Guotai Haitong Home Appliance Sector 26Q3 Earnings Preview: External Demand Better Than Domestic Demand, Profitability Remains Under Pressure

Guotai Haitong released a research report stating that in 26Q3, external demand for the home appliance sector was better than domestic demand, while domestic sales still faced high base pressure. On the profitability side, rising costs & intensified competition & currency exchange continued to affect profitability, with gross margins under sustained pressure, mainly due to rising raw material prices & difficulty in passing them through amid weak demand; in addition, intensified competition also caused average prices of some categories such as air conditioners to decline significantly. The bank expects that 26Q3 performance will be overall weaker than Q2, with leading white goods brands performing relatively steadily. Guotai Haitong's main views are as follows: Demand side: Export sales continued to outperform domestic sales, while domestic sales still faced high base pressure. Domestic sales in 25Q3 were still at a relatively high base, while export demand was overall better. Looking ahead to Q4, with a low base for domestic sales, revenue is expected to improve. Profitability side: Rising costs & intensified competition & currency exchange continued to suppress profitability. Gross margins remained under pressure, mainly due to rising raw material prices & difficulty in passing them through amid weak demand; in addition, intensified competition also caused average prices of some categories such as air conditioners to decline significantly. Copper prices were still fluctuating at high levels, aluminum prices fell after a clear rise, plastics continued to surge, and cost-side pressure remained. In addition, judging from domestic online average price performance, AVC online average prices were all weak, such as air conditioners with Q3 average price -17.74% YoY, washing machines -10.57%, refrigerators -8.13%, range hoods -9.13%, sweeping Siasun Robot&Automation -10.39%, and floor scrubbers with average price -16.22%; the overall average price decline was significantly larger than in Q2. 26Q3 profit forecast: Q3 performance is expected to be overall weaker than Q2. White goods: On the domestic sales revenue side, Q3 still faced base pressure; on the profitability side, rising raw materials such as copper, aluminum, and plastics could not be fully passed through, and the decline in terminal average prices in Q3 was larger than in Q2. It is expected that second- and third-tier white goods brands will face greater profit pressure in Q3, while leading brands will perform relatively steadily. Black goods: Domestic sales base pressure remained in Q3 and export sales had a demand pull-forward effect from the World Cup, but price growth is expected to continue to drive performance. On the cost side, panel prices are moderating, but memory chip prices are bringing pressure. Cleaning: The domestic peak season has passed, overseas major promotions were shifted, revenue growth is weakening sequentially, and memory and plastic pellets continue to affect profitability. Risk warnings: Uncertainty in tariff policy, uncertainty in overseas demand, and the stimulus effect of the trade-in policy on subsequent demand being less than expected.