Guojin Securities: How do you view Baijin's investment opportunities at this point in time?

The Zhitong Finance App learned that Guojin Securities released a research report saying that the white power sector is currently in a resonance phase where fundamentals have bottomed out, marginal cost pressure has eased, and institutional positions are at a historically low level. The second half of the year has the foundation for performance repair and valuation repair. In the long run, overseas market growth and shareholder returns are expected to drive the sector valuation system to shift from “mature manufacturing” to “high quality cash flow+increased shareholder returns+steady growth”. Combining undervaluation, high dividends, and steady cash flow attributes, the bank is optimistic about investment opportunities in the white electronics industry in the second half of the year and maintains the industry's “buy” rating.

Guojin Securities's main views are as follows:

Fundamentals: The pressure on the base has decreased, and the direction of economic recovery in the second half of the year is quite clear

26H1 home appliance zero fell 9.5% year on year, mainly affected by the high base figure formed by the 25H1 national supplement; entering the second half of the year, base pressure eased significantly. Referring to the average share of zero 45%/55% of home appliances in the first half of the year since 2020, the bank estimates that 26H2 home appliances had zero scale of about 600 billion yuan, an increase of 7.7% year on year; of these, Q3 and Q4 decreased 2.8% year on year and increased 18.2% year on year, respectively, and are expected to show a trend of narrowing in Q3 and significant restoration in Q4. By category, domestic sales of air conditioners and refrigerators are expected to increase by 7.4% and 2.2% respectively in the second half of the year, and domestic sales of washing machines will drop by 1.1%, and the decline will narrow further; export air conditioners have clearly recovered as the base falls, and refrigerators and washing machines will continue to grow, and are expected to increase by 11.1%, 3.3%, and 4.1%, respectively.

Major impact: Copper and aluminum prices may have reached a high year-on-year growth rate, and profit pressure is expected to gradually ease

The average price of copper and aluminum rose 40.0% and 45.9% year on year respectively in 26Q2. This is a stage where commodity price pressure is concentrated in this round, and it is also an important stress testing window for Baidian's performance. Judging from the current trend, the month-on-month increase in copper prices has clearly slowed down. Since July, the price of aluminum has fallen back to around 3,200 US dollars/ton, close to the average price of 26Q1. The bank made scenario estimates of the increase in copper and aluminum prices. Under most price assumptions, the year-on-year growth rate of copper and aluminum prices in the second half of the year will all decline compared to the first half of the year. In retrading history, leading companies can effectively hedge cost fluctuations through price increases, cost reduction, and production allocation, and the marginal drag on profits from raw material prices is expected to weaken from quarter to quarter.

Chips and valuations: Institutional positions are at historically low levels, and stable fundamentals are expected to bring about position recovery

By the end of 26Q2, the proportion of public funds in the home appliance industry was 1.02%, down 0.6 percentage points from month to month, the lowest level since 2015. Pessimistic expectations such as weakening demand and rising costs may have been fully reflected. As fundamentals gradually stabilize and market style becomes more balanced, Baidian, which has both undervaluation, high dividends, and stable performance attributes, is expected to make up for positions. Furthermore, the “Measures for the Management of Insurance Company Assets and Liabilities” will be implemented in 2027, making it clear that the net investment income coverage rate for personal insurance must not be less than 100%. Since net investment income mainly comes from stable cash income such as interest, dividends, and rent, the allocation value of high-dividend assets has further increased against the backdrop of declining long-term interest rates and pressure on bond coupons. Baidian has outstanding dividend distribution capacity and low valuation. It is expected to benefit from increased insurance capital and public position reimbursement, bringing incremental capital to the sector.

In the long run, mature consumer companies increase shareholder returns through dividends and repurchases, which helps strengthen valuation support

Taking Coca Cola as an example, the compound growth rates of the company's revenue and profit from 2013 to 2025 were -0.3% and 2.6% respectively. During the same period, the company continued to increase dividends and implement repurchases, and the PeForward hub increased from 17.4 times to 21.8 times. Shareholder returns for domestic white power companies also continued to improve: the US dividend rate increased to 73% in 2025, announced a repurchase plan of 65-13 billion yuan in 2026; Haier announced that the 2026-2028 dividend rates will not be less than 58%, 60%, and 60%, respectively. Baidian has abundant cash flow and manageable capital expenditure intensity, and the increase in shareholder returns is expected to push the market to reprice its long-term value.

Growth outlook: Overseas markets represented by Europe are expected to become an important source of growth for the air conditioning category

The penetration rate of household air conditioning in Europe in 2025 is only about 23%. In recent years, the frequency and intensity of hot weather has continued to rise, and the need to consume air conditioning continues to increase. In 2025, China exported 17.23 million air conditioners to Europe, a compound increase of 9.9% over 10.73 million units in 2020. The total share of Chinese brands such as Haier, Gree, Midea, and Hisense in Eastern Europe is over 60%, while the Western European market is still less than 20%. The low penetration rate and low brand share form a double room for improvement. The bank estimates that under the scenario where European air conditioning penetration rates reach 40%, 50%, and 60%, respectively, steady state's annual sales are expected to reach about 19.8 million, 24.69 million, and 30.48 million units. China's leaders are expected to enter the share harvest period with continuous improvement of products, channels and brand layouts.

Risk Alerts

The recovery in terminal demand fell short of expectations; prices of raw materials such as copper and aluminum rose above expectations; price competition in the industry intensified; overseas tariff policies and exchange rates fluctuated greatly; and the pace of decline in national subsidies and other policies exceeded expectations.