China Galaxy Securities: Home appliance exports continue to strengthen, policy fueling domestic sales in the warm winter. We recommend focusing on three investment themes.

China Galaxy Securities released a research report stating that under the policy of "substituting old for new", the performance of domestic appliance sales has significantly improved. Domestic appliance companies are actively promoting expansion in emerging markets, steadily increasing their global market share. The momentum of appliance exports continues to strengthen, and the industry continues to see positive feedback. In the future, as the policy benefits spread, with more housing renovations and decoration activities, coupled with potential marginal improvements in the long-term real estate investment and construction sectors, incremental demand for appliances is expected to gradually recover. It is recommended to focus on three investment themes. China Galaxy Securities' main points are as follows: The policy has activated the appliance market, and a proactive fiscal policy provides room for continued subsidies. According to statistics from the National Bureau of Statistics, in November 2024, the retail sales of appliances reached 120 billion yuan, a year-on-year increase of 22.20%. After the central government subsidies for the "substituting old for new" program were in place in August, appliance retail sales have grown by more than 20% year-on-year for three consecutive months, with a significant policy impact igniting a warm winter market domestically. In December, the meetings of the Central Politburo and the Central Economic Work Meeting were held successively, proposing to implement a more proactive fiscal policy and moderately loose monetary policy. Considering that the subsidies for the "substituting old for new" program will end on December 31 this year, the proactive fiscal policy direction has opened up room for imagination into 2025, and the high prosperity of the domestic appliance market is expected to continue. Preceding stocks for the export of white goods, with slightly better prosperity than expected. According to the General Administration of Customs, from January to November 2024, China's cumulative exports of household appliances reached 40.99 billion units, a year-on-year increase of 21.3%, with a cumulative export value of 91.72 billion US dollars, a year-on-year increase of 14.1%. The growth momentum in exports continues to be strong, with product structure optimization ongoing. Benefiting from the warming global demand, significant growth in emerging markets, and factors such as overseas merchants stocking up in advance, the momentum of appliance exports continues to strengthen. From the perspective of white goods, in October, the export growth rates for air conditioners, refrigerators, and washing machines were 54.29%, 18.06%, and 17.83% respectively. Despite a high base figure, the prosperity of white goods exports slightly exceeded expectations, expected to be related to the recovery of overseas demand and stocking up in advance. Stabilization and improvement signals in the real estate sector. In November 2024, the sales volume of commercial housing in 30 large and medium-sized cities increased by 10.77% year-on-year, achieving positive growth for the first time this year. The policy effects are gradually showing, and residential sales are picking up. Among them, the sales volume of first-tier and second-tier cities increased by 21.68% and 19.94% year-on-year respectively, marking a stabilization after a decline. In the future, with the transmission of favorable policies, increased housing renewals and decoration activities, plus potential marginal improvements in the long-term real estate investment and construction sectors, the demand for appliances is expected to gradually warm up. Investment recommendations: Under the drive of the "substituting old for new" policy, the performance of domestic appliance sales has significantly improved, with appliance companies actively promoting expansion in emerging markets, steadily increasing their global market share, and the industry continues to see positive feedback. In terms of valuation, leading companies with excellent quality have a certain margin of safety. It is recommended to focus on three investment themes. 1. White goods leading companies that are expected to benefit from the improvement in domestic and export markets, Midea Group Co., Ltd (000333.SZ) and HAIER SMARTHOME (600690.SH) are recommended; 2. Leading kitchen appliance companies that are expected to benefit from industry optimization and stabilization in the real estate sector, Hangzhou Robam Appliances (002508.SZ) is recommended; 3. Clean appliance companies that are actively expanding channels and accelerating the launch of new products, Beijing Roborock Technology (688169.SH) is recommended. Risk warning: risks of demand improvement falling short of expectations; risks of price fluctuations in raw materials; risks of uncertainty in appliance exports.