Orient: Opportunities for mid- to high-end positioning in household appliances are emerging. We recommend operating leading companies with stable management.

Orient released a research report stating that home appliance companies are announcing price increases one after another, transmitting the increase in raw material costs downstream. Leading companies have a more stable position and their product positioning is mostly in the mid-to-high end, making the transmission of prices downstream smoother. The bank judged that there are accelerated penetration opportunities in the segmented race track targeting mid-to-high-end users (such as 3D printing, AI glasses). The bank recommends well-established leading companies. The first theme: leading companies have higher operating efficiency, and in a period of rising costs, their operations are more stable. Combined with high dividend yields, they can be preferred for stable allocation, with related targets being Haier SmartHome (600690.SH, not rated) and Hisense Visual Technology (600060.SH, buy). The second theme: going overseas remains a long-term trend, with a valuation switch expected in 2026, with related targets being Beijing Roborock Technology (688169.SH, buy) and Kingclean Electric (603355.SH, buy). The main opinions of Orient are as follows: Home appliance companies are announcing price increases, transmitting raw material costs downstream From July 1, 2025 to January 30, 2026, the price of LME copper rose by 32%, leading to recent announcements of price increases by home appliance brands. Hisense announced that starting from February 11, 2026, prices of its Hisense and Kelon air conditioners would increase by 5%-10%. AUX air conditioners also announced a price increase of 3%-8% from January 19 due to rising copper prices and additional labor and environmental costs. Midea air conditioners previously announced price increases of 2% from January 3, 2026, and 4% from January 5, with a combined increase exceeding 6%. Price increases have no significant impact on overall sales volume, but can promote market concentration In addition to the current upward trend in bulk prices, there have been two rounds of raw material price increases in the past 10 years, driven by supply-side reforms (2016-2017) and post-pandemic liquidity and supply chain shortages (2020-2021) respectively. After reviewing each round of substantial raw material price increases, home appliance companies will take certain pricing actions, mostly led by leading companies. Price increases have no significant relationship with subsequent overall sales volume, as sales within the sector are more influenced by real estate policies, replacement cycles and external subsidies (such as trade-in programs). However, after each round of price increases, the industry landscape tends to become more concentrated. For example, following the upward trend in copper prices (and other bulk commodities) in 2020-2021, the average selling prices of air conditioners and refrigerators both increased by over 10% year-on-year, with the CR3 market share of air conditioners showing a continuous increase trend from June 21 to February 22; and refrigerators also showed a significant increase in CR3 market share from September 21 to January 22. Leading companies have a more stable position and their product positioning is mostly in the mid-to-high end, making the transmission of prices downstream smoother. During an upward trend in PPI, opportunities for mid-to-high-end positioning are becoming apparent 1) Mid-to-high-end race track: PPI, as a core synchronous indicator of industrial profitability, provides a positive signal for the stabilization and recovery of industrial enterprises and the economy. The bank judges that there are accelerated penetration opportunities in segmented race tracks targeting mid-to-high-end users (such as 3D printing, AI glasses); 2) Mid-to-high-end brands: Due to their higher product pricing, consumers of mid-to-high-end brands have lower price sensitivity, allowing price increases to be transmitted downstream more effectively. Therefore, a bulk upward trend is beneficial for increasing the market share of high-end brands. Risk warning The sustainability of trade-in subsidies is uncertain and tariff disturbances may fluctuate.