China Securities Co.,Ltd.: How do we view several core issues in the home appliance industry after the Spring Festival?

China Securities Co., Ltd. released a research report stating that during the Spring Festival period, the restructuring of the US tariff system led to a decline in the comprehensive tax rate, which benefited the overall home appliance industry. However, the degree of benefits varied among different categories. Looking ahead to 2026, the company believes that overseas demand is more resilient than domestic demand, the competitive landscape is expected to marginally improve, copper price pressure can be offset through industrial price increases, and the industry fundamentals are solid and stable. In the emerging home appliance and smart hardware sectors, it is recommended to focus on three structural opportunities: AI-equipped smart devices, consumer-grade 3D printing, and AINAS. The commercialization process of related sectors is accelerating. The two main themes to pay attention to in traditional home appliances are manufacturing overflow and increased allocation of insurance funds. The main points of view of China Securities Co., Ltd. are as follows: Q1: How does recent changes in US tariffs impact the industry? The restructuring of the tariff system led to a slight decrease in the comprehensive tax rate on China from 31% to 28.6%. The home appliance industry as a whole benefited from this, but the degree of benefits varied. Small home appliance companies with production concentrated in China had net profit margins of only 5%-10%, and the tax rate reduction directly improved profitability. Large home appliance companies have expanded their production globally, but high tariffs on steel appliances still limit the benefits. Short-term changes in tariffs do not alter the trend towards global production layout by companies. Q2: How is the industry fundamentals of the home appliance sector in 2026? In 2026, overseas demand is better than domestic demand for home appliances, and overall cost disruptions are manageable. Reports from companies like Whirlpool, Samsung, and LG indicate an improvement in the overseas competitive landscape, with additional boosts from events like the Winter Olympics and the World Cup. Domestic subsidies continue to support sales of large home appliances, but the industry is slightly under pressure. Copper prices are a major cost variable, and overall price increases of 3%-5% can cover this, with a consensus on industry-wide price hikes forming. Q3: What investment opportunities are there in the emerging home appliance and smart hardware sectors? There are three structural opportunities in emerging smart hardware: AI-equipped smart devices, consumer-grade 3D printing, and AINAS. The commercialization of scenarios like ball sports and security patrols is accelerating, with estimated long-term market sizes totaling over one hundred billion US dollars. The IPO of Taotao Vehicles in 2026 will reshape the 3D printing valuation, and Ugreen Group Limited's AINAS crowdfunding in March 2026 is a recent catalyst for the industry. Q4: What opportunities are there worth noting in traditional home appliance companies? The two main themes worth noting are manufacturing overflow and insurance fund allocations. Companies like Zhejiang Sanhua Intelligent Controls, Ningbo Dechang Electrical Machinery Made, and Kingclean Electric have made progress in the automotive and Siasun Robot&Automation sectors, with increased proportions of emerging businesses driving overall profit structure optimization. It is estimated that approximately 96 billion yuan of insurance funds will flow into the home appliance industry by 2026, benefiting high-dividend white goods leaders. Investment Advice 1) The company's annual focus remains on companies like TCL ELECTRONICS, Hisense Visual Technology, Zhejiang CFMOTO Power, Midea Group Co., Ltd, and HAIER SMARTHOME that have global reach; 2) Focus on new industry developments like the implementation of Zhejiang Taotao Vehicles' machine dog business in 2026 and ONEROBOTICS' initiatives in tennis and household robotics; AINAS implementation revolutionizes the industry, making Ugreen Group Limited an attractive investment; 3) Manufacturing overflow opportunities to watch include companies like Ningbo Dechang Electrical Machinery Made. Risk Warning: Fluctuations in downstream industry prospects, slower-than-expected customer expansion, rising raw material prices, and exchange rate fluctuations pose risks. Translated by chatgig dog Ltd.