中国家电业：被压抑的需求在炎热的夏季是否会扭转空调销售

1、Global Research11 May 2020China Home Appliances SectorWill pent-up demand and a hot summer turn around A/C sales in May? ErratumA V-shaped A/C volume recovery likely in May, with price rebound in H220EWe reiterate our positive view on the sector owing to our observation of narrowing price declines f

2、or air conditioners (A/C) since March 2020, after a roughly 30% drop in January and February. We foresee a limited price downtrend in Q220 and expect a potential rebound from H220 onwards, as we believe the significant A/C price reduction since Q419 is likely due to the destocking of low energy-effi

3、ciency products in addition to the COVID-19 outbreak. However, we estimate these products now account for only about 10% of the channel inventory of Gree and even less for Midea. We do not expect small companies such as AUX have the ability to cut prices further, given their cash constraints and tha

4、t the price discounts compared with market leaders have contracted. We witnessed more positive signs in April and the Labour Day holiday, with a strong industry sales rebound since the start of May, a narrowing ASP reduction by Gree and Midea, and significant offline share gains by Gree since April.

5、Property upcycle since Q319 could last until 2021EWe expect overall home appliances shipment volumes to resume growth in 2021 after a moderate decline in 2020 (-5%/11%/6% in 2019/2020E/2021E), mainly due to pent- up demand following the COVID-19 outbreak and the property completion upcycle (3%11%/8%

6、 YoY increase in 2019/2020E/2021E). We expect positive property completion growth since September 2019 to translate into a recovery of home appliances sales from Q220, given a roughly six- to nine-month lag between the pickup in completions and home appliances sales growth as well as the COVID-19 pa

7、ndemic.Rising consolidations post COVID-19 will likely benefit leaders pricing power We think the COVID-19 outbreak has accelerated industry consolidations, with the top- three A/C companies online market shares rising from 56% in 2019 to 78% in Q120, likely driven by their swift shift towards digit

8、al marketing and strong balance sheets, in our view. We expect the direct-to-consumer (DTC) model, including online and directly controlled retail stores, will become the focus for market leaders future investments, especially for Gree, given its late online strategy executions and Mideas share loss

9、.Buy on Gree and Midea; Neutral on RobamWe lift Grees price target 9% in view of its market share gains since April and a potential turnaround for the A/C industry by H220. We believe investors are likely most concerned about the price competition in the A/C segment while they have probably looked b

10、eyond the negative near-term earnings impact from the COVID-19 outbreak.Figure 1: UBS-covered appliance companies valuation comparisonConsumer ElectronicsChinaEquitiesChristine Peng, CFAAnalyst HYPERLINK mailto:christine-y.peng christine-y.peng+852-2971 7571Rennie PanAnalyst S1460520030001 HYPERLINK

11、 mailto:rennie.pan rennie.pan+86-21-3866 8810TickerCompany nameRatingPT(Rmb)Current Price (Rmb)Mkt Cap (USD, m)P/E (x)EV/EBITDA(x)P/BV(x)Net Dividend Yield (%)ROE (%)NewOld2020E2021E2020E2021E2020E2021E2020E2021E2020E2021E000333.szMidea GroupBuy67.7767.7756.3352,13716.03.43.03%4%23%23%0006

12、51.sz GreeBuy66.4060.8056.9948,45613.92.72.44%4%21%22%002508.sz RobamNeutral32.0032.0032.594,37118.816.714.63%3%22%22%Pricing as of 8 May 2020. Source: UBS estimates HYPERLINK /investmentresearch /investmentresearchThis report has been prepared by UBS Securities Asia Limited. ANA

13、LYST CERTIFICATION AND REQUIRED DISCLOSURES BEGIN ON PAGE 21. UBS does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should cons

14、ider this report as only a single factor in making their investment decision.Erratum: This note replaces an earlier version which incorrectly stated Robams rating in Figure 1.COMMENTARYA potential V-shaped A/C volume rebound in MayMore positive signs arising from the Hot April and Labour Day holiday

15、A V-shaped A/C retail sales volume recovery, which we think is mainly due to the resumption of onsite installation in majority cities and high temperature during the Labour-day Holiday.Narrowing magnitude of ASP reduction in Gree and Midea (online and offline) as seen from the weekly price tracker (

16、per AVC), despite continuous promotion in April.Gree achieved significant YoY offline share gains during Hot April (above 50%, up around 10ppt YoY, while both Gree and Midea gained online shares in April, suggesting continuous consolidation. We think Grees performance in April may partially relieve

17、its channel pressure and is therefore less likely to launch deeper price cuts.Historically, Gree launches regular promotions twice a year, April and September, during the time it usually takes share from competitors (incl. Midea) aggressively. Given the COVID-19, we expect the timing of Grees regula

