Orient: The household appliance industry is expected to have hit bottom, seize the opportunity to make high-quality configurations.

Orient released a research report stating that the household appliance sector has reached its expected bottom, with Q1 financial reports confirming that many export chain companies still have strong operational resilience. Leading companies are operating steadily, with high dividends and repurchase programs driving stock dividend yields to historical highs. Some export chain companies are also maintaining strong business prospects, and are poised to achieve better performance growth once external disruptions are alleviated. Main points from Orient include: - Portfolio holdings in the sector are at their lowest level in nearly two years, with low trading congestion due to low expectations. - Household appliance sector funds held 1.9% in Q1 2026 (overweight -0.14%), with the overweight ratio at the 21st percentile since 2003. Fund holdings have continued to decline over the past few quarters, from 5.5% in Q3 2024. This decline is mainly due to: 1) Demand side: concerns about weakening domestic demand due to the tapering of government subsidies, as well as significant disruptions in exports due to tariffs; 2) Cost side: rising raw material prices and exchange rate fluctuations are putting pressure on profits. Despite this, Orient believes that the stock price performance of many household appliance companies in the past two quarters has already reflected multiple pessimistic expectations, and the sector's low holdings indicate that a bottom is in sight. - Leading companies are operating steadily, with high dividends and active repurchase actions highlighting their value for stable allocation. - To cope with upstream cost pressures, companies like Midea have raised prices since January, and on April 1, brands like Haier and Hisense officially raised product prices by 5%-20%. Due to their stronger pricing power, leading companies have shown more stability in their operations. In Q1 2026, Gree achieved a +3% increase in revenue/mother net profit. Gree plans to distribute 30 yuan per 10 shares (including an interim dividend of 10 yuan per 10 shares), with total cash dividends amounting to 16.755 billion yuan for the year, resulting in a dividend yield of 7.8% based on the market value on April 28. In addition, Gree plans to repurchase 5-10 billion yuan of shares, representing 70% of outstanding shares for cancelation, resulting in a repurchase yield of 1.626% - 3.25%. Taking into account both dividend yield and repurchase yield, the comprehensive yield ranges from 9.425% to 11.05%. The stable allocation value of leading household appliance companies is evident. - Export chain companies experience short-term performance fluctuations due to exchange rate impacts, but their operational resilience remains. - In the export chain dimension, the income of many companies continues to grow, leading to short-term performance fluctuations. In Q1 2026, Ecovacs Robotics saw a +27% revenue growth and -15% net profit growth year-over-year, while Stone reported a +23% revenue growth and +21% profit growth. After excluding exchange rate impacts, both companies achieved non-GAAP net profit growth rates of over 60% in Q1 2026. TCL Electronics' Q1 revenue grew by 10%-20% year-on-year, while adjusted net profit attributed to mother increased by 125%-150% year-on-year. The sustained high growth in revenue confirms that the outlook for categories such as clean appliances and consumer electronics for export markets remains positive. While exchange rates and raw materials are causing short-term disruptions in profits, the operational profit margins of many export chain companies are showing an upward trend once external factors are removed. In the future, many export chain companies are expected to achieve better performance growth when external disruptions ease. Risk warning: - Risks include rising raw material costs, intensifying industry competition, and further fluctuations in exchange rates affecting the company's exchange losses.