Image source @ Visual China
Text | Market Capitalization Watch, author | Blue Danube, edited | Little City Sister
10 years ago, no one questioned the core position of independent smoke stove products in the kitchen, and many people did not even hear the name of the integrated stove.
However, in the evolution of the past decade, the integrated stove, which was once a "marginal" product, has launched an impact on the traditional "smoke stove" products at a compound annual growth rate of nearly 30% per year, and there is a trend to replace the latter.
This article will focus on the following three issues:
1. Why is the integrated stove rising?
2. Which companies will benefit?
3. What are the current tests facing the industry?
The rise of categories
Chinese kitchen has three major pain points, namely large oil smoke, loud noise and compact space.
Although the popularity of range hoods has solved the problem of fumes and noise in some kitchens, there is nothing to do about the small kitchen area.
In this regard, a new tool that integrates range hoods, gas stoves, disinfection cabinets, ovens, steaming boxes, etc. to save area - integrated stoves came into being, and gradually moved from the rural fringes to the centers of first- and second-tier cities.
The integrated stove product, which was born around 2000, has entered a rapid growth stage after experiencing the initial stage of the market with concept popularization and perfect performance.
According to Zhongyikang data, the scale of the mainland integrated stove market increased from 4.88 billion yuan in 2015 to 18.1 billion yuan in 2020, and the compound annual growth rate of retail sales in the industry reached 29.97%.
In the same period, the retail scale of the mainland kitchen appliance market (excluding integrated stoves) increased from 74.3 billion yuan to 111.4 billion yuan, with an annual compound growth rate of only 8.4%.
The growth gap of more than 20% makes the integrated stove a star track in the kitchen appliance market.
The reason is that, on the one hand, the ownership of traditional kitchen appliances (represented by range hoods and gas stoves) in the urban market has increased significantly, and the upside space is limited; on the other hand, the erosion of the original range hood market by integrated stoves cannot be ignored.
Aowei cloud data show that from 2015 to 2021, the sales of range hoods fell from 26.71 million units to 21.5 million units, and sales fell from 34.1 billion yuan to 33.3 billion yuan; in the same period, the sales of integrated stoves rose from 570,000 units to 3.04 million units, and sales rose from 3.6 billion yuan to 25.6 billion yuan.
Between one drop and one liter, the substitution effect of the integrated stove on the range hood is clearly visible.
Aowei cloud data predicts that by 2023, the sales volume of integrated stoves will reach 4.11 million units, accounting for 76.8% of the sales of range hoods, and for the first time in sales, it will surpass.
Despite the rapid development, the penetration rate of the integrated stove industry is only about 10%.
Zhongyikang data shows that in 2020, the penetration rate of domestic integrated stoves is 12.7% (238/(238+1640)), and it is expected that by 2025, the penetration rate will rise to 24.7%.
According to the law between the penetration rate and the valuation of the enterprise: generally speaking, the industry penetration rate is called the introduction period before reaching 10%, and the development is relatively slow; and once the threshold of 10% is crossed, it enters the stage of rapid growth, and the valuation of the enterprise also ushers in the peak; when the penetration rate reaches 40%-50%, the company's total market value or stock price will peak, and the valuation will begin to fall.
This means that in the next 5-10 years, the integrated stove industry will be in a state of performance and valuation.
Valuation differentiation
At present, there are four integrated stove companies in China that have landed on the capital market, namely Zhejiang Meida, which was listed in 2012, and Shuaifeng Electric Appliances, Yitian Intelligence and Martian, which were listed in the same year in 2020.
At present, the market share of these four companies is in the top four in the industry, but the gap in specific scale is obvious.
Specifically, according to euromonitor consulting statistics, in 2020, the market share of Zhejiang Meida is 17%, the Martian people are 10%, and Yitian Intelligent and Shuaifeng Electrical Appliances are 7%.
In terms of revenue scale, in 2020, the revenue of Zhejiang Meida and Martian entered a gradient of 1.5-2 billion yuan, and the revenue of Yitian Intelligent and Shuaifeng Electric Appliances was in the gradient of 5-1 billion yuan.
Interestingly, the market did not value the four companies in order of their current size. On the contrary, the order of valuation given by the market is Martian > Yitian Intelligent > Zhejiang Meida > Shuaifeng Electric Appliances.
And the magnitude of this valuation difference is surprising. The price-to-earnings ratio of Martian and Yitian Intelligence is more than 2 times that of Zhejiang Meida and Shuaifeng Electric Appliances, and the price-to-book ratio also reflects a similar law.
Why is there such a serious valuation divergence?
Deeply investigating it, it is not difficult to find that at present, capital has put forward higher requirements for integrated stove enterprises in the high-speed growth period in terms of growth rate.
After combing through, we found that the above two companies with higher valuations have achieved a high compound growth rate in performance in the past. The performance growth rate of enterprises lagging behind in valuation is relatively slow, even less than the industry average.
Specifically, from 2018 to 2020, the compound annual growth rate of the net profit of Martian was as high as 72.89%, followed by Yitian Intelligent with 37.65%; the compound growth rate of the net profit of Zhejiang Meida and Shuaifeng Electric Appliances was 19.96% and 13.72%, respectively.
In short, the main focus of the current capital market on integrated stove companies is whether enterprises can seize the take-off of the industry and gain more market share.