18、r promotion (Hot April) to be postponed by around one month till May.Figure 2: April and September are two critical timings to track50%45%40%35%30%25%20%15%10%5%0%Retail market share: Gree vs Midea (2019)123456789101112GreeMideaSource: CMM, UBSFigure 3: A/C retail sales appeared a v-shaped recoveryA

19、/C industry yoy growth by volume150%Labour-dayOfflineOnline100%50%0%-50%20W0720W0820W09March-W10W11W12W13April-W14W15W16W17May-W18-100%Source: AVC, UBSFigure 4: 2020 weekly Offline A/C ASP yoyFigure 5: 2020 weekly Online A/C ASP yoy0%0%-5%-5%-10%-10%-15%-20%-25%-30%-35%-40%-45%-50%W01W03W05W07W09W11

20、W13W15W17Gree ASP yoyMidea ASP yoy-15%-20%-25%-30%-35%-40%-45%W01W03W05W07W09W11W13W15W17Gree onlineMidea onlineSource: AVC, UBSSource: AVC, UBSFigure 6: Grees offline market share reached to over 50% during the Hot April promotionFigure 7: Both Gree and Midea gained online shares in April60%50%Mark

21、et share by value - offlineHot AprilMarket share by value - onlineHot April60%50%40%40%30%30%20%20%10%10%0%1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17Gree offlineMidea offline0%1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17Gree onlineMidea online*Note: 2020 weekly data Source: AVC, UBS*Note: 2020 weekly da

22、ta Source: AVC, UBSWe foresee limited magnitude of price downtrend in Q220Recent significant ASP reduction is likely due to the destocking of low energy-efficiency productsThe A/C segment started the downward pricing trend since February 2019 due to lacklustre demand and high channel inventory. Head

23、ing into 2020, the industry ASP has dropped by over 30% for the first two months, far more significant than that during the previous price war (2014-2016) when ASP dropped high-single digit at most. However, we have observed narrowing magnitude of price declines since March and foresee limited downs

24、ide from current level.We think the recent sharp declines reflected the urgency for A/C manufacturers to destock their low energy-efficiency products before the implementation of new A/C standard taking effective on 1st July, 2020. We think such destocking has started since the beginning of 2019 whe

25、n industry players became aware of the new A/C energy efficiency standards. Since most products to be eliminated (FSD type) under this new standard are priced much lower than average, the destocking has therefore dragged the industry ASP significantly, in our view.Gree and Midea have no urgency to d

26、estock low-efficiency productsOur analysis suggests that the possibility of continuous de-stocking low-efficiency products by Gree and Midea will be very limited, as we estimate c10% of Grees channel inventory is at risk and even less by Midea given its low channel inventory. (More details on Append

27、ix)Figure 8: The history of A/C ASP YoY growthASP yoy -CMM offline30%20%10%0%-10%-20%-30%-40%Jan-10 Aug-10 Mar-11 Oct-11 May-12 Dec-12 Jul-13 Feb-14 Sep-14 Apr-15 Nov-15 Jun-16 Jan-17 Aug-17 Mar-18 Oct-18 May-19 Dec-19IndustryGreeMideaSource: CMM, UBSFigure 9: We estimate c10% of Grees channel inven

28、tory is currently at risk (FSD type) Figure 10: after its proactive de-stocking during 2019, especially in the November shopping festival50045040035030025020015010050023.8%25%20%15%8.6% 10%5%0%Gree FSD A/C de-stocking(10k units)100908070605040302010Jan-19Feb-19Mar-19Apr-19May-19Jun-19Jul-19Aug-19Sep

29、-19Oct-19Nov-19Dec-19Jan-200Jan-19 Mar-19 May-19 Jul-19Sep-19 Nov-19 Jan-20 FSD A/C inventory estimation (10k units)FSD A/C as % total inventorySource: ChinaIOL, AVC, UBSSource: ChinaIOL, AVC, UBSCash pressures on AUX makes it unlikely to further lower pricesBefore Gree kicked off the price war in N

30、ovember, 2019, AUXs cash balance was already negative and its profitability has deteriorated since 2018. AUXs net cash was RMB-4bn, versus RMB 128bn for Gree and RMB94bn for Midea. Also, AUXs A/C profitability was reduced to almost zero in Q319 and could further deteriorate as Gree started aggressiv

31、e promotion in November 2019, in our view. These suggest to us that AUX might not further lower its prices for the rest of 2020 given the cash pressures.Figure 11: Net cash comparisonFigure 12: AUX A/C business net profit has deterioratedNet cash (2020Q1, Rmb bn)14012010080604020- (20)128.394.6(3.9)

32、GreeMideaAUX*Note: Net cash = Cash and cash equivalents - Short-term debt - Long -term debt* Notes: AUXs net cash position is as at 2019Q3 (the latest available data). Source: company data, UBS* Note: financials of AUXs A/C business is calculated by deducting data of its medical subsidiary (Sanxing

