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原标题:China Home Appliances:Nippon Paint,why tier 1city demand may

浏览次数:185 时间:2019-09-29

Decorated house ( 精裝房): Government has been pushing decoratedhouses in tier one cities. Property developers often choose well-renownedbrands when decorating the houses. This leads to market share gains forthe leaders.

Buy Qingdao Haier, Gree and Midea (ranked by preference)

Event 1- Clarification of potential investment in Luoyang LYC and Tianjin FAW

    For Gree and Midea: Midea gained significant market share in thisemerging decoration market. Midea’s Shanghai distributor indicated thatits orderbook from decorated house air conditioning (AC) systems grewover 100% YoY YTD. Gree is traditionally strong in the constructionchannel and has been pushing residential centralized AC.

    To better demonstrate how China’s white goods brands will benefit from increases in consumer demand through penetration and upgrading (replacement), we update our proprietary forecasts in this report. We expect the market to post a 5.2% CAGR in sales in 2017-19. We expect key players to gain market share by launching high-end products to cater to consumer demand (which is driven by replacement rather than penetration).

    On 19Sep 2017, Gree confirmed it had teamed up with Luoyang LocalGovernment and IIT Committee of Henan province, to participate in the “Luoyangintelligent equipment manufacturing production base project”, reported by thepress on 15Sep 2017. Total investment of this project is around RMB15bnincluding a site area of 5000mu, and the estimated production value will reachRMB30bn per annum after completion. Gree will also participate in the stateownedenterprise Reform of LYC Bearing; the investment amount from Gree hasyet to be defined. The company will make a further announcement if necessary.

    Replacement demand: according to Nippon Paint’s distributor, Shanghai’scommercial housing market started to take off from 2001. The distributorsees robust redecoration demand that accounts for 20% of its revenue.

    China market to post 5.2% sales CAGR in 2017-2019E

    Meanwhile, Gree

    For Gree and Midea: tier 1 cities see good replacement demand, especiallyfor AC (as the previous major AC installation cycle started in 2009).

    The domestic market should remain the bread and butter of Chinese white goods players for the next three to four years, where we expect the industry to grow 5.2% in 2017-19. About 20% of this would come from an increase in penetration, 30% from new housing and 50% from replacement demand. By product, the key growth drivers are air conditioners (39% of white goods revenue in 2017E) and small appliances (18.5%), while refrigerators and washing machines would have lower than industry growth.

    denied it intended to acquire Tianjin FAW Xiali as Souhu.comreported on 16Sep 2017. Gree clarified that it has never discussed the acquisitionof Xiali with Tianjin FAW.

    Product upgrade: Nippon Paint’s distributor indicated good popularity with“nontoxic paint” products (Formaldehyde- free, waterborne paints…etc.).

    Acquisitions = acquisitive growth + better products for replacement demand

    Event 2- Acquisition of 5% stake in Shanghai Highly Group

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