Orient Securities has released a research report stating that leading major appliance manufacturers demonstrate operational resilience, with continuously improving dividend yields, offering stable value for dividend-focused investment allocations. White goods maintained relative stability despite a high comparison base, while black goods and cleaning appliances benefited from sustained export momentum, achieving steady revenue growth. Companies focused on overseas markets continued to experience favorable revenue conditions, with operational performance gradually improving, suggesting a potential inflection point ahead. Key viewpoints from Orient Securities are as follows:
Fund allocation to the sector continues to decline, with holdings at a historical low. In Q1 2026, fund allocation to the home appliance sector was 1.9%, showing a sequential decrease from the 5.5% level in Q3 2024. The sector was underweight by -0.14% in Q1 2026, placing its overweight ratio at the 21st percentile since 2003. The primary reasons for the reduction in holdings are: 1) Demand Side: Domestically, market concerns about weak internal demand due to the phase-out of national subsidies; externally, tariffs have caused significant disruption to exports. 2) Cost Side: Pressure on profits from rising raw material costs and exchange rate fluctuations remains significant and persistent.
Recent Q1 results indicate the sector's relative stability under a high base. Overall sector revenue for Q4 2025 / Q1 2026 was 338.5 / 393.1 billion yuan, representing year-on-year changes of -8% / +0% respectively. Within this, white goods / black goods / cleaning appliances / small kitchen appliances / large kitchen appliances saw Q1 2026 year-on-year changes of -1% / +9.9% / +15.4% / -3.9% / -3.0%. White goods remained relatively stable despite the high base, black goods and cleaning appliances showed robust revenue growth supported by strong exports, while small and large kitchen appliances continued to decline due to weak domestic demand and the property market. On the profit side, sector earnings declined year-on-year, but the gross margin-to-sales expense spread showed steady improvement. Overall net profit attributable to shareholders for Q4 2025 / Q1 2026 was 21.6 / 31.2 billion yuan, changing by -27% / -5% year-on-year respectively. For Q1 2026, white goods / black goods / cleaning appliances / small kitchen appliances / large kitchen appliances saw year-on-year profit changes of -2.4% / -1% / -37% / -23% / -23%. The sector's gross margin-to-sales expense spread stabilized and recovered under external pressure, increasing by +0.5 percentage points year-on-year in Q1 2026, with white goods and black goods up +0.6 and +0.7 percentage points respectively.
Financial expense ratio is a key factor impacting profits; operating profits are stable excluding forex effects. The overall gross margin-to-sales expense spread for the sector improved year-on-year in Q1 2026. Profit pressure mainly stemmed from increased financial expenses due to exchange rate fluctuations. The sector's financial expense ratio increased by +1.8 percentage points year-on-year in Q1 2026, with white goods / black goods / cleaning appliances / small kitchen appliances / large kitchen appliances up +1.9 / +0.7 / +3.8 / +1.0 / +0.4 percentage points respectively. Excluding the impact of financial expenses, the sector's overall net profit margin saw a year-on-year improvement in Q1 2026.
Companies are actively implementing cost-cutting and efficiency measures amid external pressures. Since Q4 2025, companies have been more proactive in advancing cost reduction and efficiency initiatives, countering external pressures by gradually reducing self-subsidies, implementing internal cost controls, and optimizing cost structures. Based on Q1 2026 operational results, the sector achieved an improvement in the gross margin-to-sales expense spread despite raw material cost pressures, indicating the effectiveness of cost control efforts. Both the sales expense ratio and R&D expense ratio for the sector decreased year-on-year in Q1 2026, further demonstrating the gradual manifestation of cost-cutting and efficiency gains.
Investment Recommendations and Targets: Recommendation One: Leading companies possess higher operational efficiency and demonstrate greater stability during cost-increase cycles. Combined with relatively high dividend yields, they are preferred choices for stable allocations. Related target: Haier Smart Home. Recommendation Two: Overseas expansion remains a long-term theme, with a potential inflection point expected in Q2. Related targets: Roborock, Ecovacs, All Sun, Lake.
Risk warnings: Uncertainty regarding the continuity of trade-in subsidy policies; potential recurrence of tariff-related disruptions.