GLMS SEC has issued a research report maintaining a 'Recommended' rating for the home appliance industry. Air conditioner sales in April showed a sequential weakening both domestically and for export. The gap between domestic shipments and sell-through narrowed, with inventory trends returning to a healthier state. Exports were impacted by geopolitical conflicts in the Middle East, leading to short-term volatility in the recovery pace, with total monthly shipments down 9% year-on-year. Looking ahead, the domestic peak season faces a high comparative base from the previous year, while export uncertainties persist. The base for the second half of the year is generally lower, offering potential for a synchronized improvement and a gradual bottoming-out followed by an upward trend. Prices for copper and aluminum remain elevated, imposing cost constraints that may temper competitive intensity. Before a first-order inflection point in industry prosperity is reached, market concentration is likely to continue increasing. Currently, valuations for major home appliance makers are at historically low levels, with leading companies, accounting for share buybacks and dividends, often offering dividend yields above 6%, combining stable growth with high yields.

Key data from Industry Online for April shows household air conditioner production at 21.08 million units, down 5.99% year-on-year, with sales of 20.50 million units, down 9.23%. Domestic sales were 11.85 million units, down 7.09%, while exports were 8.64 million units, down 12.01%. Ending inventory stood at 15.00 million units, down 12.29%. By manufacturer, Gree's sales were up 12.22% year-on-year (domestic sales -1.61%, exports -35.71%); Haier's sales were down 1.57% (domestic sales -4.69%, exports +6.35%); Hisense's sales were down 19.28% (domestic sales -5.00%, exports -28.49%).

The gap between shipments and retail sales narrowed, indicating healthier domestic sales. April's domestic air conditioner sales fell 7% year-on-year, weaker than Q1's +1% and production schedule expectations of -0.5%. From a base perspective, air conditioner domestic sales in April of the previous year grew 4% year-on-year, with sequential stability. Estimated total retail sales for air conditioners in April fell 14% year-on-year, compared to -13% in Q1. However, domestic shipment volume in Q1 2024 showed positive year-on-year growth, significantly faster. April shipments weakened sequentially while end-user demand remained stable, leading to a narrowing gap between shipments and sell-through, marginal improvement in channel inventory, and a return to healthier conditions. Furthermore, the monthly domestic sales rhythm in 2024 has been volatile. On a smoothed basis, domestic air conditioner shipments from January to April were down 2% year-on-year, compared to +5% in the same period last year, resulting in a two-year CAGR of approximately +2%. Looking forward, domestic air conditioner sales from May to July of the previous year saw double-digit growth, establishing a high base. Industry Online's production schedules suggest domestic sales in May-June 2024 may remain weak year-on-year, with potential for bottoming and recovery in the second half.

Leading players gained market share, but prices remained weak year-on-year. In April, domestic sales volumes for Gree and Haier air conditioners fell 2% and 5% year-on-year, respectively, while Hisense and Aux fell 5% and 3%. Leading brands mostly increased their market share. The combined domestic shipment market share for Midea and Gree both increased by 1 percentage point year-on-year in April, marking the fifth consecutive month of year-on-year improvement for the CR2. Midea's upward trend continued, with a cumulative increase of 4 percentage points from January to April. Gree, which was down 2 percentage points in Q1, showed sequential improvement. Additionally, Haier, Aux, and Hisense all saw slight increases in their domestic market share in April. On the retail front, Gree's Jinghong brand continued to contribute incremental growth, with its combined online retail volume share up 3 percentage points year-on-year in April. The estimated average retail price for air conditioners in April fell 3% year-on-year, compared to a 1% decline in Q1, indicating limited cost pass-through amid weak demand pressure.

Geopolitical disturbances affected exports, with recovery facing setbacks. Air conditioner export volume in April fell 12% year-on-year, compared to a 6% decline in Q1, showing a sequential slowdown in line with production schedule expectations (-12%). Impacted by geopolitical conflicts in the Middle East, momentum in emerging markets remained weak. North America was affected by inflation expectations and tariff concerns, leading to an overall insufficient recovery in external demand. Looking ahead, the production schedule for air conditioner exports in May indicates a year-on-year decline of 6%, a narrowing decrease, though expectations remain constrained by geopolitical uncertainties. In the second quarter of the previous year, tariffs were high, and core markets like South Asia experienced rainy peak seasons, leading to a significant weakening in exports. From May to December of the previous year, cumulative exports fell 15% year-on-year. Barring unexpected escalation in geopolitical conflicts, exports are expected to gradually return to a recovery path as the base effect diminishes, with medium-to-long-term momentum remaining unchanged. Leading companies' export orders continue to recover, with strong OBM (Original Brand Manufacturing) momentum. Diversification across product categories and regions helps buffer against geopolitical and tariff impacts, suggesting the recovery phase may outperform expectations.

Risks include a significant rise in raw material costs and uncertainties related to geopolitics and tariffs.