Dabang Securities: Long-term air conditioning contract lands, refrigerant prices show signs of rising again.

Debon Securities stated in a research report that air conditioner long-term orders were implemented, domestic sales decreased during the Spring Festival off-season, while overseas demand remained strong, and the export outlook for home appliances continued to improve. In December 2024, domestic refrigerant enterprises started production at a low level, signaling a rise in refrigerant prices. With the formal implementation of the refrigerant quota scheme in 2025, the increase in R32 quotas can to some extent reduce the sudden risk of temporary quotas from the Ministry of Environmental Protection. In the context of strong supply constraints, the refrigerant market is expected to continue to be prosperous in the long term. According to the information from Baichuan Yingfu on January 3, the cash-out prices for R32 and R410a in the mainstream air conditioning factories in the first quarter of 2025 were 39,800 yuan/ton and 40,800 yuan/ton respectively, with an increase of 6.1% and 11.8% respectively compared to the previous period. The key points from Debon Securities are as follows: Decrease in domestic sales during the Spring Festival off-season, while overseas demand remains strong According to Industry Online, from January to March 2025, the production of household air conditioners in China was 17.14 million, 14.40 million, and 24.98 million units, with a year-on-year change of -1.5%, +22.6%, and +14.5% respectively. Structurally, for domestic sales, the production of air conditioners in China during the first three months was 7.24 million, 6.69 million, and 13.90 million units respectively, with a year-on-year change of -1.1%, +10.2%, and +12.5% respectively. Despite a slight decline in January due to factors such as the Spring Festival off-season, production still maintained rapid growth in February and March. With more proactive macroeconomic policies and stronger consumption stimulus in 2025, it is expected that production and sales will continue to grow in the first half of the year. Regarding exports, the production of air conditioners for export in China from January to March was 9.90 million, 7.71 million, and 11.08 million units respectively, with a year-on-year change of +10.1%, +23.3%, and +10.0% respectively, continuing the previous trend of high-speed growth. Emerging markets such as the Middle East and Southeast Asia have shown significant growth, and major home appliance overseas bases are expected to gradually increase production in 2025, driving the continuous improvement of home appliance exports. Low inventory levels for manufacturing enterprises, signals of refrigerant price increases Affected by factors such as insufficient remaining production quotas at the end of the year, domestic refrigerant enterprises started production at a low level in December 2024, with widespread shutdowns for maintenance. The low inventory levels of mainstream production enterprises provide support for the rise in refrigerant prices. Additionally, a recent accident at an Indian GFL plant causing the plant to stop operating may further support price increases in the R32 foreign trade market. According to Baichuan Yingfu, as of January 3, the prices of R22, R32, R125, and R134a were 33,000, 43,000, 42,000, and 42,500 yuan/ton respectively, with increases of +1.5%, +7.5%, +10.5%, and +9.0% respectively compared to the previous month. In addition, in the first quarter of 2025, the prices for R32 and R410a in mainstream air conditioning factories were 39,800 and 40,800 yuan/ton, with increases of 6.1% and 11.8% respectively compared to the previous period, showing a rising trend. Formal implementation of the quota scheme, optimistic about the industry's continued prosperity On December 16, the Ministry of Ecology and Environment officially issued the "Notice on the Allocation and Distribution of Quotas for the Consumption of Ozone-Depleting Substances and Hydrofluorocarbons in 2025." According to the plan, the production/internal consumption quotas for second-generation refrigerants (HCFCs) in China in 2025 will be 16.4/8.6 thousand tons, reducing production by 67.5% compared to the baseline value. With downstream demand mainly from the air conditioning repair market, prices may increase. The production/internal consumption quotas for third-generation refrigerants (HFCs) will be 79.2/39.0 thousand tons, an increase of 4.6/5.0 thousand tons compared to 2024, with R32 allocated an additional quota of 41,00 tons. This is slightly higher than market expectations, but may help reduce the sudden risks posed by temporary quotas from the Ministry of Environment Protection. The increase in R32 quotas in this round is due to the reduction in HCFC quotas in 2025 and the strong consumption of downstream air conditioning units, and the additional quotas can also to some extent reduce the sudden risks posed by temporary quotas from the Ministry of Environment Protection. With strong supply constraints, the refrigerant market is expected to continue to be prosperous in the longer term. Recommended targets to follow: Zhejiang Sanmei Chemical Industry (603379.SH), Zhejiang Juhua (600160.SH), DONGYUE GROUP (00189), Haohua Chemical Science & Technology Corp., (600378.SH), Zhejiang Yonghe Refrigerant (605020.SH). Risk warning: Policies falling short of expectations, demand not meeting expectations, fluctuations in raw material prices.