China Securities Co., Ltd.: Going overseas dividends and transformation cycles are two investment mainlines for the home appliance sector.

China Securities Co., Ltd. released a research report stating that the household appliances sector will be plagued by disturbances caused by tariff increases, fluctuations in the policy of exchanging old appliances for new ones, and high base expectations in the second half of 2025, resulting in underperformance compared to the Shanghai and Shenzhen 300 Index. From a long-term perspective, the competition of enterprises will eventually return to the essence of product innovation and efficiency advantages. Therefore, from an investment perspective, the company believes that there are two main themes: continuing to explore overseas markets as the most important source of growth, and reaping the benefits of transformation. Key points from China Securities Co., Ltd. are as follows: Home appliances: Domestic demand gradually under pressure, Chinese companies accelerating expansion overseas, and improving their position in the high-end market Domestic sales stimulus effect weakening, with expectations for export improving. According to Lotuc Technology data, in Q2 and Q3 of 2025, the brand shipments of whole TVs in the Chinese market decreased by 2.1% and 10.4% year-on-year, respectively. It is predicted that the year-on-year decline in Q4 will reach more than 15%, with even greater declines in the retail market. The total shipment volume for 2025 is expected to decrease by 6.8% year-on-year, and retail sales are expected to drop by around 10% year-on-year. Looking ahead to 2026, the fundamental pressure on domestic demand is likely to continue, according to Lotuc Technology. Regardless of whether the "National Subsidy" policy, which is a focus of the market, continues or not, the Chinese TV market will continue to decline in 2026. If there are other forms to replace the National Subsidy, the total shipment volume will decrease by 6.2% year-on-year in 2026. If any stimulus policy is no longer in place, the year-on-year decline is likely to exceed 10%. However, based on the fact that 2026 is a major year for sports events, with the World Cup in the US, Canada, and Mexico expected to stimulate demand for overseas TVs, the primary task for Chinese TV companies is to increase their presence in overseas markets and develop strategies to accommodate this. TCL and Hisense have increased their market share both in China and internationally, with significant room for growth overseas. According to AVC Revo data, the global shipments of Hisense and TCL both exceeded 13 million units in the first half of 2025, with a global market share of over 14%, an increase of around 1 percentage point year-on-year. Specifically, Hisense's domestic and international market shares are 21.1% and 12.7% respectively, increasing by 1.1% and 0.3 percentage points; TCL's domestic and international market shares are 18.9% and 13.8% respectively, increasing by 0.5% and 1.1 percentage points. Meanwhile, Samsung's global shipments exceeded 16 million units, with a market share close to 18%, a decrease of 0.5 percentage points year-on-year. Its shipments are concentrated in overseas markets, with an overseas market share of around 22%. There is still significant room for Chinese brands to catch up. Chinese TV giants have improved their overseas production capacity layout, guiding shipment growth in 2025. Looking at the global market, as Samsung retreats in the mid-to-low-end market, exits the LCD panel business, and transfers its market share to other overseas brands like LG and Sony, Lotuc Technology predicts that Chinese brands Hisense and TCL will dominate the global market within three years. According to AVC Revo, TCL is adopting an aggressive strategy to achieve its global market share growth, while Hisense has set ambitious shipment targets. It is worth noting that there is no need to overly worry about the risk of US tariffs, as Hisense and TCL have advanced overseas production capacity layouts. Brands like ONN and VIZIO, which rely on mainland China assembly factories, face greater tariff risks and subsequent cost pressures. Therefore, the competitive pressure on top brands may decrease. The significant trend towards higher-end and larger-sized TVs is driving the improvement of brand profitability. The demand for high-end TVs continues to recover. According to DSCC data, in Q2 of 2025, global shipments and sales of high-end TVs increased by 40% and 21% respectively year-on-year, marking the fourth consecutive quarter of year-on-year growth. According to AVC Revo data, the total shipment area of TVs in H1 of 2025 reached 72.2 million square meters, an increase of 3.6% year-on-year, with an average size of 53.7 inches, continuing the trend of larger screens compared to 53 inches in 2024. As the industry continues to optimize its product structure, downstream brands' profit margins are expected to further improve. The upheaval in the high-end TV market, with Chinese brands actively promoting MiniLED TVs. The share of MiniLED TVs in the high-end market is constantly increasing, reducing the importance of OLED in the high-end market. In 2023, OLED accounted for over 60% of the shipments and sales in the high-end market, but in Q2 of 2024, MiniLED surpassed OLED, and has since continued to gain market share in the high-end segment. In Q2 of 2025, the shipment volume and sales of MiniLED TVs increased by 101% and 66% year-on-year respectively, while OLED TV shipments remained flat and sales declined by 7% year-on-year. This is mainly due to the higher cost-effectiveness of MiniLED TVs, leading more consumers to choose them. Chinese brands actively promoting MiniLED TVs are benefiting more. Chinese brands are seizing market share in the high-end segment, with structural upgrades driving continued profit growth. In Q2 of 2025, TCL's global shipments of 65 inches and above TVs increased by 26.9% year-on-year, with the proportion of shipments rising by 5.2 percentage points to 29.1%. Shipments of 75 inches and above TVs increased by 20.8% year-on-year, with the proportion rising by 2.0 percentage points to 14.7%. In H1 of 2025, TCL's average global shipment size increased by 1.5 inches to 53.4 inches, with quantum dot TVs and MiniLED TVs witnessing year-on-year shipment growth rates of 73.7% and 177.7% respectively. Since Q4 of 2024, Samsung's MiniLED shipments have fallen to fourth place, behind Hisense, TCL, and Xiaomi. Chinese TV brands are seizing the global high-end market with their technological advantages in MiniLED and cost-effective offerings in the LCD field, increasing their market share for large-sized and mid-to-high-end TVs, thereby optimizing product structure and improving profitability for Hisense and TCL. Risk factors: 1. GDP growth lower than expected: Home appliances are durable consumer goods closely related to household income expectations. If GDP growth slows down or has a significant impact on industry sales. 2. Significant fluctuations in raw material prices: Home appliance companies depend heavily on raw materials, and if bulk prices rise again, the sector's profitability will weaken. 3. Overseas market risks: Uncertainty in overseas markets has increased in recent years, with leading home appliance companies having a high proportion of exports. If external demand decreases, it will have a corresponding impact on performance. 4. Intensified market competition: In a weak market environment, industry competition becomes more fierce, with some companies at risk of losing market share and profit due to low-price competition.