The Zhitong Finance App learned that on July 19, the State Council held an executive meeting and proposed policies and measures to strengthen support for large-scale equipment upgrades and consumer goods trade-in. The conference pointed out that large-scale equipment upgrades and consumer goods trade-in are highly motivating, and increasing policy support is conducive to better unleashing the potential of domestic demand. Galaxy Securities pointed out that the central government's promotion of large-scale equipment upgrades and trade-in of consumer goods can effectively hedge the dragging effect of deep real estate cycle adjustments on the economy, unleash consumer consumption potential, promote inventory cycle switching, encourage enterprises to expand capital expenditure, and help launch a new Jugla cycle.

Specifically, the National Standing Committee decided to coordinate funding for ultra-long-term special treasury bonds to further promote large-scale equipment upgrades and consumer goods trade-in. Optimize support methods for equipment renewal projects, expand the scope of support to equipment updates in the fields of energy and electricity, old elevators, etc., as well as energy saving, carbon reduction and safety transformation in key industries, lower the application threshold, and simplify the approval process. Support the scrapping and renewal of old operating ships and old operating trucks, raise subsidy standards for agricultural machinery, new energy buses, etc., and increase the financial interest rate ratio for equipment renewal loans.

Up to now, the policy system has been established, and action plans in all 4 areas, including equipment renewal, consumer goods trade-in, recycling, and standard upgrading, have been introduced, and 31 provinces (districts and municipalities) have issued implementation plans for large-scale equipment renewal and consumer goods trade-in in the region.

The current stage of equipment renewal and trade-in model: First, expanding the scale of domestic demand is moderate; it is not mainly about boosting economic growth, but mainly on stability and support; second, equipment renewal and trade-in mainly require product upgrades, energy saving and environmental protection, and adhering to standards leadership. Simply put, in the equipment renewal process, it is necessary to promote a continuous increase in the share of advanced production capacity. In the field of durable consumer goods, we need more intelligence and digitalization, and insist on promoting high-quality products to enter the market.

This year is the second year after a steady transition in epidemic prevention and control. After a continuous recovery in 2023, the economic development pattern in 2024 is more clear and policy intentions are more clear. China continues to promote the transformation and upgrading of the economic structure, gradually shifting from high leverage, high debt and high growth led by real estate to reasonable debt and high-quality growth led by technological manufacturing. However, due to the continuous adjustment of real estate investment, investment in the upstream and downstream industrial chains and post-cycle real estate consumption have been greatly affected, and the urgency of expanding domestic demand has increased. Promoting large-scale equipment renewal and trade-in of consumer goods is conducive to expanding domestic demand and further consolidating economic recovery.

This round of large-scale equipment renewal policies covers various fields of industry, agriculture, construction, transportation, cultural tourism, education and medical care. Promoting the digitalization and modernization of production through equipment renewal is conducive to promoting the development of new quality productivity, meeting the goals of energy saving and emission reduction, and helping to start a new round of Jugra cycle upward. In terms of data calculation, it is estimated that the seven departments mentioned in the “Action Plan to Promote Large-scale Equipment Renewal and Consumer Goods Trade-In” will increase by a total of about 900 billion yuan by 2027, with an average annual increase of about 225 billion yuan. According to nonlinear forecasts, the 2024 fiscal year will increase by about 470 billion, driving fixed asset investment by 2 percentage points in 2024. In terms of subsidies, fiscal policy support is expected to be between 33-55 billion dollars a year.

Galaxy Securities believes that China's economy is currently at a special stage where multiple phases are superimposed. The momentum of the inventory cycle and Jugla cycle bottomed out and rebounded by stronger downward pressure on the real estate cycle, and the sixth wave of the Kangbo cycle centered on the digital economy is still nurturing. In this context, the central government promotes large-scale equipment upgrades and trade-in of consumer goods, which can effectively hedge the dragging effect of deep real estate cycle adjustments on the economy, unleash consumer consumption potential, promote inventory cycle switching, encourage enterprises to expand capital expenditure, and help launch a new Jugra cycle.

The bank pointed out that the valuation of the industries covered by the “Action Plan” is at a low level in history, there is plenty of room for repair, and performance is improving at the bottom. It is expected to benefit from an increase in demand for equipment and a boost in domestic demand for consumer goods in the future. Specific investment opportunities are recommended as follows:

(1) Machinery and equipment: based on the elasticity of benefits, demand boom, and enthusiasm for policy influence, equipment updates recommend railway equipment, machine tools, construction machinery and ships; (2) Medicine: policies guide the release of equipment procurement demand, leading domestic manufacturers are expected to fully benefit; (3) Transportation: The country strengthens “trade-in” support subsidies to help shipowners complete ship replacement. China Railway Group actively supports the “trade-in” upgrade and development of high-speed rail, and industry demand has strong potential to be released; (4) automobiles: one is the leading domestic own-brand OEMs, and the other are leading component manufacturers in the segment that have established deep cooperative relationships with leading domestic independent brands; (5) Household appliances: the renewal demand for major appliances is expected to be concentrated, and the performance of white electricity is worth looking forward to. Promoting the construction of a recycling system in the home appliance industry, the concentration of leading brands is expected to increase; (6) light industry manufacturing: the potential for home trade-in is huge, and leaders gain opportunities by speeding up the layout; (7) social services: speeding up the renewal of cultural tourism equipment, and grasping the two main investment lines of “business model optimization” and “quality improvement and expansion”.

Related concept stocks:

BYD Co., Ltd. (01211): According to First Shanghai Securities, the year 24 is a big year for the company's new cars. With the release of DM 5.0, the company's various brands and overseas sales are expected to increase further in the second half of the year, and the annual sales volume is expected to exceed 3.6 million vehicles. The upgrading of the company's models and the increase in the share of export sales are expected to continue to increase the net profit of bicycles, and the net profit of bicycles will improve quarterly.

Zoomlion Heavy Industries (01157): CCB International pointed out that under the impetus of globalization and product diversification, Zoomlion Heavy Industries is entering a period of strong profit growth for many years. Over the past three years, the company's globalization initiatives have achieved key milestones, including a 67% compound annual growth rate of overseas revenue, major product breakthroughs in global markets (such as earthwork and mining), and a strong sales network covering more than 100 countries.

Haier Smart Home (06690): BOC International pointed out that Haier's digital transformation results were remarkable, and the obvious improvement in cost ratios led to profit-side performance exceeding expectations in the first quarter. For ice washing products that have already entered the stock market, combined with the company's strong competitive position in this market and the company's gradually increasing ability to dismantle and recycle used household appliances, Haier is expected to benefit from the implementation of the trade-in policy.