Summary of the China Consumer Appliances Sector Conference Call Industry Overview - **Industry**: China Consumer Appliances Sector - **Focus**: White goods, specifically air conditioners (AC), washing machines (WM), and refrigerators Key Points from the Expert Call 1. **4Q25 Shipment Revisions**: - Shipments for AC, WM, and fridges have been revised down to -20%, -1%, and -3% year-over-year (YoY) respectively. - This decline is attributed to weak domestic demand due to fading trade-in subsidies, a high base from 4Q24, and rising copper prices [3][4]. 2. **Domestic Subsidies Outlook**: - There are diverging opinions on whether domestic trade-in subsidies will be extended into 2026. - Some experts believe extensions are likely due to unreleased replacement demand and the 2027 recycling target, while others argue for an end to subsidies due to diminishing impacts and low availability in the second half of 2025 [3][4]. 3. **2026 Domestic Shipment Forecast**: - Expected changes in shipments with subsidies: AC -2.0%, WM +1.9%, fridge -1.5% YoY. - Without subsidies, the forecast is: AC -5.4%, WM -2.2%, fridge -4.1% YoY. - The outlook is lower than previous forecasts due to recent cuts in 2025 shipment numbers. - The demand for WM is expected to remain stronger than for refrigerators in 2026, influenced by product upgrades and previous demand pull-forward during COVID [4]. 4. **Overseas Market Outlook**: - Global white goods volume is expected to grow by 1.5% YoY in 2026, with specific growth rates for AC, WM, and fridges at +2.5%, +1.2%, and +0.5% YoY respectively, assuming stable US tariffs. - Chinese export volumes for AC, WM, and fridges are projected to decline by -4.0%, +0.2%, and -4.3% YoY due to rising overseas capacities and high US tariffs. - Key export markets for China in 2026 include Latin America, Africa, Indonesia, and Japan, although increased production capacities in Southeast Asia may reduce reliance on Chinese exports [4]. Stock Implications - **Caution on Sector**: The outlook for the China home appliance sector is cautious due to a post-subsidy down-cycle expected from Q3 2025 to 2027, with intensified competition. - **Preferred Stocks**: Midea and Haier are favored for their overseas growth potential and strong defensiveness, while Gree is viewed with caution as it is primarily a domestic AC player [5]. Risks Identified - **Sector Risks**: - Risks include a downturn in the property market affecting demand, elevated raw material prices, and global supply chain constraints impacting exports [7]. - **Company-Specific Risks**: - **Gree**: Risks include reduced demand due to property policy tightening, rising raw material prices, foreign exchange losses, increased competition, and lower-than-expected dividends [8]. - **Midea**: Risks include tighter property market policies, RMB exchange rate fluctuations, and slowing growth in the global robot market [9]. - **Haier**: Risks include declining refrigerator demand, slow adoption of smart appliances, and high raw material costs [9]. This summary encapsulates the key insights and forecasts from the conference call regarding the China consumer appliances sector, highlighting both opportunities and risks for investors.

Summary of Conference Call Notes on China Appliances Industry Industry Overview - The Chinese appliance market exhibited mixed dynamics in the first half of the year, with Q1 showing strong performance due to domestic subsidies and export pull-forward, while April data indicated a moderation in growth as exports flattened from Q1's growth [1][2][3]. - Q2 projections remain positive for overall air conditioning (AC) shipment growth, with a forecasted 9% increase, driven by a 17% growth in domestic shipments, despite a 1% decline in exports [3][4]. Key Company Insights Midea - Midea's revenue grew by 20.5% YoY in Q1, driven by domestic subsidies and export front-loading. However, growth is expected to decelerate to 4-5% for the remainder of the year [18]. - Forecasted revenue growth for Midea is approximately 9% in 2025, with home appliances contributing 66% of revenue, expected to grow by 8% [19]. - The company is focusing on energy solutions and industrial technology, with a projected 15% revenue growth in these segments [19]. - Midea's operating profit margin (OPM) is expected to dilute as it grows lower-margin businesses faster, with a forecasted OPM of 11% in 2024 [19][24]. Gree - Gree is expected to grow its topline by 6.5% YoY in 2025, but is likely to face challenges from softening domestic demand in the second half of 2025 as national trade-in subsidy programs taper off [8]. - The company’s topline growth is projected to decelerate significantly to 3.5% YoY in 2H25, underperforming industry peers [8]. Haier - Haier is projected to grow its topline by 7.4% YoY in 2025, with earnings expected to increase by 13.7% YoY, driven by growth in overseas markets, particularly in emerging markets [7]. - The target price for Haier is set at 28 RMB, indicating a potential upside of 5-6% [7]. Market Dynamics - Domestic sell-through growth is primarily volume-driven, with significant increases in both offline (20%) and online (45%) sales volumes, despite modest average selling price (ASP) growth of 3% [4]. - Intense pricing competition is noted in the entry-level segment, with manufacturers like Midea implementing price cuts of 5% across their online portfolio and targeting deeper reductions of 10-20% on specific entry-level products [4]. - The overall market remains value-conscious, with consumers showing a preference for premium SKUs due to national trade-in subsidy programs [4]. Production and Shipment Insights - April data indicated a cooling trend in AC shipments, with only 3% growth compared to 16% in Q1, driven by a flattening of exports [3][12]. - The production plans for Q2 indicate a 7% growth in domestic shipments for Midea, while exports are expected to remain flat or decline [18]. - The overall industry shipment data for ACs shows a YoY growth of 18% in Q1, with a projected 9% growth in Q2 [12]. Investment Implications - The investment outlook for Midea, Haier, and Gree is maintained at Market-Perform, reflecting cautious optimism amid mixed market dynamics and competitive pressures [11]. Additional Insights - The robotics and automation segment is expected to grow, with Midea positioned to benefit from potential growth in humanoid robotics manufacturing [6]. - Midea's long-term model forecasts a revenue compound annual growth rate (CAGR) of 7.7% and earnings CAGR of 9.1% from 2024 to 2029 [20]. This summary encapsulates the key points from the conference call regarding the Chinese appliances industry and the performance outlook for major companies within the sector.