Guolian Minsheng Securities has released a research report indicating that improvement in the home appliance sector is anticipated, maintaining a "Recommended" rating. In March, domestic air conditioner sales returned to positive year-on-year growth, showing sequential improvement and exceeding production schedule expectations. Exports, however, with significant exposure to the Middle East, face disruptions due to geopolitical conflicts, suggesting a potentially uneven recovery path in the near term. Total air conditioner sales for the month declined by 2% year-on-year, although this contraction narrowed compared to the January-February period. Looking ahead, rising costs coupled with steady but weak demand are expected to drive further concentration in the domestic market. The outlook for industry structure can be viewed with cautious optimism. With the peak domestic sales season approaching, sales momentum warrants close attention. Leading companies demonstrate diversified product categories and geographic operations overseas, with strong brand export momentum, indicating sustained long-term alpha potential. Currently, the relative valuation of white goods is near historical lows, offering stable growth and high dividend yields. Key points from Guolian Minsheng Securities' report are as follows.
Industry Online data for March shows household air conditioner production reached 24.03 million units, down 3.28% year-on-year. Sales totaled 23.93 million units, a decrease of 1.70% year-on-year. Domestic sales accounted for 13.50 million units, increasing 5.62% year-on-year, while exports were 10.44 million units, falling 9.80% year-on-year. Ending inventory stood at 14.41 million units, down 16.48% year-on-year. Analyzing sales by manufacturer: Gree saw an 8.70% decline (domestic sales +1.61%, exports -30.00%); Midea increased 7.35% (domestic sales +18.18%); Haier remained flat (domestic sales +7.78%, exports -17.72%); Hisense grew 1.20% (domestic sales +45.83%, exports -32.63%); Changhong's exports for the month rose 16.00%.
Domestic sales returned to positive year-on-year growth, with channels stocking up for the peak season. Domestic air conditioner shipments in March increased 6% year-on-year, turning positive and outperforming the January-February period (-3%) and earlier production forecasts (-2%). For March 2025, domestic shipments grew 3% year-on-year but slowed sequentially from January-February. Excluding base effects, the two-year CAGR for domestic sales in March was +5%, accelerating from the January-February period and exceeding expectations. Despite weak end-market performance since the start of the year—with AVC data indicating a 18% year-on-year decline in retail volume for March and a 13% cumulative decline for Q1—the relatively strong shipments may be linked to rising cost expectations and channel inventory building for the peak season. Furthermore, leading companies reported only mid-single-digit declines in installation cards for Q1, better than the industry average. Subsequent Industry Online production schedules suggest a slight year-on-year decline for domestic air conditioner sales in April-May, with single-digit growth in June. However, actual domestic sales performance has consistently surpassed initial production forecasts this year, suggesting the improvement trend may continue.
Leading companies are gaining market share, with sales momentum outperforming the industry. Domestic sales volumes for Midea, Gree, and Haier air conditioners in March increased by 18%, 2%, and 8% year-on-year, respectively, while Hisense and Aux saw changes of +46% and -5%, indicating divergent trends. In Q1 2026, Midea's domestic market share increased by 5 percentage points year-on-year, driving the CR2 (combined share of the top two players) to rise year-on-year for the fourth consecutive month. Among second-tier brands, Hisense continued its strong growth trend seen since the beginning of the year. At the retail level, leading companies' installation card growth rates are better than the industry average. Under pressure from costs and demand, market concentration is trending upwards. Brands like Jinghong continue to contribute incremental growth; Gree's online retail volume share cumulatively increased by 7 percentage points year-on-year in Q1, showing strong performance, while Midea and Haier gained offline market share. In a weak domestic demand environment, AVC data indicates Q1 average retail prices for air conditioners were largely stable year-on-year. Cost pressures are tempering competitive intensity, allowing for a cautiously positive outlook on industry structure.
Geopolitical disruptions affect exports, with recovery remaining uneven. Air conditioner exports in March fell 10% year-on-year, with the decline widening compared to January-February. Geopolitical conflicts in the Middle East are impacting demand and logistics, slowing the recovery pace. According to customs data, key Middle Eastern countries account for approximately 18% of total annual air conditioner exports for 2025. Based on late-March Industry Online data, production schedules for April and May indicate year-on-year changes of -12% and +2% for exports, suggesting gradual improvement. However, comparing against a significantly lower base from the same period last year—Q2 2025 exports declined 8% year-on-year—exports could return to a recovery trajectory if geopolitical conflicts do not escalate beyond expectations, potentially converging towards a mid-to-high single-digit growth rate. Order intake for leading companies' exports has been recovering since Q3 2025. The shift of production overseas is progressing, investments in OBM are gradually yielding results, and strong brand alpha, combined with product and regional diversity, provides a buffer against geopolitical and tariff impacts, underpinning operational resilience and the potential for continued improvement.
Risk warnings include a sharp rise in raw material costs, and uncertainties surrounding tariffs and external demand.