Home appliance industry: the external environment is obviously relaxed and the value restoration is expected to speed up [institutional review]

November monthly report and December investment strategy

The home appliance sector has lost sharply since 2021 for the third time in nearly 15 years, with the first two times in 2014 and 2018.

The main reason is that the high cost of raw materials suppresses valuations. Now, the cost environment and real estate expectations have improved significantly:

Since the end of October, the prices of bulk raw materials have continued to decline, and the decline of major materials has exceeded double digits. If the whole year of 2022 is linearly extrapolated according to the current price level, the average prices of some raw materials will turn negative from the same period last year from the first quarter of next year. In the second quarter, the average prices of most categories will turn negative compared with the same period last year, and the cost pressure is expected to be significantly alleviated, taking into account the manufacturers' own price increase digestion and transfer, as well as the potential profit "scissors difference". The plate has gradually entered the profit improvement channel, the certainty is high, the range may exceed expectations.

To sum up, standing at the current point, the cost factors that drag down the plate's performance are continuing to ease; the pessimistic real estate expectations that suppress the plate's valuation are also ushering in improvement; and the valuation performance is resonant, and the value repair is expected to speed up. It is recommended to actively lay out the white electricity and kitchen electricity faucets that are fully adjusted and profitability improved.

Looking forward to next year at the current time, the probability of improvement is greater than the probability of further deterioration.

1) White Power's profit elasticity needs to be paid more attention to, and the delayed pattern optimization, channel change and high-end achievements are likely to drive higher-than-expected profit repair;

2) after full adjustment, the small kitchen appliance leader, which is the driving force for growth, is expected to gain something in terms of income and performance;

3) the universal dividend of the integrated stove itself superimposes the head enterprise to be aggressive, and the high growth is expected to continue through the cycle;

4) Clean Appliances, as the only sub-sector that has recorded positive income since the beginning of the year, is in urgent need of new product stimulation; smart micro-investment needs to be closely followed in both the short-term supply chain and the long-term incremental market.

Maintain the industry's "bullish" rating. Focus on the main line of "profit improvement", including traditional white appliances and small household appliance leaders with obvious cost squeeze, sufficient stock price correction and definite profit improvement in 2021, such as Midea, Haier Zhijia, Hairong Cold chain, Supor and Little Bear Electric Appliances, active layout to improve flexibility; At the same time, the main line of "high growth" is recommended, mainly in the subdivided areas where the industrial boom is guaranteed. In the case of a stable environment, the relative advantages of high growth targets will be more obvious, such as Martians and Yitian Intelligence.

Risk tips: terminal demand is much lower than expected; raw material prices fluctuate sharply; large-scale price competition occurs in the industry.