GLMS SEC has released a preview for the home appliance sector's Q1 2026 report. The first quarter of 2026 continues to be affected by base period comparisons, with the sector's fundamentals at a cyclical low, signaling the approach of a potential dawn. The period of greatest pressure from high domestic sales bases has passed. Overseas sales are expected to continue improving, with emerging markets potentially delivering better-than-expected performance. A sequential quarterly recovery in overall sector operations is anticipated, and a narrative focused on shareholder returns provides stylistic support, making the sector worthy of investor attention.

The main views from GLMS SEC are as follows:

**Major Appliances (White Goods): Sequential Growth Improvement, Headwinds on Cost Side** In Q1 2026, the base effect pressure on domestic sales of major appliances has eased, with demand stabilizing weakly and showing signs of bottoming out. The recovery trend for overseas sales of refrigerators and washing machines is strong, while the decline in air conditioner exports is narrowing, suggesting an inflection point may be near. Driven by both domestic and overseas sales, industry revenue is forecast to show sequential improvement. On the profitability front, sustained increases in copper prices since Q4 2025, recent rises in plastic and aluminum prices influenced by Middle East geopolitical conflicts, combined with impacts from exchange rates, tariffs, and overseas competition, continue to create headwinds. Coupled with a high base from the same period last year, year-on-year profits for the quarter may remain relatively weak. In this environment of rising costs, leading white goods companies demonstrate resilient operations, with strong profit safety margins and greater flexibility for price adjustments. Ongoing efforts to enhance efficiency and reduce costs are helping to counter short-term pressures.

**Consumer Electronics (Black Goods): Narrowing Decline in Domestic Sales, Strong Overseas Momentum** Since the start of 6, television sales have shown a divergence between domestic and international markets. Domestically, LCD TV sales volume for January-February 2026 fell 8% year-on-year. Although this reflects a high base from last year's national subsidies, the decline has narrowed significantly compared to the over 20% drop in Q4 2025. Against a backdrop of slightly rising panel prices, increased penetration of RGB-MiniLED and large-screen TVs is expected to continue improving the industry's profitability. For overseas sales, LCD TV export volume for January-February 2026 grew 13% year-on-year, turning positive sequentially. Demand related to major sporting events in 2026 may be gradually materializing. Considering that leading domestic TV manufacturers are continuously optimizing their channel and product mix, and steadily gaining overseas market share, their international performance may outpace the broader industry.

**Cleaning Appliances: High Domestic Base, Sustained High Export Growth** For cleaning appliances, domestic retail sales of robotic vacuum cleaners for January-February 2026 declined 5% year-on-year, a narrower drop compared to Q4 2025, primarily due to high subsidy-driven bases from the same period last year. Sales of floor washers increased 8% year-on-year, turning positive sequentially from Q4 2025. Looking ahead, product innovation is expected to drive structural upgrades in the sector, although overall base pressure remains. On the export front, combined app downloads for leading overseas brands show high year-on-year growth, with Chinese brands continuously increasing their market share. The European market, where Chinese brand expansion has been relatively smooth, shows the fastest growth, followed by North America and Asia-Pacific. Given the superior product structure of Chinese brands, the trend of rising volume and average selling prices for robotic vacuum cleaners overseas is likely to continue.

**Small Household Appliances: Revenue Remains Weak, Initial Signs of Cost Pressure** In the first quarter, retail sales of small kitchen appliances remained weak, although pressure is expected to ease somewhat compared to Q4 2025. Sales value performance continues to outpace sales volume, indicating the effects of improved competitive dynamics and product mix upgrades; sales of coffee machines and air fryers were particularly strong in Q1. However, export of small kitchen appliances may face pressure in Q1 due to external demand disruptions. On profitability, the appreciation of the Renminbi in Q1 and rising plastic prices in March could have a negative impact. However, rising domestic average selling prices provide a positive offset. Furthermore, ongoing internal cost-cutting efforts and an increasing proportion of higher-margin new businesses are expected to continue benefiting profit margins.

**Post-Cyclical Appliances: Real Estate Drag Persists, Subdued Industry Expectations** In the first quarter, both residential property sales area and completion area remained in a downward trend, suggesting that demand pressure on post-cyclical appliances has not yet lifted. Additionally, the new round of national subsidies in 2026 includes only water heaters from the kitchen appliance category, creating base effect interference. Although dishwashers, steam ovens, and electric water heaters have returned to resilient growth, their share is limited. Consequently, revenue for kitchen appliance companies in Q1 is still expected to decline, though this is anticipated. An acceleration in industry consolidation may accompany this, with leading companies likely demonstrating more pronounced operational resilience. On the profitability side, costs such as cold-rolled steel were weak in Q1, but channel investments increased, suggesting margins are likely to remain stable.

**Investment Recommendations:** Continued recommendations include: 1) High-quality operators with prominent cost-performance advantages among white goods leaders: Midea Group, Haier Smart Home, Gree Electric Appliances, Hisense Home Appliances; 2) TV leaders with steadily increasing global market share and profit margins: TCL Electronics, Hisense Visual Technology; 3) Robotic vacuum cleaner leaders outperforming in terms of sector growth momentum: Roborock, Ecovacs; 4) Companies with continuously increasing market share and actively expanding growth boundaries: Supor, Robam, Bear Electric Appliance.

**Risk Warnings:** 1) Sharp increase in raw material costs. Raw materials constitute over 80% of the operating costs for major appliance companies. Current profit expectations for the sector are based on the assumption of generally stable raw material prices. Recent upward trends in non-ferrous metal prices, if they evolve into a broad-based rally in commodity prices, could lead to profits falling short of expectations. 2) Uncertainty regarding tariffs and external demand. US tariff policy remains uncertain. While end-demand for appliances in European and American markets is generally on a steady recovery path, it is still influenced by monetary and fiscal policies. Geopolitical conflict risks persist and could impact the overall recovery of overseas demand and Chinese appliance exports.