[Shenwan Home Appliances] Continuously Recommend Export Chain & Cleaning Appliances Sector!

English summary

Core logic: 1) There is a need for capital rebalancing in the market. In 26Q2, public funds were underweighted in the home appliance sector by 0.42%, close to historical extremes over recent years, making it a front-runner in the rebalancing process. 2) White goods targets such as Midea Group took the lead in rebounding and hit consecutive new highs, driving the home appliance sector recovery; this week it clearly transmitted to cleaning appliances. 3) On the fundamentals side, the export chain previously faced three constraints: exchange rate losses from substantial RMB appreciation, the impact of US reciprocal tariffs on exports in 25Q2, and the drag on profit margins from companies collectively ramping up overseas capacity after tariff increases. We believe that, first, the RMB has appreciated sharply for three consecutive quarters, and the sustainability of appreciation at that intensity in H2 is low. Moreover, #exchange rate losses significantly impact export chain companies' profits, even nearly offsetting full single-quarter operating profits for some companies. #The appreciation rate in July has greatly decreased (26Q1/Q2 appreciation of 0.1/0.12, July only 0.015), and after 26Q3, reported profits are expected to improve substantially both YoY and QoQ. ...