CITIC Construction Investment: The home appliance industry maintains a high level of prosperity and is optimistic about allocation opportunities for leading companies

The Zhitong Finance App learned that CITIC Construction Investment Securities released a research report saying that with the issuance of state subsidies, the home appliance industry remains booming and is optimistic about allocation opportunities for leading companies. Among them, high temperatures in summer drive high demand for air conditioners, the upgrading of the structure of black electric products drives the average price increase, and panel prices are falling. Competition in the sweeper industry ushered in marginal improvements, and profit margins are expected to reach an inflection point. Changes in e-commerce investment tax rules are beneficial to leading brands. Countries benefiting two-wheelers stimulate high sales growth, and motorcycles are speeding up overseas. Leaders in all sectors have benefited from the high level of prosperity in the industry. Their share and profit margin performance is good. They expect steady Q2 and Q3 results, and are optimistic about the subsequent performance of leading companies.

CITIC Construction Investment's main views are as follows:

White electricity: Under hot summer catalysis, air conditioning achieved beautiful high growth performance in July. According to data from Aowei Cloud Network, the overall retail sales of air conditioners increased by 39.6% in July, including US +32.6%, Gree +36.6%, and Haier +111.2%. The growth rate of production schedules has slowed down. According to data from Industry Online, the total production volume of air ice washing in August totaled 26.97 million units, down 4.9% from production performance in the same period last year. By product, household air conditioning production fell 2.8% in August, and there is an improvement trend driven by hot weather and national subsidies. Refrigerator production fell 9.5% year on year, mainly due to 618's major push for early overdraft demand. Washing machine production fell 3.0% year on year, and corporate strategy gradually shifted to high-end product promotion to enhance customer experience. Air ice washing exports are all under pressure due to tariffs. Early national overdrafts and tariffs have been fully reflected in the valuation. We expect the white power industry to perform steadily in Q2, and that Q3 will still perform well at high temperatures. Combined with high dividend attributes, we continue to be optimistic about allocation opportunities for industry leaders.

Black Electricity: 1) TCL Electronics releases 2025 interim results forecast and 2025H1 global TV sales data: It is expected to achieve adjusted net profit of 95-1.08 billion yuan in the first half of 2025, an increase of about 45%-65%. In the first half of the year, the company's global TV shipments reached 13.46 million units, an increase of 7.6% year on year, ranking among the top two in the world (EN); miniLED TV global shipments increased by 176.1% year on year, ranking first in the world (EN). On a quarterly basis, the company's Q2 shipments reached 6.96 million units, up 4.2% year on year. Among them, domestic sales were 1.4 million units, a decrease of 3.3% year on year, and export sales were 5.55 million units, up 6.3% year on year. The growth rate of domestic and foreign sales showed a month-on-month decline, mainly due to changes in domestic sales brand structure. Thunderbird increased sharply by 66.4% in the first half of last year, facing a high base, while the TCL brand grew 11.3% in the first half of this year, driving improvements in product structure, ASP and profit margins. Q2 China's MiniLED penetration rate was close to 25%, hitting a quarterly high; export sales were affected by the slowdown in North America and Europe. Due to changes in tariffs and production capacity switching, Q2 shipments fell by about 10%, but the high-end product and channel structure improved markedly. MiniLED grew rapidly, and Bestbuy became the largest sales channel. OPM is expected to continue to improve. At the same time, Europe was affected by the high base brought about by the European Cup and Olympics last year. However, entering MediaMarkt, Europe's largest electronics chain channel, Q3 is expected to benefit from a low base, while emerging markets maintain steady double-digit growth. The company structure has improved markedly, the cost ratio continues to be optimized, and the equity incentive plan's target completion expectations for the whole year remain unchanged. 2) Black Electric will enjoy cost dividends in the second half of the year, and lower domestic inventories will facilitate inventory replenishment in the second half of the year: on the one hand, panel manufacturers' production control efforts are insufficient, and panel prices continue to fall. At the same time, panel prices will drop by an average of 6% year on year in July. At the same time, retail prices of complete machines will recover after the promotion season. A new round of state subsidies will be issued, and panel prices and machine prices will form a “scissor gap”, which will be reflected in the financial reports of machine manufacturers for the second half of the year; on the other hand, domestic brand inventories are gradually declining, but Korean brand inventories are still high. The product structure of the black power industry continues to improve, the MiniLED penetration rate continues to increase, and the cost side has declined steadily, slightly, and I am optimistic that the share and net interest rates of leading Chinese companies will increase.

