2021 will be a particularly difficult year for the home appliance industry, which has always been known for its solid value. There are two main reasons behind this, one is cost pressure, and the other is pessimistic expectations of real estate.
The raw materials for home appliances are mainly bulk products such as steel, copper, aluminum and plastic, which account for 85%-90% of operating costs. In about half a year, the main logic of the sector has changed from “demand recovery + pattern optimization + new product volume” to “historic cost pressure drags down profitability”, the gap is huge, and there are also issues such as shipping, chips, and power cuts. Dominated the first drop of the year. In the second half of the year, real estate expectations have accelerated and deteriorated again. Since the second half of 2017, commercial residential sales, which have maintained a small-single-digit growth for most of the time, plummeted to -20% in July 2021 as policies were tightened again. Left and right, this broke the previous expectation of “no major ups and downs” and led the second decline in the sector during the year. Thanks to the obvious drive of new products on industrial volume and price, clean electrical appliances have become one of the few bright spots in the sector during the year.
Standing at the current point in time, we believe that the main tone of the industry in 2022 is “the external environment may be significantly eased, and the internal logic will be accelerated.” As the so-called profit and loss are of the same origin, the sector will have a large adjustment due to the drag of “cost + real estate” during the year, so the sector will most likely be repaired due to the improvement of these two factors. In late October 2021, the price of bulk materials began to fall from a high level, and by the end of December, the rate reached more than 10%. Even if the current level is linearly extrapolated, the certainty of profit improvement in 2022 is quite high; if it can continue to fall, the profit side will exceed 10%. The expected probability is high; of course, it also needs to be closely tracked to avoid the situation in early 2020. As for real estate, under the guidance of city-specific policies, affordable housing planning, etc., the recent expectations have also improved significantly. It is OK to “fall”. As long as there is “no major fall”, the impact on industry valuation and demand will be relatively small. After all, in the past few years Appliances operate in such an environment.
Of course, both cost and real estate are actually external factors. As their influence weakens, on the one hand, it will bring about the repair of the sector, and on the other hand, it will make the interpretation of the internal logic of the industry smoother. This is what the current market ignores. In fact, the operating environment of the home appliance industry in the past three years has not been very good. In 2019, the price war of air conditioners, the impact of the epidemic in 2020, and the cost pressure in 2021; but it is these three years that the industry has completed the further optimization of the competitive landscape and channels. The flattening and digitization of the industry, the cultivation of new categories and high-end brands, the initial expansion of the brand, and the diversification on the right track… Even if we look at the 40-year history of industrial development, these changes have strong milestone significance. The follow-up development provides a steady stream of power, and a new era is quietly coming. Over the past few years, event shocks have obscured these inherent results, but in 2021, when both business and costs are very poor, fewer revenue-side low expectations, smaller earnings adjustments, and faster earnings repairs all herald these inherent changes. It is gradually reflected on the business side, and it may become more obvious after the external negative factors are removed. Therefore, we are optimistic about the market performance of the home appliance sector in 2022.
Looking forward to 2022, under the background of the steady growth policy, the pessimistic expectations of the light manufacturing industry have been restored, the valuation bottom has been supported, and attention has been paid to the optimization of the subdivision of the track. And ROE expands steadily; the prosperity of the textile and apparel industry has shifted from the brand side to the manufacturing side, the dual control of energy consumption has accelerated the clearance of backward and small production capacity, the rapid export growth has stimulated industry demand, the concentration of leading textile manufacturing industries has increased, and high-growth segments The invisible champion of the industry shows high flexibility in performance.
Home furnishing industry: Demand is better than market expectations, leading companies are upgrading to dimensional competition, focusing on turnover and efficiency improvement, business models iteratively expand boundaries, and reflect alpha. From the perspective of overall demand: the probability of continuous tightening of real estate regulation is low; housing and housing are not speculated to squeeze investment demand and encourage self-occupation demand, which is the real demand for household consumption; the huge secondary renewal demand has yet to be activated; the first mention of home furnishing Home improvement goes to the countryside, boosting the penetration rate of the sinking market. From the specific track: the value chain of the software track has obvious scale effects, the price band is extended, the concentration is increased, and the profit is gradually repaired with the improvement of the price of raw materials; the customized track actively deploys new channels, horizontally expands the category, and leads the business model. Iterative, to promote the steady expansion of the share.
Packaging industry: Marginal improvement in external demand, gradual easing of pressure on raw material and energy costs, and profitability of the industry as a whole. Leading companies took the initiative to enter the high-boom track and achieved growth beyond expectations.
Paper industry: Under the pressure of the expected release of new production capacity, the overall profitability of the industry is under pressure, and companies with management and raw material cost competitiveness are expected to enjoy stable excess profits; the special paper track has a better layout, and leading enterprises have high production capacity. Expansion in order to effectively develop overseas market demand; forestry carbon sinks are expected to become an important starting point for promoting “carbon neutrality”, the CCER trading market (carbon emission rights trading market) has restarted the approval and heating up, and the forestry carbon sink industry is expected to increase in volume and price.
Light industry and consumer industry: The rise of domestic products on the mass consumer goods track creates new momentum for development; after experiencing the dividends of channel expansion in previous years, the next stage of development relies on product strength and brand strength to resist the impact of macro demand and changes in channel traffic; new The identity of the tobacco track has been recognized, and supporting management rules have been gradually introduced, which is conducive to the expansion of leading companies with standardized operations.
Textile and apparel industry: In the first half of 2022, manufacturing is stronger than branding. It is expected that the leading textile manufacturing segment will still maintain high growth. We are optimistic about the investment opportunities brought about by the integration of domestic supply chains. ESG requires superimposing low-carbon consumption trends. Environmentally friendly materials are highly favored and optimistic. New material, environmentally friendly manufacturing leader. It is expected that the demand of brand apparel companies will still be under pressure in the first half of the year, and it is expected to bottom out in the mid-term. It is still optimistic about fast-growing industries such as sports shoes and clothing, and the leading domestic products are worth long-term investment.