GLMS SEC Securities: Maintains "outperform market" rating on the air conditioning industry with stable domestic sales and high growth in foreign sales within three months.

GLMS SEC Securities issued a research report stating that the air conditioning industry maintains a "stronger than the overall market" rating. Domestic sales of air conditioners remained stable in March, with continued rapid growth in exports. Domestic policy support is gradually increasing, with substantial opportunities in overseas emerging markets and low tariff exposure. The leading companies are expected to perform well in the first quarter of 2025, with increased dividends and buybacks. The quality and dividends of stocks are expected to remain high. The replacement of old air conditioners with new ones is going as planned in 2025, and domestic demand is expected to boost expectations. The performance window in the first quarter report should be noted. Key points from GLMS SEC Securities report: March data on air conditioner production and sales released online In that month, the production of household air conditioners was 24.85 million units, up 13.94% year-on-year, and sales were 24.34 million units, up 8.54% year-on-year. Domestic sales were 12.78 million units, up 3.46% year-on-year, while exports were 11.57 million units, up 14.82% year-on-year. The end-of-period inventory was 17.26 million units, up 1.56% year-on-year. Among the companies, Gree's sales increased by 3.37% year-on-year (domestic +1.64%, exports +7.14%); Midea's sales increased by 5.43% year-on-year (domestic +1.54%, exports +9.38%); Haier increased by 12.61% year-on-year (domestic +5.88%, exports +31.67%); Hisense increased by 6.10% year-on-year (domestic -4.00%, exports +15.29%); Changhong increased by 53.06% year-on-year (domestic +61.29%, exports +38.89%); TCL increased by 6.40% year-on-year (domestic -5.00%, exports +11.76%). Domestic sales remained steady, in line with expectations. In March 2025, domestic sales of air conditioners increased by 3% year-on-year, reaching a new high for the same period, compared to +19%/+18% for the same period in 2023/2024. The growth rate remains steady, with an increase of 6% year-on-year in the first quarter compared to a CAGR of 10% in the same period in 2021. Overall, domestic sales of air conditioners in the first quarter were stable. In April, domestic sales continued to gain momentum as demand picked up, with exports up by 24% year-on-year in the fourth quarter of 2024, potentially creating a suction effect for future sales. Looking ahead, domestic sales of air conditioners in the second quarter of 2024 were down by 2% year-on-year, with declines of -1%/-16% in May and June, respectively. However, with declining base numbers at the terminal, policy-driven improvements are expected to drive increases in prices and demand, with the potential for growth in the mid-to-high-end market. Exports saw significant growth with manageable risks. Foreign sales of air conditioners in March increased by 15% year-on-year, with a cumulative increase of 24% in the first quarter, compared to 22% year-on-year in the first quarter of 2024, showing continued rapid growth and reaching a new high in scale. According to industry reports, production schedules for exports in April and May increased by 8% and 3% year-on-year, respectively. The U.S. accounts for less than 8% of total exports of household air conditioners in 2024, indicating a low tariff risk. The report predicts steady growth in foreign sales orders for the leading companies in the first quarter of 2025, with resilience shown amidst the implementation of tariffs in March. Looking ahead, air conditioner exports in the second to fourth quarters of 2024 are expected to increase by 39%, 38%, and 49% year-on-year, respectively. The report predicts a convergence of growth rates towards the mean, with continued contributions from emerging markets and OBM expansion. In March, Midea/Gree's exports of air conditioners increased by 9%/7% year-on-year, while Haier/Hisense/Changhong increased by 32%/15%/39% year-on-year, showing continued growth for second-tier manufacturers. Risk warnings: Policy implementation falling short of expectations, fluctuations in raw material prices and exchange rates, lower-than-expected foreign demand and tariff risks.