The Zhitong Finance App learned that Huafu Securities released a research report saying that with the elimination of durable goods retail inventories, mainly in the US market, there are signs of recovery in US real estate, and the white electricity and tool categories are expected to benefit; at the same time, the Paris Olympics will open in July, which is expected to drive demand for black electricity. From a long-term perspective, categories such as robot vacuum cleaners and televisions have now gained a certain market share overseas with their respective advantages, and white electric faucets are also gradually promoting independent brands to go overseas through the idea of “localization”, which is expected to improve the profitability and certainty of the export business in the long term.
Benefiting from the dividend style, the home appliance sector has seen impressive gains since the beginning of the year. By the close of April 19, 2024, the Shenwan Home Appliance Index had a cumulative increase of 16.1% since the beginning of the year, ranking third among the 31 first-tier industries; in terms of internal segments, white appliances, small household appliances, and kitchen appliances increased by 29.4%, 12.1%, and 6.5%, respectively. Huafu Securities said that on the one hand, the home appliance industry achieved a steady recovery in revenue and profits in 2023; on the other hand, in an environment under pressure from the market, the home appliance sector's higher dividend rate level has a comparative advantage within the consumer sector, making it a better choice for capital to chase dividends under risk aversion.
Trade-in: spatial estimation & historical market review. According to estimates by Huafu Securities, the number of air conditioners, refrigerators, washing machines, range hoods, and color TVs that have been out of service has reached 0.9/1.1/1.2/2.1/160 million units, respectively, and there is considerable room for replacement. At the same time, referring to the effects of the previous round of household appliance consumption stimulus policies, under a neutral assumption, Huafu Securities expects that this round of policies may drive the industry to achieve mid-single digit growth.
Focus on valuations benchmarking overseas under global industrial transfer trends. In terms of ROE, the core indicator of shareholder returns, leading domestic appliances have an outstanding advantage, while PE valuations are significantly lower than comparable overseas companies. Huafu Securities believes that as domestic home appliance companies gradually go overseas and integrate into the world, the valuation system is also expected to be on par with leading overseas companies.
Investment advice:
1) In the context of changes in the global landscape, focus on the global trend of Chinese home appliance brands going overseas to impact leading global trends. It is recommended to focus on major electronics companies Haier Smart Home (600690.SH), Midea Group (000333.SZ), Hisense Vision (600060.SH), TCL Electronics (01070), and small household appliances that are actively participating in the Southeast Asian blue ocean market, Feike Electric (603868.SH), Little Bear Electric (002959.SZ), and two-wheelers going overseas 689009.SH), Chunfeng Power (603129.SH), Jimi Technology (688696.SH), which is active overseas in Europe and America and continues to repair with a low base, and Xinbao Co., Ltd. (002705.SZ), a leading global manufacturer of small household appliances & good at R&D and marketing of popular products.
2) The advantages of Chinese sweeper brands have continued to be reflected in the increase in global product share. In addition, global sweepers are in the early stages of increasing penetration. It is recommended to focus on Stone Technology (688169.SH) and Covos (603486.SH).
3) Focus on post-60s spending, which has a huge population base, high income and high savings, and is entering a wave of retirement. It is recommended to focus on Supor (002032.SZ) and Joyang Co., Ltd. (002242.SZ), etc., which position the middle and high-end quality of life.
4) The Paris Olympics are about to open in July. Black Electric is expected to usher in themed investment opportunities. It is recommended to focus on Hisense Video (600060.SH) and Kanguan Technology (001308.SZ).
Risk warning: Prices of raw materials have risen sharply; export tariffs to the US have been further raised; shipping costs have risen due to geographical conflicts; and the competitive landscape has deteriorated.