Intelligent Wave: Can Small Appliances Seize New Opportunities?

Driven by the wave of intelligence and trade-in programs, the home appliance industry is experiencing a new round of growth. As A-share listed companies gradually disclose their mid-year performance reports in August, many home appliance companies have shown impressive performance, presenting a positive growth trend.

Data shows that as of August 21st, a total of 23 home appliance companies have released their semi-annual reports, with 13 companies achieving year-on-year growth in net profit for the first half of the year. It is worth noting that with the continuous improvement of competitiveness in the global market for China's home appliance industry, many companies, including Shenzhen Chaori Co., Ltd. and TCL Smart Home, have indicated that their performance growth is attributed to the promotion of intelligence and trade-in policies in the first half of the year.

However, despite the overall industry's excellent performance, some small home appliance companies such as Beifangqingsong and Xiaoxiong Electric have faced many challenges in the past period. Although these companies have not yet disclosed their mid-year performance forecasts, the market is very concerned about whether they can break through against the trend in this round of growth.

The reporter tried to contact Beifangqingsong and Xiaoxiong Electric to learn more, but as of the time of publication, no further response has been received. Investors are generally concerned whether these small home appliance companies can achieve performance rebound under the promotion of intelligence and trade-in trends, which is also a major suspense in the future market trend.

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Many companies have good mid-year performance reports

The home appliance industry is undergoing a profound transformation towards intelligence, which is becoming the main driving force for performance growth. As representatives of the industry, TCL Smart Home and Shenzhen Chaori Co., Ltd. have significantly improved their performance through intelligent strategies.

Taking TCL Smart Home as an example, the company achieved a business income of 8.962 billion yuan in the first half of this year, a year-on-year increase of 24.74%; net profit reached 559 million yuan, a year-on-year increase of 32.65%. This indicates that the market demand for intelligent home appliance products is strong, especially in core product lines such as refrigerators, freezers, and washing machines, where the accelerated application of intelligence has played an important role in increasing revenue.

TCL Smart Home pointed out in its financial report that Hefei Home Appliance has made significant progress in cost control due to the comprehensive implementation of the intelligent factory project. By deeply integrating intelligent technology with refined operation strategies, Hefei Home Appliance has successfully achieved precise cost management and continuous reduction while ensuring product quality. In this process, Hefei Home Appliance has taken the cost management system as the core, actively implementing in-depth cost reduction and efficiency measures, covering all aspects of production process management, supplier collaboration, and inventory lean management. These measures have not only improved the company's operational efficiency but also consolidated the company's competitiveness in the market.

Similarly, Shenzhen Chaori Co., Ltd. has also achieved significant results in the fields of smart display and smart home networking. The company achieved a business income of 9.52 billion yuan in the first half of the year, a year-on-year increase of 23.07%; net profit was 911 million yuan, a year-on-year increase of 24.04%. This growth trend also reflects the strong market demand for smart home appliance products.

Shenzhen Chaori Co., Ltd. stated that the company will continue to plan ahead to ensure the balance between expansion and resource allocation, establish and improve management structures, systems, and models to continuously optimize organizational structure, strengthen internal control, and improve decision-making efficiency and resource integration effectiveness. Through the construction of information management, especially the collaborative functions of OA systems and SAP systems, Shenzhen Chaori Co., Ltd. has achieved standardization and intelligence of management, and promoted the improvement of autonomous operation and management capabilities of various subsidiaries by improving internal control and strengthening external control, so that the company's management level can adapt to the needs of rapid scale expansion.In reality, the growth in performance of several home appliance companies is backed by strong national policies. In March of this year, there was a clear proposal to promote the high-end, intelligent, and green development of industries. In the new round of "trade-in" policies, higher subsidies are provided for products that are more environmentally friendly and energy-efficient. Specifically, individual consumers can enjoy "trade-in" subsidies when purchasing eight types of home appliance products such as refrigerators, washing machines, televisions, air conditioners, computers, water heaters, household stoves, and range hoods that meet level 2 or above energy or water efficiency standards. The subsidy standard is 15% of the product's selling price; if purchasing products with level 1 or above energy or water efficiency standards, an additional 5% subsidy can be obtained.

