Orient Securities has published a research report indicating that home appliance manufacturers are successively announcing price increases to pass rising raw material costs downstream. Leading companies possess more stable market structures and their products are predominantly positioned in the mid-to-high-end segment, allowing for a smoother transmission of price increases to consumers. The firm judges that niche sectors targeting mid-to-high-end users, such as 3D printing and AI glasses, present opportunities for accelerated market penetration. It recommends investing in leading companies with stable operations.
The first investment theme highlights leading companies that demonstrate higher operational efficiency and greater stability during cost-increase cycles. Combined with attractive dividend yields, they are considered a primary choice for stable portfolio allocation. Related targets include Haier Smart Home (600690.SH, Not Rated) and Hisense Visual Technology (600060.SH, Overweight).
The second long-term theme focuses on overseas expansion, anticipating a potential valuation shift by 2026. Related targets include Roborock (688169.SH, Buy) and Leye Electrical (603355.SH, Buy).
Key viewpoints from Orient Securities are as follows: Home appliance companies are announcing price increases to pass on rising raw material costs. Between July 1, 2025, and January 30, 2026, LME copper prices increased by 32%. This rise in raw material costs has prompted recent price hike announcements from appliance brands. Hisense announced that starting February 11, 2026, prices for its Hisense and Kelon brand residential air conditioners will increase by 5% to 10%. Aux Air Conditioning also announced price increases of 3% to 8% for its residential air conditioners effective January 19, citing rising copper prices alongside increased labor and environmental costs. Midea Air Conditioning previously announced a 2% price increase starting January 3, 2026, followed by a further 4% increase on January 5, resulting in a combined price hike exceeding 6%.
While price increases have shown no significant negative impact on overall sales volume, they can promote industry consolidation. Apart from the current cycle of rising commodity prices, the past decade has witnessed two other periods of significant raw material cost increases: one driven by supply-side reforms (2016-2017) and another following the pandemic, fueled by liquidity and supply chain shortages (2020-2021). Historical analysis shows that after each period of significant raw material price increases, home appliance companies have implemented price hikes, typically led by industry leaders. These price increases have not shown a clear correlation with subsequent overall market sales volumes. Sector sales are influenced more significantly by housing policies, product replacement cycles, and external subsidy policies, such as trade-in programs. However, following each round of price increases, industry concentration trends have emerged. For instance, after the rise in copper and other commodity prices during 2020-2021, the average selling prices for air conditioners and refrigerators increased by over 10% year-on-year. Subsequently, the combined market share of the top three air conditioner companies showed a continuous upward trend from June 2021 to February 2022. Similarly, the market share of the top three refrigerator manufacturers increased noticeably from September 2021 to January 2022. Leading companies have more稳固 market positions, and their products are often positioned in the mid-to-high-end segment, allowing for more effective cost pass-through.
Opportunities in the mid-to-high-end segment become apparent during PPI upcycles. As a core coincident indicator for industrial enterprise profits, a rising PPI signals a positive outlook for industrial companies and economic stabilization. The firm judges that niche sectors targeting mid-to-high-end users present opportunities for accelerated penetration. Furthermore, consumers of mid-to-high-end brands are generally less price-sensitive due to higher initial product pricing, allowing these brands to pass on cost increases more effectively. This dynamic suggests that rising commodity price cycles can benefit market share growth for premium brands.
Risks include uncertainty regarding the continuity of trade-in subsidy policies and potential recurring tariff disruptions.