Guotai Haitong: Household appliance industry financial report income shows resilience, the value of leading white goods configuration highlights.

Guotaihaitong released a research report stating that based on the performance of the home appliance industry's 25Q4 and 26Q1 financial reports, the sector's revenue has resilience while profits are under pressure. The leading companies in the home appliance sector have considerable shareholder returns and exhibit strong value for investment. The government subsidy is expected to transition smoothly, and the stable operation of leading companies in the home appliance sector combined with high dividends make for a cost-effective investment. The core driving force for smart home appliances going overseas is recommended, with Siasun Robot & Automation being the top picks. It is recommended to consider companies with stable and improving performance, as well as those with potential for growth in the real estate chain. Additionally, the recommendation for home appliance companies to expand into other industries is also worth considering. Key points from Guotaihaitong are as follows: Performance overview: In the home appliance sector, the overall revenue and net profit attributable to shareholders decreased by -8% and -26.8%, respectively, in 25Q4. In 26Q1, revenue remained stable with a slight increase of 0%, while net profit attributable to shareholders decreased by -5.3%. The revenue shows resilience while profits are under pressure, mainly due to weak downstream demand, rising raw material costs, increased competition, and exchange rate fluctuations. The performance of the white goods sector was the most stable. The inventory of the home appliance sector at the end of 26Q1 increased by 5.6% year-on-year, slowing down from the 9.5% growth in 25Q1. However, the revenue growth rate has also decreased from +14.1% to around +0.0%, with inventory growth outpacing revenue growth significantly. Revenue aspect: Export growth is better than domestic sales, which were affected by the government subsidy pace. Domestic sales in 25Q4 were affected by the reduction of government subsidies and high base numbers, while in 26Q1, the marginal impact of government subsidies weakened, especially in the kitchen appliances that are mainly sold domestically. Export resilience is stronger than domestic sales. In 25Q1, there was a rush to export overseas before the implementation of increased US tariffs. Despite the high base numbers, the export resilience was stronger, particularly in small household appliances, cleaning products, and white goods sectors, where Chinese brands have strong product competitiveness and higher market demand overseas. Performance aspect: The profit growth was weaker than revenue growth, as rising raw material costs, exchange rate fluctuations, and intense competition pressure profits. Although white goods and black goods benefited from the optimization of product structures, the gross profit margin increased year-on-year in 25Q4/26Q1. However, in the backdrop of weak demand, the increase in gross profit margin was largely offset by the significant rise in the sales expense ratio. In 26Q1, the sector's sales expense ratio saw marginal contraction. Furthermore, the exchange rate fluctuations in 25Q4/26Q1 eroded profit margins, leading to a significant increase in the sector's financial expense ratio. Risk reminder: risks of fluctuating raw material prices and increasing industry competition.