GLMS SEC has released a research report maintaining a "recommended" rating for the air conditioner sector, indicating signs of bottoming out and improvement. Data shows that the year-on-year decline in both domestic and export shipments of air conditioners narrowed significantly to low-to-mid single digits in January-February, outperforming earlier production forecasts. Leading domestic players reported better installation card performance than the industry average, with market concentration trending upward. Looking ahead, with demand stabilizing weakly and costs rising, the outlook for domestic market structure and pricing can be viewed somewhat positively. Exports are expected to reach an inflection point as the base effect diminishes, supported by a general upward trend in sector recovery. Leading companies have provided favorable export order guidance, demonstrating strong OBM momentum and advanced production capacity layout, suggesting the recovery phase may exceed linear expectations. Currently, the relative valuation of white goods is at a historical low, with high quality and dividend yields. Key views from GLMS SEC are as follows:

Industry Online data for February shows January-February air conditioner production at 32.82 million units, down 1.89% year-on-year, with sales at 33.32 million units, down 3.49% year-on-year. Domestic sales reached 14.07 million units, down 3.47% year-on-year, while exports were 19.25 million units, down 3.50% year-on-year. Ending inventory stood at 14.31 million units, down 14.59% year-on-year. By manufacturer, Gree saw a 12.20% decline in sales (domestic -14.44%, export -8.70%); Midea reported a 5.50% increase (domestic +18.07%, export -2.43%); Haier's sales fell 4.11% (domestic +12.99%, export -25.90%); Hisense sales rose 4.70% (domestic +28.57%, export -5.80%); Changhong sales dropped 33.96% (domestic -54.17%, export -7.61%).

The narrowing decline in domestic sales indicates improving end-market conditions. Domestic air conditioner shipments in January-February fell 3% year-on-year, better than the 29% decline in Q4 2025 and earlier production forecasts anticipating a 12% drop. Considering the base effect, domestic shipments grew 24% year-on-year in Q4 2024 and 9% in January-February 2025, reducing pressure. The early extension of subsidies into early 2026 has also contributed to domestic sales improvement. Excluding base effects, the compound annual growth rate for January-February domestic sales compared to the policy-unaffected same period in 2024 was approximately +2%, while the two-year CAGR for Q4 2025 was about -6%, indicating a return to positive sequential growth and stable expansion. At the retail level, leading companies reported double-digit growth in installation cards during January-February, confirming demand recovery. According to Industry Online's production schedule guidance, domestic sales in March and April are projected to change by -2% and +2% year-on-year respectively, showing a steady upward trend. Actual domestic sales in January-February exceeded earlier production forecasts, suggesting the improvement may continue.

Leading companies outperformed second-tier players, with the CR2 concentration ratio increasing year-on-year in January-February. Domestic sales volume for Midea, Gree, and Haier changed by +18%, -14%, and +13% year-on-year respectively, while Hisense, Changhong, and Aux changed by +29%, -54%, and -42% respectively, indicating generally stronger performance by leaders. Midea's domestic shipment market share increased 6 percentage points year-on-year in January-February, driving the CR2 for domestic shipments up 4 percentage points year-on-year, marking the third consecutive month of year-on-year improvement. Haier maintained its growth momentum, with domestic shipment share rising 2 percentage points year-on-year. Among second-tier brands, only Hisense has performed relatively well since the beginning of the year, while Changhong, Aux, and TCL all saw their shipment shares decline year-on-year. In retail, leading companies' installation card performance in January-February surpassed industry monitoring data. Gree's sub-brand Jinghong continued to contribute incremental growth, with its online retail volume share increasing 8 percentage points year-on-year. Going forward, in an environment of rising costs and weakly stable demand, the outlook for market structure can be viewed with cautious optimism.

Despite a high base, export improvement is expected to continue. Air conditioner exports fell 4% year-on-year in January-February, compared to a 19% decline in Q4 2025, indicating a narrowing decline on a high base and also outperforming production forecasts. Subsequently, production schedules for March and April exports indicate year-on-year changes of +7% and +3% respectively. The base for the same periods in 2025 was +15% and flat. As pressure eases, month-on-month improvement is anticipated, with a first-order inflection point approaching. Recent fluctuations in US tariff litigation suggest a general trend of reduced pressure, although uncertainties remain high in Middle Eastern markets and shipping. The recovery trend for refrigerator and washing machine exports is gradually solidifying; January-February customs data shows home appliance export volume up 16% year-on-year. Barring unexpected geopolitical developments, air conditioner exports are expected to converge toward the historical mid-to-high single-digit growth average after digesting the base effect. Leading companies have reported continuously improving export orders from Q3-Q4 2025; during this bottoming-out and recovery phase, performance may exceed linear expectations.

Risks include a sharp rise in raw material costs, tariff uncertainties, and external demand volatility.