33、Medical Electronic) under AUX group.Source: company data, UBSFigure 13: Gross profit margin comparisonFigure 14: Net profit margin comparisonGross profit margin (A/C business)37.1%40%35%31.8%30%25%20%21.8%Net profit margin16%14%12%10%8%6%4%2%12.4%9.0%15%0% 0.1%2016201720182019GreeMideaAUXDec-16 May-

34、17 Oct-17 Mar-18 Aug-18 Jan-19 Jun-19 Nov-19GreeMideaAUXNote: financials of AUXs A/C business is calculated by deducting data of its medical subsidiary (Sanxing Medical Electronic) under AUX group.* Notes: AUXs GPM is for the period ended 2019H1 Source: company data, UBSNote: financials of AUXs A/C

35、business is calculated by deducting data of its medical subsidiary (Sanxing Medical Electronic) under AUX group.Source: company data, UBSMidea and Grees incentives to further cut prices could be limitedThe price gap between Midea and AUX products has reached a low, making us believe further price cu

36、ts for Midea may risk its brand equity. While Gree will be in a better position to continue with price reductions given its price premium against Midea, Grees focus has shifted to channel restructuring, according to latest management strategies after the Hillhouse deal end of 2019, especially given

37、its widening market share gaps with Midea.Figure 15: Price gap between Midea and AUX has narrowed downPrice premium: Midea - AUX (online, RMB/unit A/C)1,0008006004002000(200)(400)Jan-15 May-15 Sep-15 Jan-16 May-16 Sep-16 Jan-17 May-17 Sep-17 Jan-18 May-18 Sep-18 Jan-19 May-19 Sep-19 Jan-20Source: AV

38、C, UBSFigure 16: Changes in market share for Media and AUX (volume, yoy)20%15%10%5%0%-5%-10%-15%-20%Jan-15 May-15 Sep-15 Jan-16 May-16 Sep-16 Jan-17 May-17 Sep-17 Jan-18 May-18 Sep-18 Jan-19 May-19 Sep-19 Jan-20Chg in Mideas market share yoy- onlineChg in AUXs market share yoy- online*Note: Positive

39、 value indicates the companys market share improved versus same period last year Source: AVC, UBSFigure 17: Price gap between Gree and Midea has widened1,400Price premium: Gree-Midea (RMB/unit A/C)1,2001,0008006004002000Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul

40、-16 Jan-17 Jul-17 Jan-18 Jul-18 Jan-19 Jul-19 Jan-20Source: CMM, UBSFigure 18: History of relative market share change: Grees share gain minus Mideas share gain20% Relative market share chg: Chg in Grees market share - Chg in Mideas market share15%10%5%0%-5%-10%-15%-20%Jan-11 Jul-11 Jan-12 Jul-12 Ja

41、n-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18 Jan-19 Jul-19 Jan-20*Note: Positive value represents Gree is gaining market from Midea Source: CMM, UBSIndustry channel inventory looks healthier than last destocking cycleCurrently the channel inventory is 4 months sa

42、les of volume, which is much lower than the 6-7 months during the 2014-2016 price war. We think the possibility of a severe industry-wide price war is very low, given the overall channel inventory is generally healthy compared with that of the previous price war.Figure 19: Channel inventory (months

43、of sales volume)Figure 20: Channel inventory (units)8.04,5004,0003,5003,0002,5002,0001,5001,00050007.06.05.04.03.02.01.02014/012014/052014/092015/012015/052015/092016/012016/052016/092017/012017/052017/092018/012018/052018/092019/012019/052019/092020/010.02014/012014/052014/092015/012015/052015/0920

44、16/012016/052016/092017/012017/052017/092018/012018/052018/092019/012019/052019/092020/01Months of InventoryInventory Estimation (10k)Source: ChinaIOL, AVC, UBSSource: ChinaIOL, AVC, UBSA three-year property completion upcycle since 2019 could translate into a full recovery from H220Home appliance v

45、olume growth outlookWe expect the overall home appliances shipment volume to resume growth in 2021, after a moderate decline in 2020, mainly driven by delayed demand due to COVID-19 and new demand from incremental property sold. Among sub-sectors, we think that kitchen appliances would benefit most

46、from the property upcycle in 2021 as new demand accounts for c70% of total volume sold. We forecast the home appliances sector to grow at -5%/11%/6% in 2019/20/21E.Unit:10k20132014201520162017201820192020E2021E2022E2023E2024E2025EA/C6,2316,9976,2876,0478,8759,2599,2158,3329,42910,33610,69510,99411,2

