Domestic demand is solid and export growth is improving. In the domestic market, the total retail sales of consumer goods such as household appliances and audio-visual equipment in December was 77.25 billion billion yuan, down 0.1 percent from the same period last year, greatly promoting the concentrated release of consumption and returning domestic demand to normal. January-December 2023 Home Electricity Agency zero 871.9 billion yuan, a slight increase of 0.5 percent year-on-year, the overall recovery is slightly weak. In terms of exports, China exported 3.717 billion sets of electrical appliances from January to December 2023, an increase of 11.2 percent over the same period last year, and the growth rate has continued to expand since May 2023; the cumulative export amount reached 87.778 billion billion US dollars, an increase of 3.8 percent over the same period last year, and the demand for terminal replenishment in overseas markets rebounded. Home appliance exports maintained a good momentum.

ice wash export performance is strong, white electricity production and sales off-season is not light. Industry online data show that 13.4345 million units of household air conditioners were sold in December 2023, up 16% year-on-year, of which 6.108 million units were sold domestically, up 6.8 year-on-year. The waste heat of festival promotion led to an improvement in domestic demand. Export shipments of 7.3265 million units, up 25.06 year-on-year, continued to be strong at the export end, giving strong support to the overall air conditioner. Washing machine sales in December were 6.891 million units, up 15.93 percent year-on-year, with domestic and foreign sales of 374.08 and 3.15 million units, up 2.11 percent and 38.13 percent year-on-year, respectively. Ice box sales in December were 7.432 million units, up 29.39 percent year-on-year, with domestic and foreign sales of 3.724 million units and 3.708 million units, up 9.11 percent and 59.12 percent year-on-year, respectively.

home appliance sector by virtue of valuation cost-effective, fundamental improvement and high dividend advantages, in the market shock adjustment stage to show strong toughness. In January 2024, the home appliance index SW fell 1.96 percent, the yield ranked fifth in the first-tier industry, the performance is stronger than the CSI 300 index (-6.29 percent), in the market shock down stage, high dividends have certain defensive attributes highlighted, home appliance sector favored by funds, showing strong toughness. As of January 31, the industry price-to-earnings ratio (TTM) was 12.99 times, lower than the historical average from 2008 to the present (17.92 times), and the sector valuation was -22.59% higher than the overall premium rate of A shares (excluding bank shares), highlighting the allocation value.

investment advice: with the real estate end to improve the bottom and promote consumption policy gradually force, home appliance domestic demand is expected to be supported, superimposed on the impact of festival promotion waste heat, to help the release of home appliance consumption vitality. Overseas inventories are gradually de-stocked, and the improvement in exports is expected to continue. In terms of valuation, sector valuations remain low and the margin of safety is high. It is suggested to pay attention to the three main investment lines. 1. is expected to benefit from the white power leader with improved exports. Midea Group (000333.SZ) and Haier Zhijia (600690.SH) are recommended. 2. is expected to benefit from the improvement of real estate marginal kitchen electricity, recommend boss electrical appliances (002508.SZ); 3. domestic and foreign festival promotion to drive the recovery of clean electrical appliances, recommend stone technology (688169.SH).

risk tips: the risk of demand improvement is less than expected, the risk of raw material price changes, the risk of real estate recovery is less than expected, and the risk of uncertainty in home appliance exports.