Some people say that with the rapid growth of China's real estate industry, the home appliance industry has also stepped out of a textbook bull market for 10 years. How to support this point of view? You can tell by looking at the stock price performance of listed companies in the home appliance industry.

Take Gree Electric Appliance (000651) as an example, from the perspective of reinstatement, the share price of Gree was less than minus 5 yuan in 2006 and exceeded 27 yuan in June 2015. since then, it has fallen sharply under the influence of the entire stock market environment, but its share price has recently reached 41.7 yuan. has exceeded the 2015 high of 50%.

Market source: rich road certificate

According to Gree's stock price performance, we can seem to perceive that 10 years is not a cycle for the home appliance industry, but a new beginning.

Is this really the case? Zhitong Finance and Economics APP selected the top 10 companies with a relatively high market capitalization in China's home appliance listing industry. Overall, these 10 companies achieved good performance growth in the first half of 2017. Among them, Gree Electric Appliance, Hisense Kelon (00921), Qingdao Haier (600690), Boss Appliance (002508), Subor (002032) and Little Swan A (000418) all increased their revenue and net profit by more than 20% during the period.

Source: based on the financial results of listed companies in the first half of 2017 and the performance of stock prices during the year

When it comes to share price performance, the performance of 10 companies is also intoxicating. As of October 18, five companies had increased by more than 70% during the year, with Gree, Midea, Hisense Kelon and Haier in the top four. Why emphasize the top four? Because these four companies have one common feature, yes, that is air conditioning.

The all-round growth of air conditioning sales has contributed to the great increase in Kelon's performance.

Zhitong Financial APP learned that the domestic market performance of white electricity products was different in the first half of this year, with insufficient rigid demand and weak growth in the refrigerator market. As of June 2017, cumulative retail sales in the refrigerator industry grew 1.7 per cent year on year and 4.8 per cent year on year, according to Zhongyikang statistics.

The air-conditioning market, on the other hand, has benefited from the 2016 inventory digestion and clean-up to release room for market replenishment, high temperature weather and the warming of the third and fourth-tier market, which has a bright performance, according to Zhongyikang statistics.As of June 2017, the cumulative retail volume of the air conditioning market increased by 26.3% compared with the same period last year, and cumulative retail sales increased by 31.9% compared with the same period last year.

In terms of export markets, markets in major overseas economies continued to pick up, and export demand increased. According to customs statistics, exports of cold products increased by 17.1% in the first half of 2017 compared with the same period last year, and exports increased by 18.1% compared with the same period last year. Exports of air-conditioning products increased by 12.3%, and exports increased by 4.6%.

Benefiting from the substantial increase in demand, Hisense Kelon's air conditioning business income reached 8.525 billion yuan (the same below), a year-on-year increase of 57.38%, and the proportion of air conditioning business in the main business increased to 53.32%.

Zhitong Financial APP learned that there are three main reasons for the rapid growth of Hisense Kelon air conditioning business, one of which is to promote the continuous improvement of product core quality indicators through the upgrading of intelligent products and technology. Hisense brand, Kelon brand product quality link NPS index improved 25.6% and 26.1% respectively compared with the same period last year.

Second, promote the sinking of channels, focusing on expanding the third and fourth-tier markets, and the sales revenue of the third-and fourth-tier markets increased significantly compared with the same period last year.

Third, in terms of exports, we should strengthen overseas marketing of our products. According to customs export statistics, the export volume of the company's air-conditioning products increased by 70.8% in the first half of 2017 compared with the same period last year, much higher than the 12.3% growth level of the industry.

It can be seen that Hisense Kelon has begun to show its explosive power in the field of air conditioning. in the future, it can bring the company to a new height, in addition to traditional household air conditioning, there is also central air conditioning.

Central air conditioning meets great opportunities for development

Zhitong Financial APP learned that the central air conditioning industry has emerged as a new force in recent years and has become a major area for the upgrading of household appliance consumption. according to Oviyun, central air conditioning continued its previous growth trend in the first half of 2017, with an increase of 24.5% over the same period last year. Multi-online is still the main product, accounting for 65.9% in the first half, up 46.9% from the same period last year.

The market capacity of central air conditioners in the first half of 2017 was 24 billion, of which the home improvement retail and engineering projects were 16 billion and 8 billion respectively. The home improvement market increased by 50% compared with the same period in 2016, and the project category increased by 10%. Driven by the rapid growth of sales in home improvement retail channels, the market sales of the central air-conditioning industry in the first half of 2017 exceeded 43 billion, an increase of 22.9 percent over the same period in 2016, the highest market capacity in recent years.

In addition to home decoration, rail transit is becoming a powerful driving force to promote the demand of the air-conditioning industry. It is understood that in the past five years, the number of cities with subway operating lines in China has increased from 17 to 27, and the mileage of operating lines has increased from 1740 km to 3169 km.By the end of 2016, the number of cities approved for urban rail transit had increased from 35 in 2012 to 43, with a total planned mileage of about 8600 km. By 2020, the operating mileage of urban rail transit in China may reach 6000 km.

In this context, the demand for central air conditioning will maintain the momentum of rapid growth, Hisense Kelon will also usher in a major development opportunity because of the great development of central air conditioning.

It is reported that Hisense Hitachi, which has a stake in Hisense Kelon, currently has a market share of 9% in the field of central air conditioning, ranking behind Daijin, Gree and Midea, and occupies the second echelon leading market position.

Source: Hisense Kelong official website

Hisense Hitachi's main products are multi-online, benefiting from the rapid growth of the industry. Hitachi's revenue in the first half of the year was 4.418 billion yuan, an increase of 56.94% over the same period last year, and its net profit of 711 million yuan was up 51.92% over the same period last year, bringing a long-term equity investment income of 331 million yuan for Hisense Kelon.

With the improvement of consumer acceptability and the expansion of market capacity, Hisense Kelon commercial air-conditioning business may benefit from the rapid growth of the industry and continue to bring rapid growth benefits for the company.

Low valuation, stock price correction is worth paying attention to

It is worth noting that the current PE and PB of Hisense Kelon (00921) are 8.99x and 2.34x, while those of PE and PB of Gree Electric Appliances are 16.2x and 5.93x, that of Qingdao Haier PE is 20.5x and PB is 3.63x, that of Midea PE is 21.59x and PB is 4.77x.

Source: Futu Securities

It can be compared with the simplest valuation method that Hisense Kelon is attractive in terms of valuation. In addition, Hisense Kelon shares rose to HK $13.84 at the highest level in the early period, and then experienced a share price correction of more than 40%. There are signs of a pullback after the share price rebounded to the range of HK $10, which is a buying opportunity under high growth expectations.