2026-01-14 05:05Summary of Conference Call on China Consumer Durables Industry Overview - Industry: China Consumer Durables - Outlook for 2026: Weaker growth in the domestic market is anticipated, while overseas demand is expected to remain resilient. The forecast includes a -1% growth in consumer appliances, supported by a Rmb75 billion trade-in subsidy assumption for 2026E [1][8][38]. Key Points and Arguments Domestic Market Dynamics - Trade-in Policy: The trade-in policy for 2026 is expected to be smaller in scale, covering only 6 categories compared to 12 in 2025, with reduced subsidy amounts [8][34]. The anticipated total subsidy is around Rmb250 billion, which is lower than previous expectations [9][38]. - Consumer Spending: Despite concerns over a slowdown, healthy consumer spending growth is expected in key overseas markets, particularly the US, which is forecasted to grow by 2.2% in 2026 [12][52]. - Pricing Competition: Competition is expected to ease slightly in 2026 due to a focus on profitability and rising material costs, which may support margins [10][39]. Company-Specific Insights - Midea: - Rated as a "Buy" due to its resilience and limited downside risk. Expected revenue/profit growth of 7%/8% in 2026E, with a target price of Rmb98 [6][18]. - Anticipated to benefit from overseas market growth and emerging business opportunities [6][16]. - Roborock: - Upgraded to "Buy" as it is expected to enter a phase of fast profit growth starting Q1 2026, with a forecast of 17% revenue growth and 59% profit growth in 2026E. Target price set at Rmb210 [3][19]. - Focus on new product expansion and market share gain, particularly in Europe and less penetrated markets [7][19]. - Jason Furniture: - Downgraded to "Neutral" due to balanced risk-reward in valuation. Expected revenue/profit growth of 4%/6% in 2026E, with a target price of Rmb32 [3][20]. Market Trends and Risks - Consumer Appliances: The overall consumer appliances market is expected to see a mild decline in demand, with specific categories like split ACs facing the most significant impact from reduced trade-in support [30][36]. - Material Costs: Rising copper prices pose a risk to margins, particularly for HVAC products, which are significantly affected by material costs [14][70]. However, companies are exploring alternatives like "Aluminum for Copper" to mitigate these risks [73]. - Overseas Demand: Despite moderated growth, overseas markets remain critical for revenue, with expectations for continued resource allocation towards international expansion [46][51]. Emerging Opportunities - New Product Development: Companies are actively developing new products in robotics and AI, which may serve as mid/long-term growth drivers [65][66]. Innovations in robotic vacuum cleaners and humanoid robots are highlighted as potential future revenue contributors [68][69]. Conclusion The China consumer durables market is navigating a complex landscape with a mix of challenges and opportunities. Companies like Midea and Roborock are positioned favorably for growth, particularly in overseas markets, while the domestic market faces headwinds from reduced trade-in subsidies and pricing competition. The focus on innovation and new product development may provide additional avenues for growth in the coming years.