Clean appliances: the boom continues to lead, and the industry pattern is optimized. According to data from Aowei Cloud Network, online sales of sweepers increased 50% year-on-year in July, and maintained strong growth even after the decline in state subsidies, leading all categories of household appliances in growth.

Small household appliances: The State Administration of Market Regulation issued the “Enforcement Guidelines on the Application of the 'Advertising Law of the People's Republic of China' (1)”, which directly refers to e-commerce investment costs. According to the provisions of the current tax law, starting October 1, investment expenses generated by enterprises are classified as advertising expenses and business promotion expenses. The pre-tax deduction amount must not exceed 15% of the annual operating income, and the excess amount is subject to corporate income tax according to regulations. Simply put, the seller's investment fee can only deduct 15% of the operating income. The extra portion must be taxed as profit. The more investment fees are spent, the more taxes you may have to pay. Therefore, the future direction of supervision will strictly limit corporate investment expenses. The portion exceeding 15% of annual revenue will be subject to corporate income tax according to regulations, and a large number of enterprises will need to make up the tax. For e-commerce companies that account for too much investment, traffic costs are facing a second rise. In other words, against the backdrop of a further rise in distribution costs, the living space for emerging brands or miscellaneous brands that previously relied on burning money to gain volume and revenue will gradually decrease, and competition in online channels will return more to essential competition in brand power and product power, which will benefit leading brands where online channels dominate the model.

Two-wheelers: Pakistan is also issuing the latest policies to promote sales of electric two-wheeler products. Pakistan's “Forum Express” estimates that the country currently has more than 26 million motorcycles and 4 million cars. After years of use, many of these vehicles have far exceeded their design lifespan and need to be phased out. Currently, a number of Chinese brands are promoting e-bike sales in major cities in Pakistan, which are attracting the attention of consumers in the country.

Motorcycles: 1) Polaris released Q2 results, which were under pressure but also exceeded expectations: Q2 adjusted revenue of $1,848 billion (YoY -6%), of which: off-road revenue of $1,408 billion (YoY -8%), on-road revenue of $289 million (YoY -1%), Marine revenue of $155 million (YoY +16%), which exceeded the high-end, and was affected by weakening product structure, increased promotion, and incentive compensation pressure; overall retail sales in North America remained flat year-on-year. All three Marine segments gained market share, with dealer inventory falling 13-18% year over year, which is basically in line with current demand; the company implemented a four-pronged mitigation strategy to reduce the net impact to <$100 million, which is expected to affect $30-40M in Q3; the company launched the Ranger 500 (MSRP $9,999), which targets the utility market below $1W5, and the Q3 sales guide is $16-1.8 billion (YoY -9% to -18%), and retail demand is expected to remain flat. 2) Harley announced Q2 results: HDMC $1,044 billion (YoY -23%), global motorcycle retail sales volume -12%, US share 32%, global dealer inventory -28% YoY; HDMC operating margin fell from 14.7% in 2024Q2 to 5.9% in 2025Q2, mainly affected by declining sales volume, increased costs and tariffs; the company has no financial guidance for the full year. 3) Overseas sentiment picked up, with Chinese companies seizing the share: Europe, Italy, Spain, Germany, the United Kingdom and Turkey registrations in June were -6.7%, +20.4%, -19.8%, -18.6%, -7.4%, Spain continued to grow and expand, and Italy, Germany, the United Kingdom, and Turkey narrowed markedly in Q2 and June; in emerging markets, Brazil, Colombia, Indonesia and Thailand registered +8.1%, +41.9%, -0.3%, and +2.5% respectively. Emerging markets generally grew in emerging markets, reflecting general growth in motorcycle demand and Increased popularity. The market share of Chinese companies increased rapidly. In the first half of the year, the Muji SFIDA SR16 entered the best-selling model list, with a cumulative registration volume of over 3,000 vehicles; in June, the growth rate of Muji and QJMOTOR in Spain was close to or above 100%, with shares of +2.1 and 1.0 pct, respectively; the boom in the Latin American and Southeast Asian industries continued, and Chinese companies began to expand.