According to the Finance and Economics Intelligence APP, Guotou Securities released a research report stating that due to the weak consumer willingness and the sluggish real estate market, there is certain pressure on domestic household appliance consumption in Q3. Since the end of August, detailed rules for subsidies for old-for-new household appliances have been successively implemented in various provinces and cities, effectively boosting the consumer sentiment for household appliances. With the continuous efforts of the subsidy policy, the domestic sales outlook for household appliances is expected to bottom out and rebound. In terms of export, according to the General Administration of Customs data, China's household appliance exports in Q3 increased by 10.4% YoY, driven by strong overseas demand, with continued high demand for white goods, brown goods, and small appliances.

Guotai Junan Securities' main points are as follows:

In Q3, the revenue growth of the household appliance industry slowed down, with small appliances, brown goods, and upstream sectors leading the growth.

In Q3, the household appliance industry's revenue increased by 2.5% YoY, a decrease of 3.2 percentage points compared to Q2. Due to the impact of weak domestic consumer willingness and real estate market sentiment, domestic household appliance consumption was under pressure in Q3, but exports still showed high momentum. Looking at different sectors, in Q3, the revenue YoY growth rates were +10.6% for small appliances, +6.2% for brown goods, +5.6% for upstream sectors, +0.9% for white goods, -9.0% for lighting, and -15.1% for kitchen appliances.

In Q3, domestic household appliance consumption hit the bottom, with subsidy policies driving the market sentiment towards improvement.

Due to the impact of weak consumer willingness and the sluggish real estate market sentiment, there was certain pressure on domestic household appliance consumption in Q3. Since the end of August, detailed rules for subsidies for old-for-new household appliances have been successively implemented in various provinces and cities, effectively boosting the consumer sentiment for household appliances. Industry online data shows that in September, the YoY shipment volume of domestic sales for air conditioners, refrigerators, and washing machines increased by +7.4%, +7.4%, and +5.8%, respectively. With the continuous efforts of the subsidy policy, the domestic sales outlook for household appliances is expected to bottom out and rebound.

In Q3, overseas demand was strong, and the rapid growth of home appliance exports continued.

According to the General Administration of Customs data, in Q3, China's home appliance exports increased by 10.4% YoY, driven by strong overseas demand, with white goods, brown goods, and small appliances maintaining high export levels. It is worth noting that in recent years, China's home appliance exports to Latin America, Southeast Asia, the Middle East, Africa, and other regions have been good, with emerging markets becoming important areas for incremental contributions by Chinese home appliance companies. Although there is a risk of increased overseas tariffs, emerging markets are expected to continue to boost the growth rate of home appliance exports, and Chinese home appliance companies have strong overall competitiveness, with global market share expected to continue to rise.

In Q3, the home appliance industry's profitability remained stable, with improvements in the gross margin of white goods, lighting, and upstream sectors.

In Q3, the gross margin of the home appliance industry decreased by 1.4% year-on-year, mainly due to domestic and export price competition, rising raw material prices, and exchange rate fluctuations. Looking at individual sectors, in Q3, the gross margin of brown goods, kitchen appliances, small appliances, white goods, lighting, and upstream sectors decreased by 2.5%, 2.3%, 1.4%, 1.1%, 0.7%, 0.6% year-on-year, with brown goods, kitchen appliances, and small appliances experiencing more significant margin pressure.

In Q3, the home appliance industry's net margin remained basically flat year-on-year, with net margin performance more stable than gross margin, mainly because home appliance companies controlled expenses, optimized cost efficiency, and saw a year-on-year decrease in sales expense ratio and financial expense ratio. Looking at individual sectors, in Q3, the net margin of white goods, lighting, upstream, small appliances, brown goods, and kitchen appliances increased by 0.7%, 0.7%, 0.4%, -1.2%, -1.4%, -4.1% year-on-year. Companies in the white goods, lighting, and upstream sectors demonstrated strong cost control capabilities, leading to improved profitability.

Investment recommendation: The 'replacement of old with new' subsidy policy continues to drive improvement in domestic appliance demand. The demand for household appliances in Europe and America is stable, while Latin America, Southeast Asia, and other emerging markets have ample space for appliance demand, leading to a steady increase in appliance exports.

Regarding targets: Leading white goods companies operate steadily with high dividend yields, recommending Midea Group Co., Ltd. (000333.SZ), Gree Electric Appliances, Inc. of Zhuhai (000651.SZ), Haier Smarthome (600690.SH), Changhong Meiling (000521.SZ), and Hisense Ha (000921.SZ). The consumption prosperity of European and American household appliances is stable, with China's home appliance exports to Latin America, Southeast Asia showing positive trends. Export target stocks such as TCL Intelligent Commercial Chain Co., Ltd. (002668.SZ), Beijing Roborock Technology Co., Ltd. (688169.SH), Guangdong Xinbao Electrical Appliances Holdings Co., Ltd. (002705.SZ), Hisense Visual Technology (600060.SH) are worth paying attention to.

Risk warnings: Sharp increase in raw material prices, changes in real estate policies, significant appreciation of the RMB, risks in overseas trade policies.