Image source @ Visual China
Text | Xue Hongyan
When judging the investment value of a company, it is usually necessary to start from the development prospects of the industry. The conclusions of the period of rapid development and the period of recession are very clear, the former focuses on, the latter focuses on avoidance, but the period of stable development is a matter of opinion and easy to make mistakes.
Taking the home appliance track we pay attention to in this issue as an example, the main business of leading enterprises has entered a mature period, and the valuation level is not high or low.
Home appliance leaders in their mature stage: Take the Bull Group as an example
As far as the various subdivisions of the home appliance industry are concerned, the competitive pattern of the socket (\ terminal board \ converter) track should be relatively good, for two reasons:
First, the role of the water seller is more stable. Driven by technological innovation, the home appliance industry is experiencing continuous innovation iteration and technological upgrading, in this process, enterprises are tired of chasing new technologies, poor stability, and if you are not careful, the leader will change. Relatively speaking, sockets belong to the infrastructure of all home appliances, which are basically not affected by technological upgrades, and the industry pattern is more stable.
Second, the brand moat effect is stronger. Home appliances are mainly more than the user experience, the brand's support is relatively limited, and the unit price is relatively high, consumers are sensitive to the price difference, and the price war is still an effective means for new players to enter the market. In contrast, the core demand of consumers for sockets is safety and durability, and the unit price of sockets is low, consumers are not sensitive to price differences, unknown brands are difficult to enter the market by low prices, and head brands have strong dominance.
This is the pattern of the domestic socket market. According to whether it can be moved, the socket can be divided into two categories: mobile and fixed, the former is represented by various types of terminal blocks, and the latter is mainly a wall socket. In the mobile socket market, Bull, Millet, Philips are the main participants, the market pattern is relatively concentrated; in the fixed socket market, representative companies are Bull, Siemens, Schneider, Legrand, Simon, Panasonic, Chint, Delixi, Opple and other brands, the market pattern is relatively scattered.
According to the announcement information of Bull Group, from 2018 to 2020, in the two major categories of terminal blocks and wall socket switches on the Tmall platform, the company's products maintained the first market share for three consecutive years. Among them, in the mobile terminal board market, the company's share is basically maintained at more than 65%, with an absolute advantage; in the wall socket market, the company's share is also more than 25%, which is the first choice of consumers.
In terms of market penetration, the unit price of sockets is low, consumers need to buy, the penetration rate has been higher, and the new demand is mainly driven by the construction of new houses and the growth of the number of home appliances owned by families. At this stage, China's housing construction market and home appliance market have entered a mature period, and the growth rate is limited, which is not enough to drive the demand for sockets to continue to increase rapidly. Therefore, from the perspective of development prospects, the socket market has entered a mature period, and as an industry leader, the growth space of Bull Group is naturally limited. From the data point of view, the company's revenue growth rate has slowed down significantly in 2019, and in 2020, due to the impact of the epidemic, growth has almost stagnated.
Once there is no hope of high-speed growth, the capital market will vote with its feet, and the downward valuation will become the new normal of home appliance leaders, such as Bull Group and Gree Electric Appliances.
When the main products enter the mature period, opening up the second curve has become an inevitable choice for enterprise development to break the situation. But it's not easy to re-establish a competitive advantage in a new area.
Tough Try: Open up a second curve
Industry leaders entering new tracks, usually no shortage of funds, no shortage of talents, no shortage of channels, and even no shortage of supply chains, but there are few successful people, and the biggest obstacle usually comes from the "solidified" brand impression of consumers.
For example, Haitian Flavor is very successful in both soy sauce and fuel consumption, but the more successful it is in both areas, the weaker its presence in the field of vinegar. For Haitian, from soy sauce to vinegar, capital, talent, channels, supply chain is not a problem, the biggest problem is that most consumers have equated "Haitian" with "soy sauce", but also "soy sauce" with "Haitian".
When a company successfully achieves "brand = category", it undoubtedly builds a solid competitive advantage in the minds of consumers, but at the same time, it also greatly shrinks the space for using the same brand to enter new categories, because consumers usually resist change.
