The recent depreciation of RMB exchange rate is good for the fundamentals of home appliance industry: the recent rapid depreciation of RMB exchange rate. From April 18 to 22, 2022, the spot exchange rate of US dollar against RMB rose from 6.370 to 6.488, and the depreciation rate of RMB in one week was 1.8%. We believe that the depreciation of RMB will benefit the household appliance sector from three aspects: income profit and loss, exchange profit and loss and long-term international competitiveness, and quantify its impact.
The devaluation of RMB will boost the income and gross profit margin: the order income of household appliance export enterprises is mostly denominated in US dollars. During the appreciation of the US dollar, the export revenue of enterprises will increase after their export orders are converted into RMB. As the cost of raw materials is mostly priced in RMB, the gross profit margin of export business will also increase. Therefore, the increase in export revenue and gross profit margin brought about by the depreciation of RMB has made a significant contribution to the performance of enterprises with a high proportion of export sales. According to our calculation, the increase of income and gross profit margin to the performance growth rate of enterprises accounting for more than 70% of export revenue in 2022 is basically more than 10PCT. The enterprises whose revenue and gross profit margin increase the most in 2022 include Zhejiang Haers Vacuum Containers Co.Ltd(002615) (21.9%), Kingclean Electric Co.Ltd(603355) (12.9%), Guangdong Xinbao Electrical Appliances Holdings Co.Ltd(002705) (12.4%).
The devaluation of RMB will bring exchange gains: most household appliance export enterprises hold foreign currency monetary items. Foreign currency monetary items shall be converted into RMB at the current exchange rate at the end of the period and at the beginning of the period. The difference generated is exchange gain or loss and included in financial expenses. The depreciation of RMB exchange rate will increase the value of US dollar assets of household appliance enterprises, and then increase exchange earnings. Therefore, home appliance enterprises with more assets such as US dollars will benefit from the depreciation of the RMB exchange rate. We calculate that the impact of exchange earnings on the performance growth of export-oriented household appliance enterprises in 2022 is basically below 5pct. Exchange gains have the greatest impact on the performance growth of Kingclean Electric Co.Ltd(603355) (13.9%), Fujia shares (4.3%) and Biyi shares (4.3%) in 2022.
The international competitiveness of Chinese household appliance enterprises is expected to continue to improve: China’s household appliance supply chain has global leading advantages in R & D and design, manufacturing cost and response speed. In the long run, if the RMB exchange rate continues to decline, it will help to improve the price competitiveness of China’s home appliance export products and drive the steady growth of export orders of home appliance enterprises.
Investment suggestion: RMB devaluation and US tariff exemption will benefit the export of home appliances. The objects that benefit greatly include: Guangdong Xinbao Electrical Appliances Holdings Co.Ltd(002705) , Shenzhen Fenda Technology Co.Ltd(002681) , Shenzhen H&T Intelligent Control Co.Ltd(002402) , Xiamen Comfort Science & Technology Group Co.Ltd(002614) , Yindu Kitchen Equipment Co.Ltd(603277) , Zhejiang Haers Vacuum Containers Co.Ltd(002615) , Kingclean Electric Co.Ltd(603355) , Fujia shares and Biyi shares. In addition, the dividends of China’s high-end consumption and brand going to sea will gradually appear, and the real estate is expected to recover marginally. Continue to recommend Haier Smart Home Co.Ltd(600690) , Midea Group Co.Ltd(000333) , which benefit from the accelerated upgrading of high-end consumption and the ability to raise prices; The improvement of fundamentals is expected to usher in the reversal of adversity Qingdao Hiron Commercial Cold Chain Co.Ltd(603187) , Skyworth Digital Co.Ltd(000810) ; There are opportunities to improve the valuation of the real estate chain, and the objects worthy of attention include Hangzhou Robam Appliances Co.Ltd(002508) , Zhejiang Meida Industrial Co.Ltd(002677) , etc.
Risk tip: the actual operation is different from the calculation assumption. The appreciation of RMB exchange rate, the repeated epidemic in China, and the promotion of real estate policy are not as expected.
