BOCOM INTL: Seamless transition of policy for trade-in program, household appliances expected to continue high-quality growth by 2025.

BOCOM INTL released a research report stating that the continuation and expansion of the old-for-new policy supports the accelerated release of demand for appliance replacement during the Spring Festival period. The significant increase in the purchase limit for air conditioners and the growth in categories are worth noting. Benefiting from the old-for-new support policy, retail sales of high energy efficiency and smart appliances have increased by double digits year-on-year for four consecutive months. Smart products have performed well, and household appliance companies with diversified category layouts, complete channels, and mature competition in the air conditioning market are still favored. Key points from BOCOM INTL: Continuation and Expansion of the Old-for-New Policy On January 8, 2025, the National Development and Reform Commission and the Ministry of Finance issued a notice on the implementation of a large-scale equipment update and old-for-new policy for consumer goods in 2025, proposing continued direct allocation of ultra-long-term special national bonds to support the replacement of consumer goods. For household appliances, in addition to the traditional eight major items (refrigerators, washing machines, TVs, air conditioners, computers, water heaters, gas stoves, range hoods), microwave ovens, water purifiers, dishwashers, and rice cookers have been included in the subsidy scope. At the same time, the subsidy limit for air conditioning products has been expanded from 1 item to 3 items. The subsidy standards are the same as the previous policy, with a 15% subsidy for products that meet the secondary energy efficiency or water efficiency standards, and 20% for those that meet the primary standards. Subsidy records from 2024 will not affect eligibility for subsidies in 2025. Acceleration of Demand for Appliance Replacement Supported by the Old-for-New Policy Since the nationwide implementation of the old-for-new policy for household appliances at the end of August 2024, it has significantly boosted household appliance consumption, with retail sales achieving year-on-year growth of 25.0%, 45.1%, and 26.8% in September, October, and November, respectively. According to industry online data, in November 2024, domestic sales of refrigerators, washing machines, and TVs increased by 2.3%, 8.0%, and 4.9% respectively year-on-year, while fixed-installation appliances such as air conditioners, range hoods, and gas stoves grew faster, with year-on-year increases of 28.7%, 16.8%, and 15.0% respectively. In general, according to statistics from the Ministry of Commerce, the old-for-new policy for household appliances in 2024 led to more than 36 million consumers purchasing a total of 56 million units of the eight major categories of household appliances, with sales exceeding 240 billion RMB. The national retail sales of household appliances using the old-for-new policy exceeded 10 billion RMB in 79 days and exceeded 20 billion RMB in 40 days, demonstrating the accelerated release of consumption potential driven by the demand for product updates. Attention to High Energy Efficiency and Smart Products In the product categories supported by the old-for-new policy, the sales of products with a first-level energy efficiency rating accounted for over 90%, driving a double-digit year-on-year growth in retail sales of high energy efficiency and smart appliances for four consecutive months. At the same time, smart products have performed well, with nearly 10 million pieces of smart home products such as Siasun Robot&Automation and smart door locks being replaced. Investment Recommendation: Continued optimism about leading household appliance companies We continue to be optimistic about leading household appliance companies with diversified category layouts, complete channels, and mature competition in the air conditioning market, such as Gree Electric Appliances, Inc. of Zhuhai (000651.SZ), Midea Group Co., Ltd (000333.SZ, 00300), and HAIER SMARTHOME (600690.SH, 06690).