Zhongjin: Mainland China's August air conditioning sales exceeded expectations for both domestic and foreign markets, increasing the allocation of white goods.

CICC released a research report stating that increasing the configuration of white goods, the recommended white goods are Haier SmartHome (06690) (600690.SH) (with a target price of HK$33 for H shares and RMB 32 for A shares), Hisense Home Appliances Group (00921) (000921.SZ) (with a target price of HK$27 for H shares and RMB 32 for A shares), and Gree Electric Appliances, Inc. of Zhuhai (000651.SZ) (with a target price of RMB 50.64 for A shares). The report cited data from the industry online, showing that in August this year, China's domestic sales of household air conditioners were 7.54 million units, a year-on-year decrease of 5.4%; while exports were 5.52 million units, a year-on-year increase of 31.5%. The domestic sales of air conditioners in August exceeded market expectations, mainly due to subsidy policies and the impact of hot weather: first, data from the industry online showed that the production volume of domestic sales in August, September, October, and November decreased by 16%, 14%, 7%, and increased by 2% compared to the same period last year, while the actual domestic sales in August decreased by 5.4%, better than the previous production plans. Secondly, the domestic sales in August exceeded market expectations mainly due to good retail performance. AVC data showed that in August, domestic air conditioner online and offline retail sales increased by 18% and 13% respectively year-on-year. The long duration of high temperatures in the summer this year, especially in the eastern, central, and southwestern provinces, led to a significant improvement in air conditioner retail sales after a decline in sales from May to July. Thirdly, since the end of August, various provinces and cities have successively implemented policies for replacing old air conditioners with new ones, leading to a good rebound in air conditioner retail sales in August. In addition, each household has multiple air conditioners (split/centralized), resulting in a greater demand for replacements and causing air conditioner sales to grow faster than other categories. CICC predicts that the destocking of air conditioners is expected to end soon, and domestic sales are expected to increase year-on-year in the near future. They also expect good retail performance for white goods in September. From 2023 to the first half of 2024, the export of household appliances will continue to improve, with overseas high temperatures in the summer of 2024 leading to air conditioner exports exceeding market expectations for several months. The bank believes that the current high growth in household appliance exports is driven by the increasing market demand caused by the popularization of large household appliances in emerging markets and the gradual increase in Chinese companies' market share overseas, which will have a long-term sustainable impact.