Guolian Minsheng Securities: Improvement in domestic demand combined with bottoming profits emphasizes the investment value of the kitchen small appliances sector

According to the Zhitong Finance APP, Guolian Minsheng Securities released a research report stating that the kitchen small appliance industry is expected to continue its recovery, and listed companies' expansion into new categories will still provide revenue growth; at the same time, industry competition is expected to ease and return to rationality, with traditional e-commerce price recovery and Douyin channel profitability also expected to improve, leading to a restoration of profitability for various small appliance brands. Against this backdrop, the firm suggests paying attention to investment opportunities in the kitchen small appliance sector, recommending brands with outstanding elasticity and visible turning points such as BEAR APPLIANCE and FLYCO, as well as SUPOR, which has maintained relatively stable fundamentals and emphasizes shareholder returns with continuous high dividends.

Guolian Minsheng Securities' main viewpoints are as follows:

Domestic sales stabilize and improve, national subsidies boost demand

After experiencing high growth driven by the home stay effect in 2020, the demand for kitchen small appliances has remained subdued, with the scale primarily consolidating; among them, from 2020 to 2022, the home scenario drove industry scale growth, with demand surging in 2020 due to the home stay effect, a decline in scale in 2021 due to a high base effect, and a return to growth in 2022; from 2023 to 2024, the industry continues to decline. In the context of a relatively mature industry, the overall industry is significantly affected by economic cycles and consumer sentiment due to a lack of rapidly expanding blockbuster products, compounded by previous overdrafts. However, since Q4 2024, with a lower base, the industry has begun to see improvements, and with the continuation of national subsidy policies, sustained recovery is expected in 2025.

Accelerated cross-industry development by enterprises, incremental growth expected

From the perspective of listed companies, each company is actively exploring new categories, which has become the main incremental revenue source over the past five years; among them, SUPOR began disclosing revenue from "other appliances" in 2021, becoming one of the main increments from 2021 to 2024; BEAR APPLIANCE has not significantly expanded its kitchen small appliance scale from 2020 to 2024, while other categories and small household appliances have achieved continuous growth. When choosing expansion directions, personal care and maternal and infant categories have become common choices, with their respective shares in SUPOR and BEAR APPLIANCE's online sales increasing. Looking ahead, expansion in other categories will still provide increments; combined with demand recovery driven by national subsidies in 2025, revenue growth recovery for listed companies is expected.

Competition becomes rational, stable profitability expected

The firm expects that by 2025, traditional e-commerce platforms will no longer dominate low-price competition, and the average price in the kitchen small appliance industry is expected to stabilize and rebound; at the same time, the Douyin channel launched a business environment improvement plan at the beginning of the year, and the profitability of brands on the Douyin channel is expected to improve. Additionally, on the brand side, in Q1 2025, Midea's market share has returned to the starting point of 2020, making further intensification of competition less likely; moreover, Xiaomi's rapid short-term share increase has drawn attention, but its overall share is low and category coverage is limited, so competition interference is expected to be minimal. Overall, from the perspectives of channels and brands, competition may become rational, and combined with the extremely low profit margin base of some kitchen small appliance companies in 2024, profitability improvement is expected.

Risk warnings: 1. Terminal demand significantly below expectations; 2. Significant intensification of industry competition; 3. Significant fluctuations in raw material prices