The same problem also occurs in Gree Electric Appliances. Gree is very successful in the field of air conditioning, successful to "brand = category", but once consumers limit "Gree" to the "air conditioning" category, when the company opens up a second curve, such as stepping into the field of small household appliances, it is easy to encounter potential resistance from consumers, of course, the air conditioning fan strongly related to air conditioning is an exception.
In contrast, brands such as Xiaomi, Midea, Suber, and Xiaoxiong all rely on specific categories to start, but they do not form a dominant influence in this category, so it is much easier when the company's product line is extended to new categories. For example, when mentioning millet, some people will think of mobile phones, and some people will think of televisions, balance cars, charging treasures, air purifiers, etc.; when it comes to beauty, some people will think of air conditioning, and some people will think of electric kettles, rice cookers, induction cookers, etc.; mention of bears, you may think that all high-value small household appliances are OK.
As far as the Bull Group is concerned, it is a "safe electricity expert" in user cognition, and all areas related to "safe electricity" are easy to penetrate, and vice versa, it is easy to encounter potential resistance from users.
Taking the current product line of Bull Group as an example, mobile terminal blocks, wall socket switches, foot sockets, etc. are traditional advantageous products; new energy vehicle charging guns are highly correlated with "safe electricity" and are easily accepted by consumers; in the field of digital accessories, charging heads and data lines are easy to extend, mobile power, Bluetooth headsets, etc., there are already strong brands to divide the market, it will be difficult for users to accept it; LED lighting, bath masters, smart door locks, electric curtains, drying racks and other fields, many strong brands, and "safe electricity" It doesn't matter much, and it will be much more difficult to promote.
In terms of data for the first half of 2021, the company's digital accessories revenue was 174 million yuan, down 10% year-on-year; the electrical lighting business other than the wall socket switch, although it did not announce the revenue details, but compared with the same period in 2019, the growth rate was limited.
At this point, it seems that enabling new sub-brands in the new business is a better choice. However, there is also a premise for the success of the sub-brand strategy, that is, there are no dominant strong brands in the market, and new brands have the opportunity to stand out. Typical such as Yihai International, first relying on the "Haidilao" brand to successfully occupy the leading position of the hot pot seasoning track, with the increase in the proportion of Chinese compound seasonings and self-heating convenience food revenue, the company timely launched "Chopsticks Small Kitchen" as a sub-brand to increase promotion, has begun to achieve results.
A large reason why Yihai International's strategy has worked is that Chinese compound seasonings and self-heating convenience foods are emerging tracks, and there is a lack of strong enough brands in the market, and there are still opportunities for "chopsticks and small chefs". The successful extension of the Bull brand to the new energy vehicle charging gun also has this factor.
However, once a strong brand is already in the market, the probability of success of the new brand strategy will be greatly reduced. So the problem returns to the point: it's not as easy as you think for a mature business to open up a second curve.
Or lower expectations, or stay away
As far as the home appliance market is concerned, is there still room for a segment that is large enough and has a new enough field? Yes, and many more. Driven by 5G, meta-universe and other factors, we are accelerating the ushering in a new era of smart homes, at which time, there will inevitably be a large number of new home appliance categories rising, providing a new development space for a number of home appliance brands. The rise of typical sweeping robots has spawned representative brands such as Coworth and Stone Technology.
The real question is which brand will be able to seize this opportunity, with a great deal of uncertainty. For investors, gambling on luck is very unreliable, and the right approach is either to lower expectations or stay away.
The so-called reduction of expectations is to treat enterprises as mature enterprises with moats and reduce expectations for future performance growth. Correspondingly, stay picky about the valuation level of the company, and only intervene when the price-to-earnings ratio is low enough. And even if the valuation is low enough when buying, after buying, you must give up the delusion of rapid profit, hold patiently, and be mentally prepared for the medium- and long-term annualized yield of less than 10%.
The so-called stay away is to only pay attention and not bet until the company successfully opens up the second growth curve. There are still many good investment targets in the market, do not have to hang on a tree, it is better to try to expand their circle of ability, looking for more certain investment opportunities.