The Zhitong Finance App learned that Societe Generale Securities released a research report that in the long run, the overseas home appliance market has sufficient room for growth. Under leading product strength and global production capacity layout, domestic home appliance companies' overseas independent brands continue to grow, and their revenue and profit margins are broad. In the short term, overseas demand will pick up in 2023+inventory replenishment+inflation expectations will improve, and the overseas business performance of home appliance companies is impressive. Looking ahead to 2024, we will continue to be optimistic about overseas investment opportunities for independent home appliance brands with outstanding alpha attributes.

Overseas space: The overseas home appliance market space is broad, and the competitive advantage of Chinese brands is consolidated. Currently, the total scale of the world's major household appliances categories exceeds 600 billion US dollars. The overall overseas growth rate is faster than domestic, and the industry space is vast. By category, the overseas categories of ice washing and kitchen appliances continue to grow. Household air conditioners are affected by regional environmental differences, and there is still room for penetration. New categories such as sweepers are growing rapidly. By region, the European and American markets are mature, and demand for replacement drives up prices. In the short term, it is dominated by local brands. Chinese manufacturers have achieved gradual penetration through brand acquisitions and independent overseas; the South Asian and Southeast Asian markets have sufficient potential for growth, the penetration rate of home appliances is increasing at an accelerated pace, and major appliances are taking the lead in popularity, and Chinese brands are relatively strong. In the short term, the recovery of US real estate is compounded by overseas channels, and the export trend of Chinese home appliances is improving; in the medium to long term, with manufacturing and supply chain advantages and continuously improving brand power, there is great potential for Chinese home appliance companies to increase their global share.

China's overseas travel: 1) Overseas scale: China's export scale of home appliances is close to 100 billion US dollars. Considering the overseas production capacity layout of some companies, the actual overseas scale is expected to be higher. Since March 2023, the year-on-year growth rate of China's home appliance exports has increased quarterly due to overseas inventory replenishment demand, the trend of depreciation of RMB, falling shipping prices, and a low base in 2022. 2) Overseas model: The overseas model for home appliances mainly includes OEM/ODM, OBM, and local brand acquisition. Since the 80s, Chinese home appliance companies have gone through the three stages of product foundry → industrial chain integration → brand overseas. The overseas model has gradually transformed from OEM business to brand operation, extending from low-profit manufacturing links to full value chain operation in the industrial chain. 3) Decision-making factors: For home appliance companies, whether a brand is currently the “best solution” depends on overseas market space and the company's capital and supply chain layout at this stage, while whether local brand collaboration is required depends on the local market entry threshold. Measured in terms of production capacity, technology, brand, channel, etc., Chinese home appliance companies generally have the conditions to go overseas. Currently, many independent brands in industries such as white electricity, black electricity, sweepers, and electric two-wheelers go overseas. 4) Profitability: According to the smile curve theory, the added value of the industrial chain is more reflected at both ends, that is, the design and sales process, and the manufacturing process in the middle has the lowest added value. Therefore, in terms of ultimate profitability, independent brand > ODM > OEM.

Core sector: 1) White electronics: A pioneer in overseas appliances, with significant advantages in the domestic supply chain. Leading brands go overseas to integrate globally, and segment enterprises to expand the OEM market. Haier Smart Home insisted on brands going overseas, concentrating on mergers and acquisitions of leading overseas brands, and the global layout has entered a harvest period; Midea Group and Hisense Home Appliances are also gradually transforming overseas from OEM to OBM businesses. Changhong Meiling, Omar Electric and others focus on segmented OEM to expand the global market. Orders in 2023 make up for impressive overseas growth. 2) Black electricity: seize the market with affordable and high quality, and independent brands accelerate shipments. Currently, the focus of the global black power industry chain is gradually shifting to China. Domestic black power companies such as Hisense Vision and TCL are expanding their upstream chip and cloud service business, while strengthening overseas production capacity, marketing, and channel layout. Chinese black power is leading the global brand, and its share is rapidly catching up with Korea. 3) Small household appliances: Domestic cost advantages of small kitchen appliances are remarkable, leading customer resources are stable, and the basic OEM market is stable. New categories such as sweepers rely on product differentiation to take the lead and continue to seize the share of local European and American brands.

Risk warning: Prices of raw materials have risen sharply, overseas demand falls short of expectations, and industry competition has intensified.