In this regard, the Martians and Zhejiang Meida have gone to two extremes.
The two companies have a full 10 years difference in the time of establishment (2000 VS 2010), and in terms of net profit scale, Zhejiang Meida is also nearly 1 times ahead of martians, but the martian market value is more than 50% higher than That of Zhejiang Meida (16.7 billion yuan VS 11 billion yuan).
The root cause of this result is the very different development strategies of the two sides. Specifically, Zhejiang Meida advocates steady development without sacrificing profits, and the Martians are high-minded with the purpose of expanding market share.
Specifically, in the context of the same gross profit margin, the Martian marketing expense rate (including dealer rebates) is significantly higher than that of Zhejiang Meida, which further stimulates the company's potential to seize the market.
From a market share perspective, the Martian strategy clearly worked.
According to the statistics of Aowei Cloud Network, from January to November 2021, the online channel market share of Martians was 23.49%, an increase of 4.54pct over the same period last year, ranking first for many consecutive years; in the same period, martians' offline channel market share was 21.32%, an increase of 6.88pct over the same period last year, surpassing Zhejiang Meida for the first time and becoming the first offline.
On the contrary, Zhejiang Meida,8.31% of the online market share, only increased by 0.41pct; while the traditional strong offline market share, but fell 4.75pct to 14.88%, has opened up a large gap with the Martians.
The degree of recognition and implementation of the main logic of the market will continue to determine the division in the valuation of integrated stove enterprises.
Two-fold test
The spurt development and low penetration of the integrated stove industry have attracted a large number of players to enter the game.
According to the statistics of Aowei Cloud Network, in 2020, there are 193 online brands of integrated stoves, 1537 sales models, 73 offline brands, and 574 sales models.
In terms of the overall market pattern, the online concentration has been continuously improved, but the offline concentration has been loosened, and CR3, CR5, and CR10 have all declined compared with the same period.
At present, the players in the integrated stove industry mainly include four categories. First, professional brands such as Martian and Zhejiang Meida; second, comprehensive brands such as Midea and Haier; third, kitchen appliance brands such as Boss and Fangtai; and four other brands, including home building materials companies such as Gujia.
From the distribution of market share, although professional integrated stove brands occupy the top 6 seats in the industry, their total market share (CR6) is 46%, and the remaining more than half is divided by other brands.
Compared with other industries, the current integrated stove industry is close to the fiercely competitive television industry, and it is still far from the air conditioning industry with a better pattern.
Considering that the current penetration rate is just over 10%, the industry is in the stage of outbreak and scuffle, which increases the uncertainty of the industry's competitive landscape.
This uncertainty is magnified: the integrated stove is currently in the critical stage of penetration into first- and second-tier cities.
According to the survey information, martians currently account for only 16% of revenue in first- and second-tier cities, which is in the layout stage. The revenue of other major integrated stove brands also mainly comes from third- and fourth-tier cities, and upward penetration is essential if you want to further open up the market space.
However, there is a clear difference between the channel play of first- and second-tier cities and third- and fourth-tier cities.
Third- and fourth-tier city channels are concentrated in third-party dealer stores, while first- and second-tier cities focus on KA channels such as Suning, Gome, and Actually Home, in this regard, the advantages of comprehensive home appliance brands and kitchen appliance giants are greater.
In addition, the integrated home appliance brand and the kitchen appliance giant also have the advantage of technology migration in the operation of the integrated stove, which brings a lot of pressure to the professional integrated stove brand.
Aowei cloud data shows that in 2020, Midea ranked fourth in the offline KA channel with a market share of 12.9% (ranking up one place), and the boss ranked seventh with a market share of 2.7% (up 20 places from the previous year).
However, fortunately, the integrated stove industry is still in the expansion stage, and the positioning of each integrated stove company is also relatively clear, and this hierarchical structure reduces the risk of the industry's price war.
According to the statistics of Zhongyikang, in 2020, the average price of domestic integrated stoves was 7530 yuan, and the average price from January to November 2021 was 8571 yuan, which has increased for 5 consecutive years.
Specific to the product, the more expensive steaming and grilling machine has gradually become the mainstream of the market, and the sales of offline models will account for 53.4% in 2021, ranking first; online model sales account for 29.6%, ranking second.
We predict that the integrated stove will benefit from product upgrades, and the trend of increasing the average price of products will continue to be deduced in the future.
In addition to the test of competition, the integrated stove will face the pressure brought by the downward trend of real estate in the next year.
According to historical laws, the completion of real estate will have an impact on the lag period of 3 months to 1 year in the home appliance sector. According to the survey information, 80% of the current demand for integrated stoves comes from new house decoration.
From January to December last year, the domestic completed area increased by 11.2% year-on-year, mainly due to the high growth rate in the first half of the year, and the year-on-year growth rate of the completed area in the second half of the year slowed down significantly.
We believe that the slowdown in completion will have a certain impact on the integrated stove industry as a whole, but the impact on the head enterprises is not large. This is because the head company has a greater advantage in channel coverage and customer acquisition capabilities.
Overall, the track of integrated stoves will become more and more crowded, and the real estate cycle will also accelerate the clearance speed of the industry. However, specific to enterprises, head professional brands such as Martian and Zhejiang Meida have a stronger ability to resist systemic risks in the industry, while most small and medium-sized enterprises are facing the crisis of being cleared.