By Brian Lantier, CFA
NASDAQ: VIOT
READ THE FULL VIOT RESEARCH REPORT
Viomi (NASDAQ: VIOT) has not provided any guidance for 2026, but it appears as though demand for household durables (like the company’s water filtration systems) continues to struggle in China based on the latest economic reports released by the government.
Durable Good Consumption in China
The trends in the domestic Chinese home appliance market that emerged in the first quarter – lower overall demand, weak pricing, and the hangover from appliance subsidies in 2025, which pulled forward demand – appear to have continued through the first two months of the second quarter. In the most recent government data, consumers continue to show price sensitivity, and large consumer purchases like autos and home appliances fell 20% in May.[1]
This decline in demand has persisted in the market despite the government renewing 15% subsidies on refrigerators, washing machines, televisions, air conditioners, computers, and water heaters in 2026. We have been forecasting a roughly 20% decline in Viomi's 2026 sales, as we felt the 2025 sales jump (up 20%) was driven in large part by the inclusion of water purification systems in the government trade-in program in 2025, which was not renewed in 2026. However, if all appliances, including those with continuing subsidies like air conditioning units, are experiencing a 20% decline even with the subsidies in place this year, we think the impact on a company like Viomi, with its concentration of sales in China and its main focus on water purification, could be greater than we are currently forecasting.
There are several significant shopping holidays on the horizon, including the annual 618 shopping festival this week, that could signal a change in consumer demand. Currently, we believe domestic economic headwinds and the demand that was pulled forward in 2025 may significantly impact Viomi's operations in the first half of 2026.
Despite the very challenging operating environment right now for Viomi, we think several key shopping holidays are on the horizon, beginning with the 618 shopping event this week, that could provide a catalyst for the company. We continue to believe that the company would be fairly valued at 12-14 times our 2027 estimate of $0.17/ADS, so we are maintaining our 12-month target of $2.25/ADS. We would note that if the company were to expand its share buyback program or sign a major offline retail distribution agreement in the US market, it could change our outlook, and the company's shares could find support sooner than anticipated.
The company's balance sheet remains very strong, with close to $188 million in cash at year-end, and affords the company the flexibility to continue enhancing shareholder value through special dividends or share buybacks.
We encourage investors to read our full updated research report on Viomi to get a better understanding of the market dynamics impacting the company today.
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[1] https://www.scmp.com/economy/economic-indicators/article/3356567/chinas-consumer-prices-see-may-uptick-oil-shock-inflates-factory-gate-costs