The Zhitong Finance App learned that Tianfeng Securities released a research report saying that outdoor power equipment (OPE) is used in a wide range of scenarios, mainly referring to garden machinery tools used to maintain lawns, gardens, and urban greening. The development has gone through three stages of fuel power, AC power, and DC power. Driven by advancements in supply-side lithium battery technology and catalyzed by policies and regulations in the context of carbon neutrality, lithium battery OPE is gradually becoming mainstream, and its share in North America (excluding ride-on) has increased from 13% in 2010 to 36% in 2021. There is heavy snow in the OPE industry. Lithium battery OPE continues to penetrate with mature product power against fuel and economic efficiency that continues to reduce costs. Chinese manufacturers rely on the advantages of the domestic lithium battery industry to usher in development opportunities.

Tianfeng Securities's views are as follows:

The outdoor power equipment industry has long slopes and heavy snow, and there is strong potential for growth.

Outdoor power equipment (OPE) is used in a wide range of scenarios. It mainly refers to garden machinery tools used to maintain lawns, gardens, and urban greening. The development has gone through three stages of fuel power, AC power, and DC power. According to Global Market Insights data, the global garden machinery market is estimated to be close to 40 billion US dollars in 23 years and is in a steady growth stage. The market size is expected to exceed 45 billion US dollars by 2025, and the CAGR is close to 7.0%. More than 80% of OPE demand comes from North America and Europe. OPE has immediate consumption attributes and strong growth potential due to Europe and America's rich land resources, the highest level of residents' income and urbanization, the most popular horticultural culture, and strict legal supervision.

The wave of lithium electrification is coming, opening up room for OPE growth.

Driven by advancements in supply-side lithium battery technology and catalyzed by policies and regulations in the context of carbon neutrality, lithium battery OPE is gradually becoming mainstream, and its share in North America (excluding ride-on) has increased from 13% in 2010 to 36% in 2021. The growth of OPE comes from: 1) Lithium battery technology is becoming more mature, basic performance is basically comparable to household fuel products, and it even has advantages such as light weight, no maintenance, less noise, less vibration, and more intelligence, etc.; 2) The development of the lithium battery industry has helped lithium battery OPE products continue to reduce costs, has basically achieved the same fuel OPE price, and is cheaper throughout the life cycle; 3) Environmental protection policies are gradually limiting the use of traditional fuel OPE, and it is expected that the lithium electrification rate will accelerate in the future.

Downstream channels in the OPE industry are king, and domestic manufacturers use lithium battery curves to overtake cars.

The upstream and downstream industrial chains of the garden machinery industry are relatively mature, and the downstream voice is high, and terminal sales rely heavily on offline sales. In particular, the two major supermarkets in the North American market, The Home Depot and Lowe's, account for more than 50% in total, with a total of nearly 5,000 stores, making it a must-compete place for the OPE brand, and once it enters, it is easy to defend and attack. In terms of the competitive landscape, leading manufacturers are still mainly European and American fuel OPE suppliers, while domestic manufacturers are mainly contributing to the lithium battery OPE segment. Among lithium battery OPE products, the cost of three-electric power systems is relatively high. Thanks to the complete and mature supply chain of the domestic lithium battery industry, the local lithium battery OPE brand has outstanding advantages on the cost side. Domestic manufacturers Chuangke Industrial and Quanfeng Holdings rank first and second in the world with 20.4% and 11.4% of lithium battery OPE shares, respectively.

Domestic manufacturers will achieve long-term development by relying on cost advantage+patent protection+platform-based ecology.

China's lithium battery OPE manufacturers have relied on technology accumulation and cost advantages in lithium batteries, brushless motors, etc., to usher in a window period of development. They have formed good cooperative relationships with downstream giants. At the same time, high technical barriers are also expected to hinder the entry of new brands. In addition, domestic lithium battery manufacturers generally adopt the strategy of interoperability of platform-based battery packs among all product categories, effectively reducing usage costs, and achieving sales exclusivity to a certain extent, further increasing user stickiness and repurchase rates. It is expected that the first-mover advantage of domestic lithium battery OPE manufacturers will gradually accumulate to make the strongest

Investment suggestions: The OPE industry has experienced heavy snowfall. Lithium battery OPE continues to penetrate with mature product power against fuel and economic efficiency that continues to reduce costs. Chinese manufacturers rely on the advantages of the domestic lithium battery industry to usher in development opportunities. With the gradual elimination of overseas inventories, it is recommended to focus on Quanfeng Holdings (02285) (OPE leader in high-end lithium batteries, whose share rose after deep cooperation with Lowe's, and was recognized by major customers such as JohnDeere) (machinery group coverage), Innovation and Technology Industry (00669) (leading power tool leader with global, multi-brand operations), and Greebo (301260.SZ) (opening up incremental space in the commercial sector), etc.

Risk warning: risk of rising raw material costs, risk of exchange rate fluctuations, risk of overseas demand falling short of expectations, risk of increased market competition, risks related to company operations, etc.