Weekly market review:
Affected by systemic risks, the overall performance was weaker than that of the broader market. This week, the Shanghai and Shenzhen 300 Index -3.7%, the appliance sector as a whole fell -7.1%, the industry performance was inferior to the broader market. Among them, the lighting sector (-4.9%), Baidian ( -7.2%), black electricity (-8.8%), kitchen appliances and small household appliances (-7.2%), spare parts (-6.4%).
This week's core views:
Trade disputes between China and the United States cause market volatility, and there is no need to worry about taxation of household appliances: On March 23rd, US President Trump signed a memorandum, announcing measures to impose tariffs on products imported from China. The list of specific products has not yet been announced, but according to the report, it is basically concentrated in high-tech and intellectual property fields. We believe that the probability of taxation on home appliances is very small. First, the relatively hollow nature of the home appliance manufacturing industry in the United States, domestic household electrical appliances are basically exported. U.S. companies doing OEM/ODM OEM are not selling to end consumers competing with U.S. companies. If this taxation affects their domestic corporate costs and inflation levels, then China’s home appliance production capacity accounts for more than 50% of the world's total (air conditioning 70%). Above), there is no alternative supply chain system in the world.
Even with the worst assumptions, trade disputes have a 1 to 2 pct impact on domestic leading profits: In the main products of the home appliance industry, exports to the United States account for a large proportion of total exports, including television (but there is no TV company in the United States), microwave ovens. And the electric ovens, the remaining categories accounted for a small proportion (less than 20%). Specific to the proportion of leading revenue, eliminating the impact of the United States in the United States joint ventures and Haier GEA, Gree Electric / Midea Group / Qingdao Haier / Little Swan A, etc. The proportion of white goods leading to U.S. in total revenue does not exceed 5%. In the remaining sectors, except for some small household appliances companies, the proportion of the industry as a whole is relatively limited. If the U.S. profit margin is considered lower than the overall, the profit impact is only 1~2 pct. .
Investment Advice:
The performance of the home appliance sector is relatively weak recently. On the one hand, the market is under downward pressure on real estate sales, and there are disagreements on the fundamentals of the sector's subsequent fundamentals; on the other hand, it stems from rising interest rates, systemic risks such as Sino-US trade disputes, etc. Observed variables, but are expected to remain relatively stable.
We believe that the leading company's annual/quarterly report performance is very decisive, and that air-conditioning restocking will also drive some companies to exceed expectations, and after the initial decline in allocation value has gradually begun to highlight.
1) Combining with performance certainty, it is recommended to pay attention to White Electric Group, Gree Electric Appliances, Qingdao Haier, Little Swan A; Growth Lighting Opto, Vantage, Boss Electric.
2) Under the disagreement of overall demand and structure, market funds will gradually focus on some companies that are at the bottom of valuation and operation, and are expected to experience fundamental changes. It is recommended to pay attention to TCL Group and Jiuyang Group.
Risk Analysis:
Macroeconomic downturn; real estate sales shrink; raw material prices have risen sharply; trade disputes between China and the United States have intensified.