Air conditioning start-up in peak season: the market is expected to strengthen after the price reduction of refrigerants goes against the trend.

Temperatures began to pick up in March, the air conditioning manufacturing industry ushered in the traditional peak season, affected by this, the market upstream refrigerant industry is also expected to pick up.

After many interviews, the reporter learned that it is difficult to be optimistic in this year's peak season. The price of R32 refrigerant for household air conditioners unexpectedly dropped sharply at the beginning of the month, and there is still more spare capacity in the superimposed industry. Limited growth on the demand side is also expected to be difficult to change the current situation of overcapacity and low-price competition.

With regard to the unexpected price reduction of R32, analyst Wang Xinyue explained to reporters on March 17: "at the beginning of March, there was a sudden low-price supply of R32 in the market, and the price dropped from about 13500 yuan / ton to 12500 yuan / ton, a drop of 1000 yuan / ton. Affected, other manufacturers can only follow the price adjustment and plan to postpone the start-up."

Since last year, the refrigerant industry has been caught in low-price competition caused by overcapacity. in order to avoid losses, some manufacturers have taken the initiative to reduce production, so there is still more spare capacity in the industry. Wang Xinyue believes that even if the demand for refrigerants picks up significantly, these spare capacity will also put greater pressure on rising prices.

It is worth noting that there was a big rebound in R32 prices in early 2021, which was once interpreted by analysts as a "market rebound". But Wang Xinyue said that at that time, the price increase was more triggered by the rise of er, the main raw material, and the so-called "market recovery" judgment was too optimistic as the industry's peak season prices fell again.

On March 17, the reporter also called the two industry leaders to understand their judgment on the future trend of the market. Sanmei shares (603379.SH) related staff immediately after understanding the reporter's intention, said: "inconvenient to respond." As of press time, the public phone calls of Juhua (600160.SH) have not been answered.

It is understood that the current low-price competition dilemma faced by the refrigerant industry has its special background.

The third generation refrigerants entered the quota base period from 2020 to 2022. Under the condition that the overall quota is only reduced but not increased in the future, the market share of the products of each enterprise from 2020 to 2022 will determine the proportion of quotas to be obtained in the future. Under this expectation, enterprises have a strong desire to seize the market, which also makes the short-term market competition white-hot.

However, the strong expansion of production meets cold demand, which is bound to lead to a more fierce price war, resulting in the situation of "selling more and more at a loss". Take the results of Juhua shares and Sanmei shares as an example, the two companies issued a pre-reduction announcement for 2020 results, the former attributed net profit fell by 87% Kui 90% compared with the same period last year, while the latter declined slightly, but also reached about 60%.

It is worth noting that behind the significant difference in earnings decline is that the two companies have adopted different strategies. According to the 2020 operating data announcement, Juhua continued its strategy of expanding production and grabbing share. In the first-fourth quarter, its refrigerant production and sales increased by more than 20%. In contrast, Sanmei intends to control production and reduce losses. In the first-third quarter, its refrigerant production and sales decreased by 6% and 20% respectively compared with the same period last year.

For the different strategies of the two companies, the market is generally more optimistic about the counter-cyclical expansion of Juhua shares, believing that although the performance has been affected in the short term, the market share of Juhua shares is expected to further increase in the long run.