47、45Figure 21: Major appliance demand modelYoY, %9%12%-10%-4%47%4%0%-10%13%10%3%3%2%Replacement Demand50%55%45%22%59%18%54%56%56%58%60%61%63%New demand50%45%55%78%41%82%46%44%44%42%40%39%37%Inventory interruption3%5%-4%-15%3%6%0%-7%-2%3%2%1%1%Refrigerators5,5845,2984,8944,7314,4854,3114,3394,3044,5674

48、,6834,7754,8975,018YoY, %-1%-5%-8%-3%-5%-4%1%-1%6%3%2%3%2%Replacement Demand55%56%52%39%60%41%65%66%65%66%68%68%69%New demand45%44%48%61%40%59%35%34%35%34%32%32%31%Washing machine3,7693,7743,9054,1284,4144,5324,5054,3954,7644,8744,9825,0215,061YoY, %8%0%3%6%7%3%-1%-2%8%2%2%1%1%Replacement Demand48%4

49、6%50%42%60%58%76%74%73%75%77%80%82%New demand52%54%50%58%40%42%24%26%27%25%23%20%18%Hoods (10k set)1,5501,6681,5821,7961,8871,7931,7431,6961,9482,0652,1042,1412,177YoY (rhs, %)11%8%-5%13%5%-5%-3%-3%15%6%2%2%2%Replacement Demand28%16%30%1%16%-87%38%31%30%30%30%31%32%New demand72%84%70%99%84%187%62%69

50、%70%70%70%69%68%Total17,13417,73616,66816,70219,66219,89419,80218,72720,70921,95922,55623,05423,502YoY, %6%4%-6%0%18%1%0%-5%11%6%3%2%2%Source: ChinaIOL, UBS estimatesWe simplified our assumptions of incremental shipments as below. Take the 2021 A/C shipment forecast as an example, we assume the dela

51、yed demand due to COVID-19 (c7m units, 2019 total shipment of c92m*15% of Q1 share* 51% sales decline in Q120) would be met in 2021. Incremental demand from property market upcycle (c1.2m units, assume 2 units A/C per house) and rising penetration (c5m) also help the growth recovery, while the conti

52、nued channel destocking would lead to a -c2.3m shipment decline.Figure 22: Breakdown of A/C shipment changeFigure 23: Breakdown of fridge shipment changeA/C shipment volume change (10k)49412333493(705)705-2252805319-7-6051,5001,000500- (500)(1,000)(1,500)Fridge shipment volume change (10k)3005262681

53、50674748(150)2020E2021E2022E250200150-10050- (50)(100)(150)(200)2020E2021E2022EChannel inventory changePenetration, etc.Driven by property marketDelayed demand due to COVID-19Penetration, etc.Driven by property market Delayed demand due to COVID-19Source: ChinaIOL, UBS estimatesSource: ChinaIOL, UBS

54、 estimatesFigure 24: Breakdown of WM shipment changeFigure 25: Breakdown of hoods shipment changeWM shipment volume change (10k)500626828047(280)400300200100- (100)(200)(300)(400)674-8Hoods shipment volume change (10k)30016049432502001503-978377610050(160)- (50)(100)(150)(200)2020E2021E2022E2020E202

55、1E2022EPenetration, etc.Driven by property market Delayed demand due to COVID-19Penetration, etc.Driven by property market Delayed demand due to COVID-19Source: ChinaIOL, UBS estimatesSource: ChinaIOL, UBS estimatesProperty completion upcycle could translate into home appliance demand recoveryDespit

56、e the near-term interruptions, we reiterate our long-term positive view on the home appliances sector as a 3-year upcycle of China property completions (3%11%/8% for 2019/20/21E, UBSe) could drive shipment recovery for major appliance companies starting from H219.We note that residential completion

57、YoY growth has turned positive from September 2019 and grew even stronger in Q419. We think rising property growth could translate into sales recovery of home appliances in Q220, as property completion growth has historically moved ahead of home appliance sales by 6-9months. Despite the short-term i

58、nterruptions from the COVID-19 outbreak, we note property growth has resumed in March 2020, suggesting a trend that home appliance sales might be gradually picked up in the upcoming months when traffic restrictions are largely being removed.Figure 26: Property growth vs. A/C domestic shipment volume

59、 growthFigure 27: Residential completion YoY growth has picked up since Sep.2019, despite the COVID-19 interruptions50%40%30%20%10%0%-10%-20%2009201120132015201720192021EGFA completed YoY growthDomestic shipment volume YoY growth40%30%20%10%0%-10%-20%-30%-40%Jan-15 May-15 Sep-15 Jan-16 May-16 Sep-16

60、 Jan-17 May-17 Sep-17 Jan-18 May-18 Sep-18 Jan-19 May-19 Sep-19Jan-20Residential completionSource: ChinaIOL, National Bureau of Statistics (NBS), UBSSource: NBS, UBSCOVID-19 could lead to greater online penetration and industry consolidationUnder the COVID-19 impact, home appliance manufacturers hav