The Zhitong Finance App learned that in the context of interest rate cuts getting stronger, the US real estate market is gradually improving. Based on the review of historical financial data for industrial chain companies, the revenue of power tools and OPE leaders showed significant upward elasticity after the real estate cycle bottomed out, while the performance flexibility brought about by capacity utilization restoration was more impressive; in terms of the inventory cycle, Home Debao is moving faster than Lowe's. The bank predicts that Lowe's has also passed the high inventory level, and imports of representative categories of electric drills & lawn mowers have declined year on year. The overall storage pace is good; in summary, the power tools & OPE industry The leaders are expected to benefit one after another and usher in a new round of recovery.

Investment advice: To maintain the industry's “better than the market” rating, it is recommended to focus on power tool leaders Chuangke Industrial (00669), OPE leading companies Quanfeng Holdings (02285), and Glebe (301260.SZ).

The views of Guolian Securities are as follows:

Find anchors to invest in the power tools and OPE industry

Since the end of '23, based on expectations of US interest rate cuts getting stronger, the US real estate market is gradually improving, and the electric tools and garden tools sector related to the US real estate chain has begun to receive market attention; at the same time, judging from data from the US Department of Commerce, Home Depot, Lowe's, etc., electric tools and OPE have both entered the storage cycle sooner or later, and even some categories have gone into storage or are nearing the end; when demand and inventory are superimposed, flexibility in the subsequent sector can be expected. Starting from the two dimensions of real estate and inventory cycles, this article explores the real estate periodicity of electric tools and garden tools, as well as the current pace of inventory removal, to explore investment opportunities in the sector.

Real estate cycle: electric tools > OPE, demand side is expected to recover

Generalized power tools include electric tools and OPE. The main application scenarios of the former include construction, decoration, etc., which are intuitively related to real estate; the latter mainly includes daily maintenance of lawns, gardens, golf courses, etc., and temperature and precipitation also affect plant growth, which in turn affects OPE demand, so the correlation between power tools and the real estate landscape > OPE. Financial data from representative companies Chuangke and Quanfeng show that after US real estate bottomed out, the upward revenue elasticity of the two was remarkable, and the performance flexibility brought about by the restoration of production capacity utilization was even more impressive; if an inflection point in US real estate is reached in the future, the demand side is expected to usher in a significant recovery.

Inventory cycle: Electric tools lead the way in removal, OPE is expected to improve

Currently, the turnover of US building materials & OPE retailers is converging towards the historical average. Among them, Home Depot's inventory removal pace is faster than Lowe's, but Lowe's is also expected to pass the high inventory level in 2023, and the future trend is appropriately optimistic; in terms of upstream manufacturers, Chuangke has benefited from strong ties with Home Debao, leading the decline in inventory turnover days. It is expected that Quanfeng will also improve later. Further considering the year-on-year decline in US imports of electric drills and lawn mowers, and is significantly lower than the growth rate of building materials & OPE retail sales. The performance is better. Among them, power tools may be ahead of removal, while the OPE channel inventory level The improvements are also on the way.

Investment advice: it is recommended to focus on leading power tools and leading OPE companies

The bank believes that against the backdrop of stronger expectations of interest rate cuts, the US real estate market is gradually improving. Based on the review of historical financial data of industrial chain companies, the revenue of power tools and OPE leaders showed significant upward elasticity after the real estate cycle bottomed out, while the performance flexibility brought about by capacity utilization restoration was faster than Lowe's. In terms of inventory cycles, the bank expects Lowe's to have passed the high inventory level, and imports of representative categories of electric drills & lawn mowers have declined year on year. Overall, the pace of electric dewarehousing in the industry is better; overall, the pace of electric dewarehousing is better; Tool & OPE industry leaders are expected to benefit one after another and usher in a new round of recovery. To maintain the industry's “better than the market” rating, it is recommended to focus on Chuangke Industrial, a leading power tool company, and Quanfeng Holdings and Glibo, leading OPE companies.

Risk warning: 1) Domestic and foreign demand falls short of expectations; 2) Raw material prices and exchange rates fluctuate greatly.