According to the Zhitong Finance APP, China International Capital Corporation (CICC) released a research report stating that the low base in the home appliance industry in Q4 2024, combined with national subsidy policies, shows a recovery trend in industry demand, with the scope of national subsidies further expanding in Q1 2025. According to AVC, the online retail sales in Q4 2024/Q1 2025 increased by 8%/6% year-on-year, with retail volume remaining basically flat, mainly driven by price. Driven by the old-for-new policy in home appliances and the low base effect, it is expected that the demand for small home appliances will continue to recover this year. Against this backdrop, industry competition is easing, companies are focusing on high-quality development, the average price in the industry is further recovering, and the reduction of platform fees alleviates pressure on companies. Overall, it is expected that the profitability of small home appliance companies may significantly improve.
<h2>CICC's main viewpoints are as follows:</h2>
Low base combined with national subsidies, moderate recovery in small home appliance demand
Before 2020, the kitchen small home appliance industry maintained steady growth every year, with a CAGR of 7% in online retail sales from 2016 to 2019. During the pandemic in 2020, the online shift of small home appliances accelerated, catalyzing home demand, and the small home appliance industry experienced a highlight moment, with the revenues of BEAR APPLIANCE, BODUM, and Xinbao increasing by 36%/27%/67% year-on-year, respectively. Subsequently, the small home appliance industry entered a plateau period. Although new categories such as air fryers and coffee machines brought some growth in the short term, the overall industry remained weak due to macroeconomic influences. In Q4 2024, the low base combined with national subsidy policies shows a recovery trend in industry demand, with the scope of national subsidies further expanding in Q1 2025. According to AVC, the online retail sales in Q4 2024/Q1 2025 increased by 8%/6% year-on-year, with retail volume remaining basically flat, mainly driven by price.
Dawn moment, profitability turning point emerging
CICC believes that companies should focus on improving profitability. Against the backdrop of moderate demand recovery, the easing of price wars and structural improvements ensure stable gross margins, while platform fee reductions and cost control lower expense ratios, ultimately leading to the restoration of company profitability. Small home appliance companies had a relatively low base in the early stages, and the resonance between the industry and themselves brings about a performance turning point. It is expected that the improvement in profits will be better than that in revenues, with BEAR APPLIANCE, BODUM, Joyoung, and Flyco showing significant low base effects. BEAR APPLIANCE's net profit margin in Q4 2024/Q1 2025 increased by 4.8/2.9 ppt quarter-on-quarter, BODUM's net profit margin increased by 8.6/3.3 ppt quarter-on-quarter, indicating that the profitability turning point has already appeared.
Ready to go, seeking a second growth curve to break through difficulties
CICC analyzed the strategies of various companies based on the Ansoff Matrix: 1) Market penetration strategy, targeting segmented groups. For example, in the case of maternal and infant small home appliances, BEAR APPLIANCE's business has shown remarkable growth, achieving revenue of 250 million yuan in 2024 (up 31.8% year-on-year). 2) Product development strategy, technological innovation, and scenario-based. The Dongling electric steamer adopts the instant heating boiler technology from coffee machines to achieve rapid steaming, significantly increasing product prices. Derma launched a countertop water purifier that can quickly produce cold water and make ice cubes for drinking scenarios, overtaking competitors in this category.
3) Market development strategy, expanding overseas markets. In 2024, BEAR APPLIANCE, BODUM, and Derma's overseas business revenues increased by 81%/95%/20% year-on-year, respectively, but currently, overseas channels account for a relatively low proportion of revenue in each company and are in a rapid development stage
4) Diversified operations and expansion into new categories. SUPOR is actively expanding into categories such as large kitchen appliances, household appliances, cleaning appliances, personal care small appliances, and mother and baby small appliances. The company's other home appliance revenue is expected to grow at a CAGR of 13% from 2020 to 2024.
Target aspects
The improvement in the company's profitability brings performance elasticity. We recommend small appliance companies with lower year-on-year profit margins such as BEAR APPLIANCE (002959.SZ), Feike Electric (603868.SH), and Derma (301332.SZ). We also recommend the high-dividend industry leader SUPOR (002032.SZ), which has stable operations across cycles. The water purification industry chain targets also include Viomi Technology (VIOT.US).
Risk factors
Risks of intensified market competition; risks of market demand fluctuations; risks of raw material price fluctuations

002959

002705

002032

002242

CICC released a research report indicating that due to the impact of the home appliance trade-in policy and the low base effect, the demand for the small home appliance industry is expected to continue to recover in the fourth quarter of 2024 and the first quarter of 2025. Online retail sales are projected to grow by 8% and 6% year-on-year, mainly driven by price. Industry competition is easing, and companies are focusing on high-quality development, with profitability expected to improve, especially for companies like BEAR APPLIANCE and Bedi

Zhitong

BEAR APPLIANCE

Xinbao Electrical Appliances Holdings

SUPOR

Joyoung

Viomi Tech

FLYCO

CICC: Low base combined with national subsidies, the demand for small home appliances industry is expected to continue its recovery trend this year