Shenwan Hongyuan Group: Revival and structural upgrade of the tool industry cycle, prosperity has a sustainable upward foundation.

Shenwan Hongyuan Group released a research report stating that overall, the global tool industry is currently in a period of dual dividends from the recovery of the American real estate cycle and the structural upgrade of lithium electrification. By 2026, there may be a resonance turning point of channel replenishment and real estate recovery, while the OPE lithium electrification replacement accelerates, and the industry's prosperity is based on sustainable upward momentum. Leading companies with lithium electrification platform research and development capabilities, deep binding to overseas core channels, integrated advantages in supply chain integration, and product development capabilities will fully benefit from the industry cycle recovery and structural upgrade, achieving dual growth in market share and profitability. Key points from Shenwan Hongyuan Group: The global tool industry has a market capacity of billions of dollars and is steadily growing From 2018 to 2025, the market size CAGR reached 3%, with per capita consumption steadily increasing, and the combined contribution of the core markets of China and the United States exceeding 50% of demand. Electric tools and outdoor power equipment (OPE) are the dual engines of industry growth, with an average annual growth rate of over 5%. The concentration of the global industry continues to increase, with CR5 reaching 59% and 55% respectively. Chinese companies relying on lithium battery supply chain advantages, product iteration capabilities, and deep cultivation of overseas channels are breaking through. TECHTRONIC IND leads the global electric tool industry, while CHERVON, Greenworks, and others are firmly in the forefront in the OPE field, becoming core beneficiaries of global lithium electrification replacement. US tool exports are driven by the real estate cycle and channel inventory The sale of existing homes in the United States is a key leading indicator of tool end demand. Its prosperity is dominated by the monetary policy of the Federal Reserve, which directly determines downstream demands such as home improvement and garden maintenance. Channel inventory, as an intermediary variable, significantly amplifies short-term industry prosperity fluctuations, and channel inventory strategies also affect the fluctuation cycle rhythm of corporate income. From 2020 to 2025, the industry underwent a complete cycle of "replenishing inventory - passive destocking - active destocking - moderate destocking," with the channel destocking entering its final stages in 2026, likely opening a window for moderate replenishment and becoming a key turning point for industry prosperity. Meanwhile, US household maintenance and repair spending has shown steady growth, with a CAGR of 8% from 2011 to 2024, smoothing out real estate cycle fluctuations and providing long-term underlying support for industry demand. The stock price performance of global tool companies is primarily driven by performance expectations, with real estate prosperity, channel inventory, and macro policies being key determinants of performance expectations From 2020 to 2025, stock price revaluation passed through the logic of "interest rate cuts + high real estate growth + channel replenishment good performance rising stock price; interest rate hikes + weakening real estate + destocking + cost pressures declining performance stock price adjustment; tariff policy shift declining performance stock price adjustment." Top companies with product competitiveness, channel stickiness, and supply chain advantages have stronger countercyclical capabilities. Lithium electrification is the core theme for the industry to cross cycles and achieve structural upgrades The electrification of electric tools has rapidly penetrated into a stable replacement stage. By 2024, the overall penetration rate reached 65.6%, with a significant differentiation between "consumer grade > professional grade > industrial grade." The penetration rate of consumer grade has surpassed 80% and is approaching saturation, while there is still wide room for replacement in professional grade and industrial grade. OPE lithium electrification is still in the early stages of accelerated penetration, with an overall penetration rate of only 34% in 2024, 44% in household scenarios, and only 25% in commercial scenarios, presenting significant room for improvement. North America and Europe, as core markets, have clear policy-driven replacements, coupled with factors such as improvements in battery energy density, optimization of brushless motor efficiency, and the advantages of the entire life cycle costs, driving lithium electrification into an accelerated phase. Risk Warning: Overseas real estate cycle recovery falls short of expectations, significant fluctuations in lithium battery raw material prices, overseas trade policy and exchange rate risks, risks of technological route iteration, and channel destocking progress falling short of expectations.