According to a research report from Guolian Minsheng Securities, a turning point is anticipated, prompting the firm to maintain its "Recommended" rating for the home appliance industry. While nominal exchange rate appreciation constrains the pace of export recovery and profitability from overseas sales, leading brands mitigate fluctuations through pricing power, overseas production capacity, and foreign exchange hedging, resulting in a limited overall impact. Furthermore, the sector exhibits high exposure to the Northbound Stock Connect and may benefit from foreign capital inflows spurred by currency appreciation. Regarding specific investment targets: ① High-quality, high-dividend white goods leaders are recommended; ② Color TV leaders with increasing market share and improving profit margins are recommended; ③ Globally leading robotic vacuum cleaner manufacturers are recommended; ④ Companies gaining market share and actively expanding overseas are recommended. The main viewpoints of Guolian Minsheng Securities are as follows:
Volume and Price: The US dollar price demonstrates significant exchange rate elasticity. From a bottom-up perspective, the volume and price of exports are the primary channels through which exchange rates exert influence. During appreciation phases, exporters may either raise average US dollar prices to maintain stable domestic currency ex-factory prices or absorb the appreciation impact via RMB pricing; the former affects market share, while the latter impacts profitability. In past exchange rate cycles, the elasticity of export US dollar prices has been higher than that of RMB prices. Buffered by the cost advantages of the domestic supply chain, the effect of nominal appreciation has been limited. Among product categories, refrigerators, washing machines, and small appliances show lower elasticity in export volume and price. In the medium to long term, drawing parallels from the JPY appreciation during the 1970s-80s, domestic cost competitiveness may weaken, the attractiveness of overseas investment could rise, and the growth model may be reshaped by exchange rates, shifting towards investment-driven capacity relocation abroad.
Profitability: Overseas sales gross margins are temporarily weaker. Adjustments to average US dollar prices mean that exchange rate appreciation is not entirely absorbed by overseas sales profitability. A review shows that: ① From Q4 2017 to Q3 2018, the gross margin of overseas sales for major companies was generally weaker than domestic sales, with the decline in gross margin for export-oriented small appliance companies being approximately 1-5 percentage points higher than for domestic-sales-focused counterparts; ② In 2021, while domestic air conditioner sales were affected by competitive dynamics, the overseas profitability of secondary white goods and some small appliance companies remained weaker than domestic profitability, with the profit decline for export-oriented small appliances being 3-4 percentage points higher relative to domestic sales. Overall, exchange rate appreciation often coincides with cycles of rising bulk raw material costs. However, constrained by order cycles and bargaining power, adjustments to export prices are slower, leading to gross margins that generally underperform domestic sales during stress tests.
Foreign Exchange Translation: Hedging offsets net asset losses. Beyond gross margin, translation differences on foreign currency net asset/liability positions caused by exchange rate fluctuations are a major source of exchange gains/losses under financial expenses. Specifically, monetary net assets generate exchange losses during appreciation, while net liabilities generate exchange gains. During the past three annual-scale RMB appreciation cycles, major home appliance companies predominantly experienced exchange losses. Based on the latest disclosed foreign currency monetary items for H1 2025, among major companies, only Haier Smart Home and Hisense Home Appliances held net liability positions, benefiting from appreciation, while all others held net asset positions. Operationally, leading companies maintain high foreign exchange hedging ratios, effectively neutralizing impacts, suggesting actual effects may be concentrated among export-oriented small appliance companies.
Capital Flows: Potential boost from Northbound net inflows. RMB appreciation enhances the exchange rate gains for foreign capital. Historically, RMB appreciation has significantly driven northbound inflows into A-shares. The home appliance sector holds the highest Northbound Stock Connect ownership ratio among all Shenwan primary industries. Given this high existing exposure, the elasticity of marginal changes in foreign capital flow warrants attention. During the appreciation cycle starting in late 2016, aided by market sentiment, home appliance leaders, as representatives of consumer blue-chips, significantly outperformed. During the 2020-2022 appreciation period, the sector outperformed in the first half but weakened in early 2021 as the US dollar strengthened. At present, sector valuations are low both historically and relative to other industries. Holdings by Northbound Connect and public funds are also at low levels, suggesting ample room for upward movement.
Risk提示: Unanticipated increases in raw material costs, uncertainties regarding tariffs and external demand.