Zhixun Finance APP learned that SWhy released research reports stating that historically in China, the appliance stimulus policy had a significant boost effect on the replacement of old appliances with new ones, and there is a strong correlation between the increase in holdings and the real estate cycle. Compared horizontally with Japan's appliance stimulus policy, Japan's eco-friendly points system has also significantly boosted penetration and the replacement of old appliances. Calculations show that this round of policy is expected to last at least until 2025, with a sales growth effect of over 15%. Recently, under the continued catalysis of the policy for replacing old appliances with new ones, categories such as white goods and clean appliances are expected to have a significant marginal boosting effect.

Shenwan Hongyuan's main points are as follows:

Vertically benchmarking: Historically in China, the appliance stimulus policy had a significant boost effect on the replacement of old appliances with new ones, and there is a strong correlation between the increase in holdings and the real estate cycle.

Historically in China, the home appliance sector can be summarized as the three strong policy stimuli in 2007 for appliances going to rural areas, energy-saving benefits in 2009, and the replacement of old appliances in 2009. After retrospection, the penetration rate of appliances at different stages, real estate cycles, and the actual amount of policy reductions all have a significant impact on policy effects. Real estate cycles/old-for-new policies mainly affect the increase in holdings/pace of increasing the amount of old appliances exchanged, influencing appliance sales.

Based on the three historical rounds of home appliance policies, the bank has quantified the main influencing factors, and constructed a model to break down the factors affecting sales volume. From the breakdown, regarding the replacement of old appliances, the growth rates of old-for-new appliances from 2007 to 2010 reached 27%/18%/3%/9%, significantly higher than the years before and after the policies; the real estate upturn cycle is more closely related to the completion data of home appliances, with this round of the real estate cycle bottoming out in 2008, reaching its peak growth rate in 2009, and remaining highly prosperous until 2011, with air conditioner holding growth rates reaching 64%/57%/91% from 2009 to 2011, significantly higher than during the bottom years of the real estate cycle. It is evident that policies have a significant boost effect on the replacement of old appliances with new ones, and the increase in holdings correlates strongly with the real estate cycle.

Horizontally benchmarking: Japan's eco-friendly points system has significantly boosted penetration and the replacement of old appliances. Daikin focuses on its core business, expands overseas in line with the overall trend, and stands out independently in the market.

In comparison with Japan's home appliance stimulation policies, its home appliance policies mainly focus on energy-saving and environmentally friendly concepts. The largest eco-friendly rebate in Japan is quite similar to our country's old-for-new mode. Through benchmarking, the bank has observed that Japan's environmental credit system has stimulating effects on penetration rates and the old-for-new aspects. According to the above model, the implementation stages of Japan's environmental credit system split the sales volume of Japan's air conditioners in the first year based on the increase in penetration rate and old-for-new volume, showing a significant increase in penetration rate in the first year of implementing the eco-credit system (2010), and stimulating the old-for-new demand in 2011.

This round of policies is expected to last at least until 2025, with a sales growth effect of over 15%.

The bank will reference the current domestic old-for-new policy vertically with the historical domestic old-for-new policy and horizontally with the Japanese environmental credit policy. The growth rate of old-for-new volume is expected to be over 30%. Due to real estate cycles and no significant catalytic factors for penetration rates, assuming these two parameters remain stable, it is estimated that the sales volume of air conditioners in 2024/2025 will increase by about 5%/16% respectively.

The first round of our country's old-for-new policy began from July 25, 2024, when the National Development and Reform Commission and Ministry of Finance issued documents, and according to a document from Hubei Province confirming that the household appliances old-for-new program will continue in 2025 and has started accepting applications from merchants for verification. Therefore, it is expected that this round of domestic policies will last at least until 2025.

Investment Highlights: With the recent continuous catalysis of the old-for-new policy, categories such as white goods and clean appliances are expected to have a significant marginal boosting effect.

According to data from AVCLOUD, from August 25 to October 27, 2024, under the double eleven subsidies for old-for-new appliances, online sales of 7 major categories including air conditioners, refrigerators, washing machines, color TVs, water heaters, cooker hoods, and gas stoves increased by +70.3% year-on-year online and +63.1% year-on-year offline, achieving explosive growth. It is expected that in 2025, with the country still introducing subsidy policies, domestic demand will be further boosted.

In terms of small appliances, due to the relatively high unit price of clean appliances and their recent process of exchanging price for volume in the past two years, consumers are relatively price-sensitive. After the launch of the old-for-new national subsidy online platform on Singles' Day, subsidies were provided for new products such as some sweeping robots and floor scrubbers, promoting significant consumption effects.

According to AVCLOUD data, in October 2024, the online sales of sweeping robots/floor scrubbers increased by +130%/40% respectively year-on-year. With online and offline subsidies combined, the marginal boosting effect is expected to be significant. It is continuously recommended to focus on leading companies in the white goods sector such as Midea Group Co., Ltd. (000333.SZ), Haier Smarthome (600690.SH), Gree Electric Appliances, Inc. of Zhuhai (000651.SZ), Hisense Home Appliances (000921.SZ), and pay attention to the clean appliances sector, such as Beijing Roborock Technology (688169.SH) and Ecovacs Robotics (603486.SH).

Risk Warning: Risks of policy advancement falling short of expectations, risks of fluctuations in raw material prices.