In the past 15 years, the price increase cycle of raw materials is mainly from 2009 to 2011, 2016 to 2018 and 2020 to now. During the price increase period, the gross profit margin of the enterprise is damaged, and the overall impact on the net profit margin is less than the gross profit margin. According to the price of major bulk raw materials tracked, it can be found that the year-on-year sharp growth cycle of each raw material price is concentrated in three stages: the first stage is 2009q4-2011q3, the second stage is 2016q4-2018q2, and the third stage is 2020q4 to now. In order to facilitate the analysis, we build the price increase index of home appliance raw materials according to the proportion of bulk raw materials of home appliance products, and draw the following conclusions: 1) the number of year-on-year changes of gross profit margin of listed companies basically changes in the opposite direction of the price increase index of home appliance raw materials, and the gross profit margin of enterprises is damaged during the sharp price increase of raw materials, The recovery of gross profit margin can be realized when the price rise of raw materials slows down and even the price of raw materials is stable. 2) From the perspective of gross profit margin, although many white power leading enterprises are affected by the rise of raw material prices to varying degrees, from the perspective of net profit margin, the overall net profit margin of each company is far less affected than the gross profit margin.
The leader has strong cost control ability and upstream and downstream bargaining power to ensure that its impact on final profitability will be mitigated under the impact of raw material prices, and even some enterprises can still improve the net interest rate in the range of raw material price rise. We believe that the reason why Baidian leader can realize the gradual recovery of gross profit margin after the rise of raw materials is mainly due to the oligopoly pattern, which gives Baidian leader a strong voice in the industrial chain. Baidian leader has strong upstream and downstream bargaining power and can transfer part of the price increase pressure to the upstream and downstream. From the perspective of the average price of terminal products, during the last round of price increase, the prices of major white electricity terminals increased to varying degrees. The rhythm of product price increase (the price increase was obvious in early 2017) slightly lagged behind that of raw material price increase (the price of raw materials rose sharply in the second half of 2016). The rise of product terminal prices and the improvement of product structure eased the pressure of rising raw material costs, In recent years, it has driven the gradual improvement of enterprise gross profit margin.
How to view the impact of this rise in raw material prices on the profitability of household appliance enterprises? Since 2020q4, the prices of bulk raw materials including aluminum, copper, steel and plastics have increased significantly. From the perspective of quarterly average prices, 21q2 and 21q3 have the most obvious increases. 21q2 has increased by 43%, 60%, 33% and 65% year-on-year respectively, and 21q3 has increased by 40%, 35%, 34% and 39% year-on-year respectively. In 2022, the year-on-year price changes are 36%, 13%, 7% and – 14% respectively. Among them, the price of aluminum is still rising sharply, while the rise of copper and steel is slowing down, and the price of plastics has a downward trend. Similar to history, the rise in the price of raw materials is still accompanied by the increase in the average price of end products. Compared with the increase range of the average price of products in the price rise cycle of raw materials in 2017, the average increase range of the annual average price of air conditioner, refrigerator and washing machine in 2017 was 6%, 14% and 11% respectively. During the rise period of raw materials, the annual average price of air conditioner, refrigerator and washing machine in 2021 increased by 9%, 15% and 11% respectively. In 2022, although the price rise of raw materials has slowed down, the average price of white power is still rising due to the optimization of product structure. In January, the average price of air conditioners, refrigerators and washing machines increased by 8%, 7% and 12% respectively. The industry responded to the cost rise by raising the price of terminals. Therefore, we believe that although the price fluctuation of raw materials has a certain impact on the company’s profits in the short term, there is no need to worry about it in the long term, Optimistic about the subsequent recovery of enterprise profitability.
Investment advice. In the short term, the spread of the epidemic in China may further curb consumer demand. On the basis of the high overseas base, the uncertainty of demand caused by the conflict between Russia and Ukraine is superimposed. Under the background of the rise in the price of raw materials, the profitability is under pressure. Recently, the PE valuation level of leading enterprises in the household appliance sector has been reduced to a lower quantile level. In the long term, the household appliance leaders have high investment value. For a long time, we continue to be optimistic about the industry repair brought by the recovery of demand and the upgrading of white power enterprises to high-end manufacturing, and continue to recommend Haier Smart Home Co.Ltd(600690) , Midea Group Co.Ltd(000333) , Gree Electric Appliances Inc.Of Zhuhai(000651) .
Risk warning. The terminal demand is lower than expected.
