Tianfeng: Home appliances 25-year-old policy of exchanging old for new to be expanded, with a focus on air conditioning chains.

Tianfeng released a research report stating that multiple policies will be jointly issued to promote the expansion of the "trade-in" program by 2025. The State Council's regular policy briefing on January 8 announced the expansion of support for consumer goods trade-ins for 25 years. The number of household appliances eligible for trade-in subsidies has increased from 8 categories last year to 12 categories this year, with a maximum subsidy of 20% of the sale price per item. At the same time, the National Development and Reform Commission and the Ministry of Finance issued a notice on intensifying the expansion of the policy for large-scale equipment updates and consumer goods trade-ins by 2025, increasing support and optimizing the allocation of funds and participation thresholds. It is recommended to pay attention to the demand driving force of the household appliance sector, with a focus on related targets in the air conditioning industry. Key points from the State Council's policy briefing on January 8: 1) Zhao Chenxin, Deputy Director of the National Development and Reform Commission, stated that the expanded support for consumer goods trade-ins for 25 years includes 12 categories of household appliances eligible for trade-in subsidies, with a maximum subsidy of 20% of the sale price per item; considering the actual needs of household consumers, the maximum number of air conditioning products that each consumer can receive subsidies for has been increased from 1 item to 3 items. 2) Li Gang, Director of the Market Operation and Consumer Promotion Department of the Ministry of Commerce, stated that in 2024, the Ministry of Commerce has made positive progress in promoting consumer goods trade-ins in accordance with the decisions and arrangements of the Party Central Committee and the State Council. Throughout the year, more than 36 million consumers purchased over 56 million units of eight major categories of household appliances, driving sales of 240 billion yuan. The renovation of home furnishings and kitchen and bathroom products led to the sale of nearly 60 million related products, with sales totaling around 120 billion yuan. 3) Fu Jinling, Director of the Economic Construction Department of the Ministry of Finance, stated that by the end of 2024, the 150 billion yuan in funds allocated by the central government for consumer goods trade-ins had been mostly used up; some regions have actively increased funding arrangements and provided local funds after exhausting the central government's quota. The 150 billion yuan in funds for large-scale equipment updates in 2024 has been allocated on a project basis, with all funds distributed to local governments and allocated to specific projects. 4) Relevant personnel from the People's Bank of China stated that as of the end of last year, the weighted average interest rate for equipment update loans is 3%, and with financial subsidies, the actual financing cost is 1.5%, much lower than the one-year loan market quoted rate (LPR). The notice from the National Development and Reform Commission and the Ministry of Finance on intensifying the expansion of the policy for large-scale equipment updates and consumer goods trade-ins by 2025 includes the following points related to the household appliance industry: 1) Optimizing the distribution of funds for consumer goods trade-ins: Continuing to directly allocate long-term special national debt funds to regions to support consumer goods trade-ins, with a moderate tilt towards regions that have achieved good results in trade-ins in 2024. Regions should focus on key areas, prioritize support for large-scale durable consumer goods trade-ins, explore the linkage between subsidy policies and financial support, and fully leverage the role of policy funds in driving. 2) Increasing support for trade-ins of household appliances: Continuing to support trade-ins of 8 categories of household appliances (refrigerators, washing machines, TVs, air conditioners, computers, water heaters, home stoves, range hoods), including 4 new categories (microwaves, water purifiers, dishwashers, rice cookers) in the subsidy range. Individual consumers purchasing products from these 12 categories of household appliances that meet the grade 2/grade 1 energy efficiency or water efficiency standards will receive subsidies of 15%/20% of the sale price. Each consumer can receive subsidies for one item per category (up to 3 items for air conditioning products), with each subsidy not exceeding 2,000 yuan. Consumers who have already received subsidies for trade-ins of a certain category of household appliances in 2024 can continue to receive subsidies when purchasing similar household appliances in 2025. 3) Actively supporting the replacement of household consumer goods: Increasing the subsidy intensity for individual consumers to purchase items and materials used in old house renovations, kitchen and bathroom renovations, and home aging improvements, and actively promoting smart home consumer goods, etc. 4) Supporting the recycling and disposal of discarded electrical appliances and electronics: Special funds will be allocated from the central government in 2025 to support the recycling and disposal of discarded electrical appliances and electronics through the "rewards for subsidies" approach. 5) Optimizing participation thresholds: Regions should reasonably determine and promptly update the list of business entities participating in consumer goods trade-in activities, without restricting the participation of business entities based on sales volume or funding capacity, and support online and offline business entities equally, as well as business entities of different ownership, registration locations, and scales. 6) Simplifying subsidy processes: Optimizing the subsidy review process for trade-ins of automobiles, household appliances, etc., enhancing interdepartmental data connectivity and sharing, promoting the electronic certification of documents such as vehicle recycling certificates, implementing cross-departmental joint review and approval processes, and reducing unnecessary approval levels and steps. Recommended targets: 1) Focus on the air conditioning sector: Recommendations include Gree Electric Appliances, Inc. of Zhuhai (000651.SZ), Midea Group Co., Ltd. (00300,000333.SZ), HAIER SMARTHOME (06690,600690.SH), Hisense Home Appliances Group (00921,000921.SZ); for components, consider Shanxi Huaxiang Group (603112.SH), and recommend Zhejiang Dun'an Artificial Environment (002011.SZ). 2) Profit elasticity: Ecovacs Robotics (603486.SH), TCL ELECTRONICS (01070), Hisense Visual Technology (600060.SH). 3) Real estate sector: Vatti Corporation (002035.SZ), Hangzhou Robam Appliances (002508.SZ). Risk warning: Decline in the prosperity of the real estate market; exchange rate fluctuations; fluctuations in raw material prices; new product sales falling short of expectations.