safety margins and flexibility. The white electronics section continues to recommend a combination of Hisense Home Appliances (000921.SZ) + leading companies Midea (000333.SZ), Gree (000651.SZ), and Haier (600690.SH), and the main kitchen appliances recommend Boss Electric Appliances (002508.SZ).

2) Export chain: Driven by overseas customer inventory replenishment and the development of new markets, China's home appliance export boom continues to improve, export orders continue to grow, and is particularly cost-effective after experiencing a pullback in sector valuations. Stone Technology (688169.SH), which has high overseas growth and continues to advance new domestic sales products; recommends that air fryer OEM customers continue to expand, and the new coffee machine category creates a second growth curve (603215.SH); recommended small home appliance export company Xinbao Co., Ltd. (); recommended small household appliance export company with continuous improvement in revenue and profit elasticity showing quarterly 002705.SH Major customers have developed smoothly, and Dechang Co., Ltd. (605555.SH) has contributed to the growth of mass production of EPS motors; Hailong Cold Chain (603187.SH), which highlights the advantages of refrigerated display cases and the second growth curve of refrigeration accelerates.

3) Upstream core components: White power boom exceeds expectations, driving demand for upstream core components to exceed expectations. Recommended: Dunan Environment (002011.SZ): leading thermal management components company, large diameter electronic expansion valves are expected to overtake corners; Sanhua Intelligent Control (002050.SZ): leading thermal management components company, energy storage temperature control and robotics businesses open up a new growth track; Huaxiang Shares (603112.SH): Low electricity prices have significant competitive advantages, accelerating the integration and concentration of the black gold casting industry.

Risk warning: risk of exchange rate fluctuations; risk of fluctuations in raw material prices.