The central government plans to allocate special funds of around 300 billion yuan in super-long-term treasury bonds to promote the replacement of old products with new ones.
According to the Galaxy Securities, with the future expansion of internal demand and the gradual implementation of policies to boost consumption, the home appliance market is expected to be supported, with the sector's prosperity continuing to recover. Current valuations for the industry still retain a certain margin of safety. It is recommended to focus on three main investment themes:1. The leading household appliance brands that are poised to benefit from both domestic and international sales improvement, including Midea Group Co., Ltd. (000333.SZ) and Haier Smart Home (600690.SH); 2. Kitchen appliance industry leaders that stand to benefit from optimization of industry structure, such as Hangzhou Robam Appliances (002508.SZ); 3. Clean energy appliances that are actively promoting channel expansion and accelerating the launch of new products, such as Beijing Roborock Technology (688169.SH).
The main viewpoints of Galaxy Securities are as follows:
In the home appliance market, value-for-price is the primary model for white goods, and the demand structure for black goods continues to improve.
In the 29th week of 2024 (July 15-July 21), the online retail sales and sales volume of air conditioners, refrigerators, and washing machines are expected to grow 17.92%/30.23%, 1.24%/2.01%, and 4.86%/15.02%, respectively, compared with the same period last year, while the average price of these products is expected to decrease by 9.45%, 0.75%, and 8.83%, respectively. The results of the price-for-volume strategy in the hot summer is gradually emerging. As for black appliances, the demand structure is continuously optimized, with changes of 2.16% and -3.32% in online retail sales and sales volume of color TVs, respectively, and an increase of 5.67% in the average price. In terms of environmental appliances, the offline sales and sales volume of mite removers and window-wiping robots increased by 60.75%/72.09% and 164.2%/140%, respectively, while the sales growth of floor-sweeping robots has slowed down.
The central government will allocate around 300 billion yuan of special funds for ultra-long-term national bonds to encourage trade-ins for new vehicles.
On July 25, the National Development and Reform Commission and the Ministry of Finance jointly issued a notice on several measures to support large-scale equipment updates and the replacement of old products with new ones, proposing to support local authorities in improving their capacity to replace old products with new ones, including key support for home appliances and electric bicycles, materials and purchases for partial renovations of old houses, kitchen and bathroom, and home renovation for the elderly, and a promotion of smart home consumption, among others. The notice directly allocates special long-term national bonds of around 300 billion yuan, with 150 billion yuan of central funds supporting the replacement of old household appliances, old operating trucks, new energy buses and power battery upgrades, consumer goods and cars, and so on. The supporting funds involved share a ratio of 9:1, with the central and local governments sharing the burden, respectively, with the proportions borne by the central government being 85%, 90%, and 95% in the eastern, central, and western regions, respectively.
As subsequent allocations of special long-term national bonds are implemented, subsidies for the replacement of home appliances with new ones may be augmented on the basis of current subsidies. It is estimated that sales of air conditioners, refrigerators, and washing machines under the replacement subsidy may reach 11.3499, 11.3099, and 5.0863 million units, respectively. Coupled with policies promoting the renovation of old houses and smart homes, it is expected that the replacement subsidy will stimulate sales of home appliances by over 100 billion yuan. Risks include fluctuations in raw material prices, unexpected implementation of the old-for-new policy, and lower-than-expected sales.
Risk warning:
The risks in this market include fluctuations in raw material prices, unexpected implementation of the old-for-new policy, and lower-than-expected sales.