Zhongjin: Domestic sales of air conditioners in 1Q25 have been increasing gradually, focusing on companies that may benefit from potential stimulation of domestic demand.

CICC released a research report stating that according to data from the industry online, the domestic sales volume of household air conditioners in March 2024 was 12.78 million units, an increase of 3.5% year-on-year; the export sales volume was 11.57 million units, an increase of 14.8% year-on-year. The domestic sales volume of household air conditioners in 1Q25 was 27.35 million units, an increase of 6.2% year-on-year; the export sales volume was 31.52 million units, an increase of 24.5% year-on-year. Recommendations include: 1) Companies with high domestic sales ratios may benefit from potential domestic demand stimulus; 2) Companies with relatively favorable capacity layout may benefit from the imposition of tariffs; 3) Companies with limited impact from tariffs and whose stock prices may have been wrongly affected by sentiment. CICC's main points are as follows: 1Q25 domestic sales showed steady growth from a high base, with positive production scheduling in the future 1) Shipping end: In 1Q25, the domestic sales volume of air conditioners increased by 6% year-on-year (1Q23/1Q24 both increased by 17% year-on-year), with a 3.5% year-on-year increase in March, achieving steady growth from a high base. Compared to the same period in 2021, the CAGR of 1Q25/3M25 domestic sales volume was +10%/+11%. Low channel inventory ensures steady growth in sales. 2) Retail end: AVC data shows that in 1Q25, online/offline retail sales volumes of air conditioners increased by 6%/10% year-on-year, with improved online sales in March due to subsidy landing pace and short-term syphoning effect at the end of 24. 3) Production scheduling: Industry online data shows that domestic air conditioner production scheduling in 4-6 months increased by 9%/17%/31% year-on-year. The bank expects that under the drive of a low base in the same period and the peak season, domestic sales volume will show significant elasticity. The overall situation is relatively stable, with some fluctuations in retail prices 1) Domestic sales pattern: In 1Q25, Midea, Gree, Haier's domestic sales volume shares were 27.2%/24.5%/13.1%, with year-on-year changes of -0.7/-0.9/+0.1ppt; Hisense, TCL, Aux, Changhong's domestic market shares were 6.0%/5.7%/7.6%/8.0%, with year-on-year changes of +0.1/-0.1/+0.3/+2.8ppt, Changhong benefited significantly from the growth of Xiaomi's air conditioner business. Xiaomi's online retail volume/average price in 1Q25 increased by 49%/25% year-on-year, and the bank estimated that the change in average price was mainly due to the adjustment of structural proportions. 2) Retail performance since 2025 has been relatively flat, with major brands making flexible adjustments in pricing strategies. Recently, air conditioning leaders have paid more attention to cost-effective air conditioner sub-brands, and Gree has also launched the "Jinghong" sub-brand. The average price of air conditioners in 1Q25 fell somewhat compared to 4Q24, with AVC's cumulative data for the first 15 weeks (0101-0413) showing year-on-year changes of -3%/+3% for online/offline prices. There were "export rush" effects in 1Q25. 1) Shipping end, the export sales volume of air conditioners in 1Q25 increased by 25% year-on-year, and overall continued to grow at a high rate, with a 15% year-on-year increase in March, better than the previous production plan (+10%), but the bank estimates that some export orders affected by tariffs may have been shipped early. 2) In terms of production scheduling, according to the latest feedback from the industry online, North American customers have successively canceled or temporarily suspended orders for shipments from China, and the bank estimates that most companies will reduce their export production scheduling in 2Q24. 3) From a global perspective, although the North American market faces short-term pressure on demand, the penetration rate of white goods in emerging markets is still increasing, with higher demand certainty. Major industry leaders have limited exposure to the US's revenue, and the bank expects that the demand in emerging markets will become a major driver for air conditioner exports. Risk Risk of overdrawn terminal demand; risk of external tariffs; risk of intensified market competition.