Zhitong Finance and Economics app learned that Zhongjin released a research report stating that the consumption of household appliances in China in 2021 and 2022 is depressed, and in particular, the performance of the sector will be affected in 2022 due to the stock reduction in the European and American markets. The current market still lacks confidence in the sector. The bank judges that there will be marginal improvements and opportunities in the domestic and foreign household appliances market in 2024, including global development, the end of stock reduction in European and American markets, improvement of market concentration, and application of new technologies such as AI and smart homes, as well as rapid development of the heating, ventilation, and air conditioning industry.

The main points of the Zhongjin report are as follows:

Long-term trends toward globalization while short-term trends are dictated by the end of the European and US inventory cycles:1) From 2000 to 2010, China became the global production center for household appliances due to cost advantages. 2) In the 2020s, China's household appliance industry has rapidly developed through global competitiveness and e-commerce advantages, with independent brands, brand acquisitions, cross-border e-commerce, and global industrial chain layout. 3) The European and American household appliance market has been in a stock reduction cycle since 2022. In mid-2023, the inventory level of the European and American household appliance industry is expected to return to normal. The bank expects that in 2H23, the recovery of order growth can bring sustained improvement to the export data of household appliances and benefit some export-oriented enterprises. 4) The demand in overseas markets has been depressed in recent years, but some manufacturers have maintained an increasing trend in overseas brand shares.

Rapid development of the heating, ventilation, and air conditioning industry:1) From 2000 to 2010, the driving force behind the heating, ventilation, and air conditioning industry was mainly Chinese urbanization and industrialization. Since 2021, the manufacturing industry has been returning to the United States, and European heat pump subsidies have driven the demand for heating, ventilation, and air conditioning in Europe and the US beyond expectations, also leading to high growth in China's heat pump exports. 2) China's heating, ventilation, and air conditioning leader is also a household appliance leader. It has achieved domestic replacement of central air conditioning and is committed to globalization, as well as developing the fields of heat pumps and thermal management. 3) Upstream core components in the industrial chain have been continuously conquered, further enhancing China's competitiveness in the heating, ventilation, and air conditioning industry chain.

China's demand recovery provides opportunities for companies with alpha:1) Under measures such as relaxation of real estate policies and reduction of income tax, the bank expects that domestic demand will improve. However, the improvement is not enough to drive the overall high growth of most companies in the industry. The opportunities mainly lie in companies with alpha and those that can increase their market share. 2) The concentration of the kitchen appliances, civilian electricians, and lighting markets is not high, and it is currently increasing continuously. 3) The incremental demand for small household appliances depends on the company's ability to introduce popular selling products targeting the single economy, emotional economy, and efficiency of online traffic conversion.

Risks:The risk of market demand being lower than expected, and the risk of market competition intensifying.