Guolian: Domestic shipments of home air conditioners in October have significantly sped up, with exports showing an upward trend.

Guolian released a research report stating that domestic sales of household air conditioners increased significantly in October, entering a peak delivery period for the new cooling season; channel destocking has concluded, sales momentum is increasing, and restocking flexibility can be expected. Leading prices in the industry have remained stable this year, and with policy support, the industry average price has been on the rise since September. Leading brands in the high-end and offline sectors are prominent, and while short-term policies are favorable, the overall situation may not see significant changes. The policy reinforcement cycle in 2024 will strengthen, with excellent quality Q3 financial reports for leading home appliance companies, strong operational momentum, breakthroughs in overseas original brand manufacturing, positive export orders and production performances. It is recommended to proactively invest in Midea (000333.SZ), Gree (000651.SZ), Haier (600690.SH), and Hisense Home Appliances Group (000921.SZ). Key points from Guolian are as follows: Industry data for October air conditioner production and sales released online In October 2024, the production of household air conditioners was 14.06 million units, an increase of 48.03% year-on-year, and sales were 12.87 million units, an increase of 37.91% year-on-year. Domestic sales were 6.29 million units, an increase of 24.13% year-on-year, while exports were 6.58 million units, an increase of 54.29% year-on-year. End-of-period inventory was 16.04 million units, a decrease of 4.98% year-on-year. By brand, in the same month, the shipment volume of Gree decreased by 1.89% year-on-year (domestic -10.00%, export +23.08%); Midea +43.10% (domestic +40.29%, export +45.57%); Haier +50.00% (domestic +34.62%, export +90.00%); Hisense +51.56% (domestic +10.20%, export +85.33%); Changhong +189.29% (domestic +292.31%, export +100%); TCL +43.29% (domestic +2.00%, export +54.55%). Policy flexibility materialized, significant acceleration in domestic sales Driven by the replacement of old models, domestic sales of air conditioners increased significantly in October, with the monthly scale reaching a record high. In terms of pace, the growth rate of domestic sales hit bottom in September 2023, with a year-on-year decrease of 4.5% in October, still at a low level. Excluding the base effect, the domestic sales volume of air conditioners in October 2024 increased by +4.1%/+4.4% compared to the same period in 2021/2019, while the trend was stable from June to September, with a significant improvement month-on-month. Leading air conditioner installations in October were around +20% on the basis of double-digit growth in the same period, according to Aowei. Total air conditioner retail sales in all channels in October were +29% year-on-year, with a similar pace of shipments to sales terminals, channel destocking concluded, and shipment flexibility realized. Looking ahead, domestic air conditioner shipments in November-December 2023 are expected to increase by 5% year-on-year, with a manageable base effect. With channels destocked, the terminal market has continued to improve since October, driven by the replacement of old models, and elasticity in the fourth quarter reporting period can be expected. Differentiation among leading brands, Midea's market share rebounds In October, domestic sales of air conditioners for Midea/Gree/Haier increased by +40%/-10%/+35% year-on-year, while Hisense/Changhong/Oaks increased by +10%/+292%/+100%, indicating an overall uptrend in the industry, with strong resilience in second-tier brands. Midea's market share has been increasing for four consecutive months, with the domestic sales volume in the same month reaching a new high. Haier continued its fast growth, while Gree experienced fluctuations. Aowei monitoring showed that online retail sales of Xiaomi air conditioners in October increased by 135% year-on-year, with OEMs continuing to contribute additional volume, and Changhong's domestic sales performance was impressive. Aowei monitoring also indicated that the average online retail prices of air conditioners in August/September/October were -5%/+3%/+6% year-on-year, while the average online prices for brands such as Gree from January to October all decreased by 3% year-on-year. Leading brands have adopted a mild price strategy, and structural upgrades are being driven by policies. The execution of this current policy heavily favors offline channels, with leading home appliance brands having a clear advantage in high-end market share and offline channels. Given the gap in scale, the overall situation may have difficulty in changing significantly. Export momentum on the rise, reaching new highs In the same month, the export volume of household air conditioners increased by 54.3% year-on-year, with a 27% year-on-year increase in October 2023, showing quality growth and reaching new highs in scale. From a CAGR perspective, the export volume of household air conditioners in October compared to the same period in 2021/2019 increased by more than 20%, with an acceleration seen month-on-month from August to September. Looking ahead, the export volume of household air conditioners in November-December 2023 is expected to increase by 21% year-on-year. Excluding the base effect, the export volume growth compared to the same period in 2021 is +7%, with manageable pressure on actual bases. Previous delays in shipments due to typhoon impacts, combined with expectations of tariffs, may lead to a rush in orders. In October, Customs clearance for household appliances saw an increase in speed, and production scheduling for air conditioner exports in October-November has been significantly increased. Leading brands have seen rapid growth in export orders, with strong performance in air conditioner exports, and the quarter-level prosperity is likely to continue. In October, the export volumes of Midea/Gree air conditioners increased by +46%/-23% year-on-year, while Haier/Hisense/TCL increased by +90%/+85%/+55%, showing high resilience in second-tier brands. Risk warning: Rising raw material costs; significant accumulation of inventory for household air conditioners; lower-than-expected external demand.