With the implementation of these policies, home appliance product sales have noticeably recovered, and the sales of home products such as furniture and decorative materials have also generally improved, driving the sales growth of related manufacturing industries. The latest VAT invoice data from the State Taxation Administration shows that from April to July, the sales revenue of the daily home appliance retail industry, including refrigerators, and the home audio-visual equipment retail industry, including televisions, increased by 4.4% and 3.5% year-on-year, respectively, with growth rates increasing by 4.8 and 10.1 percentage points compared to March. This growth trend has further been transmitted to the production side, driving the increase in sales revenue of the television, audio equipment, lighting devices, and refrigeration and air conditioning equipment manufacturing industries. During the same period, the sales revenue of the furniture and sanitary ware retail industries increased by 9.9% and 14.3% year-on-year, respectively, with growth rates increasing by 9.3% and 24.9% compared to March.

Some companies face performance differentiation. Although many home appliance companies have performed well, some small home appliance companies such as Beishufang and Xiaoxiong Electric are facing the challenge of performance differentiation, which is worth paying attention to. Beishufang achieved a revenue of 1.257 billion yuan in 2023, and although it experienced a significant decline in 2022, its revenue rebounded to a level close to that of 2021, with a year-on-year increase of 42.3%. However, despite the recovery in revenue, Beishufang still failed to escape the predicament of losses, with a net loss attributable to the parent company of 51 million yuan in 2023. Although the loss has narrowed, the pressure to make a profit still exists.

Entering 2024, Beishufang's performance has improved, with a revenue of 293 million yuan in the first quarter, a year-on-year increase of 28.59%, and successfully turning losses into profits, achieving a net profit attributable to the parent company of 16 million yuan. However, such performance has not had a significant impact on the stock price. As of August 22, 2024, the company's stock price was 30.88 yuan per share, with a market value of 2.7 billion yuan.

It is worth noting that the progress of Beishufang's listed fundraising projects has been slow, with multiple delays. Among them, the cumulative investment progress of the marketing network construction project is 84.69%, which has been postponed to December 2024. This project was originally planned to set up 248 new direct stores nationwide, but given the continuous reduction of Beishufang's direct stores in recent years, even with half a year left, achieving this goal is still full of challenges. The progress of the R&D center upgrade project and the information technology upgrade project is only 29.37% and 29.99%, respectively, with only four months left until the scheduled completion date in December 2024. Whether Beishufang can complete it on time remains to be seen.The performance of Bear Electric Appliances is also a cause for concern.

As the "first stock of creative small household appliances," Bear Electric Appliances enjoyed a period of glory after its listing in 2019. In 2023, the company achieved a revenue of 4.712 billion yuan, a year-on-year increase of 14.43%; net profit was 445 million yuan, a year-on-year increase of 15.24%. However, in the first quarter of 2024, both the revenue and net profit of Bear Electric Appliances declined, with 1.194 billion yuan and 151 million yuan respectively, a year-on-year decrease of 4.58% and 8.53%. In addition, the net cash flow from operating activities was 129 million yuan, a year-on-year decline of 38.57%.

Fangzheng Securities analysis believes that the decline in Bear Electric Appliances' performance in the first quarter was mainly affected by the high base in 2023 and the fierce competition between e-commerce platforms and manufacturers.

In the past, Bear Electric Appliances quickly opened up the market with differentiated positioning and strong online channel marketing, and achieved rapid growth by leveraging the trend of creative small household appliances. However, as market competition intensifies, Bear Electric Appliances has gradually entered the traditional home appliance field such as washing machines, competing with white goods giants and personal care appliance leaders. In this more intense market competition, whether Bear Electric Appliances can drive the overall performance to rebound with these new businesses still needs close attention.

In addition, the industrial upgrading of domestic home appliance companies still faces many challenges. Senior industry observer Liang Zhenpeng pointed out that the current home appliance industry has development bottlenecks in aspects such as technology research and development and innovation capabilities, supply chain management, and product homogenization. Liang Zhenpeng suggested that home appliance companies should increase investment in technology research and development, improve independent innovation capabilities, and develop more competitive intelligent products. At the same time, companies need to strengthen cooperation with suppliers to improve the stability and efficiency of the supply chain. In addition, focusing on product differentiation and brand building is also a focus that companies should pay attention to, attracting more consumers by developing unique products and improving brand image.

Liang Zhenpeng summarized: "Solving the development bottlenecks of home appliance industry upgrading requires the joint efforts of the government, enterprises, and all sectors of society. By strengthening cooperation and innovation, we can promote the sustainable and healthy development of the home appliance industry."