Guolian Minsheng Securities issued a research report maintaining an "outperform market" rating for the air conditioner industry. The current leading air conditioner companies still possess scale advantages and integration barriers. Even if demand weakens, there is little necessity for price wars. The boundaries of price competition models are visible, and brand manufacturers who can achieve discretionary control through efficiency have profit margins that can be invested in channels/R&D and other strategically significant areas, making the probability of price wars relatively low. In summary, the firm believes that the air conditioner industry landscape may not change significantly in the short term. Standing firm to adapt to change, medium to long-term trend changes are worth further exploration. During the domestic sales stimulus policy cycle, with current tariff uncertainties weakening, white goods valuations may have room for recovery, suggesting active allocation.

Guolian Minsheng Securities' main viewpoints are as follows:

**Scale and Integration Barriers Remain Strong**

In recent years, shipment monitoring data reflecting the decline in leading companies' domestic market share, along with Xiaomi's strong rise in white goods, has once again triggered market attention to industry landscape changes. Horizontally, current leading air conditioner companies' domestic revenue scale is 3-4 times that of second-tier companies and 6-10 times that of third-tier companies, with scale advantages remaining prominent. Vertically, air conditioners/white goods remain one of the few large-scale industries where the entire industrial chain from core components to brands is integrated within enterprises. Currently, the two major leaders' compressor market share is not weaker than their finished products, with channel control power remaining stable and strengthening. Integration barriers remain difficult to match, especially downstream.

**Price Competition Has Never Disrupted Industry Landscape**

Without generational product innovation, price is the main tool for competitors, and air conditioners happen to be a major category that has gradually moved toward concentration through price wars. Looking back at industry history, three periods of relatively weak pricing in the past two decades occurred in 2009, 2015, and 2019-2020. The first two rounds were mainly caused by destocking, while the last was primarily based on active competition from channel transformation, with inventory having indirect impact. Regarding landscape, prosperity is often negatively correlated with concentration fluctuations, while costs also play a key role in landscape evolution. Cases of achieving leaps purely through pricing are almost non-existent.

**Manufacturing Optimization Mainly Relies on Scale**

Taking the Changhong Meiling-Xiaomi industrial chain as a typical high-efficiency manufacturing model, examining how much room for improvement remains in terminal price competitiveness when manufacturing costs and expenses are compressed to the extreme: First, in the finished product segment, Changhong Air Conditioner's gross margin has been less than 8% in recent two years, with expense ratios around 5%, leaving obviously limited compression space and minimal pricing significance. Looking upstream, the air conditioner industry has very low labor/depreciation ratios, while the 90% raw material costs mainly differ through bulk procurement bargaining and internalizing component profits through self-allocation - both paths depend on scale, favoring leaders.

**Competitors' Concession Space Is Shrinking**

Breaking down the single-unit model, under extreme conditions where manufacturers maintain healthy operations, brand owners have zero gross margins, and channels are extremely flat, the estimated terminal tax-inclusive price for 1.5P wall-mounted air conditioners would be nearly 1,900 yuan per unit, representing the "floor price" within commercially viable ranges. Current major participants may have limited price adjustment space. In typical situations, with brand owner gross margins of 20%-25% and primarily direct sales, corresponding terminal prices would be around 2,351-2,508 yuan. After deducting necessary expenses, there's approximately 10% space. For latecomers, investing in channels and R&D/after-sales services has strategic necessity, while using this for price wars relatively lacks commercial logic.

**Limited Necessity for Leader Price Wars**

As industry reviews show, price wars don't occur in a vacuum - they require industrial conditions such as destocking, cost advantages, or mismatched leader business cycles. Without these factors, difficulty would be substantial. From the leaders' perspective, first, competing for market share through price wars might be penny-wise and pound-foolish. Not considering volume-price hedging losses, even adding the absolute incremental domestic revenue of Xiaomi and Oukesi in recent years to Gree and Midea would only increase their air conditioner domestic revenue by about 10%, representing less than 3% of total revenue. Moreover, leaders' C-end domestic split-type air conditioners don't represent a high proportion of overall air conditioner business, with cabinet units/multi-split systems/exports providing strong support.

**Risk Warnings:** Policy implementation falling short of expectations, tariffs and external demand changing beyond expectations, raw material price and exchange rate fluctuations, calculation errors.