Sinolink: 25 years of national subsidies opening up, the prosperity of domestic sales of household appliances is expected to continue.

Sinolink released a research report stating that the growth of domestic appliances maintained a high level in 2024, and with the stimulus of national subsidies in 2025, the domestic sales prosperity is expected to continue. It is recommended to focus on white goods and consumer electronics as the main layout direction. The advantages of white goods, such as stable performance and high dividends, are highlighted, while consumer electronics continue to optimize the shipment structure driven by "large size + new technology". It is recommended to focus on the following two main lines: 1) leading white goods companies with stable performance and high dividends, and 2) leading consumer electronics companies with high performance elasticity. Sinolink's main points are as follows: Review of 2024 domestic appliance national subsidy policy: Overall performance of appliances: Since the introduction of national subsidies, the growth rate of domestic appliances has continued to lead, with a record high monthly growth in December 2024. The total amount of domestic appliances in December reached 113.3 billion yuan, a year-on-year increase of 39.3%, setting a new monthly growth record for the year, with a 17% increase from November, and a total accumulation of over one trillion for the year. Performance of sub-sectors: The increase in sales volume of robotic vacuum cleaners and air conditioners is more significant, with improvements in both quantity and price for consumer electronics. The sales growth rate of robotic vacuum cleaners and air conditioners increased significantly before and after the national subsidy, with robotic vacuum cleaners being the most prominent. According to AVC Online, the online sales volume of robotic vacuum cleaners increased by nearly 70% year-on-year from September to December. Air conditioners continued to perform well even in the off-season, with a 35% year-on-year growth. There was a significant boost in both quantity and price for consumer electronics, with a 20% increase in quantity and a 12% increase in price during the period. What to focus on in 2025 regarding national subsidies for appliances: Pay attention to the differences in the new round of rules: Central expansion of product categories & increased support for 2025 subsidies have the following important changes: 1) Household appliance categories expanded to the 12 categories, with the addition of microwave ovens, water purifiers, dishwashers, and rice cookers. The number of air conditioner subsidies has increased to 3 units. 2) Continuation of the 2024 subsidy standards, with repeat subsidies for consumers who have already benefited. 3) The government has allocated 81 billion yuan in advance, with a focus on areas with good implementation. Pay attention to the potential of the lower-tier markets: Lowering the barrier & increasing the participation of small and medium-sized businesses, the potential of the lower-tier markets is expected to be activated. Statistics show that provinces with relatively slower economic development saw faster growth rates in the mid-to-late stages of the national subsidy program, possibly due to: 1) initially focusing on regions with more mature information infrastructure, with towns connecting in the mid-to-late stages, and 2) as understanding of the policies and eliminating concerns about reimbursement increases, the willingness of small and medium-sized businesses to participate also increases. The 2025 national subsidy policy emphasizes the optimization of participation thresholds. With an increase in the number of participating businesses and an expansion of coverage in towns, the consumption potential of the lower-tier markets is expected to be unleashed. Pay attention to the stimulus effect of the 2025 subsidies: Domestic appliance sales as a whole are expected to achieve single-digit growth in 2025. Domestic appliances have a large potential for replacement, and under the guidance of policies, they are expected to return to a normal growth pace. The following considerations are made for the effect of subsidies in 2025: Overall domestic appliances: Using the leverage ratio of the 2024 national subsidy as a reference, the incremental effect of national subsidies on domestic appliances in 2025 is estimated. To do this, it is necessary to determine, 1) the leverage ratio of the 2024 subsidy: calculating the total amount of domestic appliances without subsidies based on the growth rate of domestic appliances in January-August 2024, and comparing the actual value with the calculated value to determine the leverage ratio. According to calculations, the leverage ratio of the 8 categories of domestic appliances in 2024 was approximately 1.2 times. 2) Total amount and effect of 2025 appliance subsidies: The total amount of subsidies in 2025 may be adjusted according to the performance of end consumers, and the leverage effect of subsidies in 2025 may also fluctuate compared to 2024. A sensitivity analysis is conducted, assuming a subsidy scale of 80 billion yuan in 2025 and a leverage effect of 90% of the 2024 level. Under this neutral assumption, it is expected that the overall domestic appliances in 2025 will achieve a growth of 5%. Sub-sector industries: Household appliance demand is divided into new home demand and replacement demand (including additional demand and inventory changes for consumer electronics). Assuming that the shipment growth rate in Q1-3 of 2024 is the natural growth rate without subsidies, the subsidy-driven amount for 2024 is calculated, and the subsidy-driven amount for 2025 is estimated. Considering that the actual leverage effect may be weaker in 2025 due to the period of subsidy extension, it is assumed that the effect in 2025 is 90% of the 2024 level. According to calculations, it is expected that the domestic shipment volume of air conditioners/refrigerators/washing machines will achieve growth of +6.7% / +3.1% / +4.2% respectively in 2025, with a significant improvement in the structure of televisions under the stimulus of national subsidies. Additional consideration is given to the impact of changes in average prices on shipment value, with the television internal sales expected to achieve a growth of +3.9% in 2025. Risk warning: Risks associated with fluctuations in domestic and international demand, increased industry competition, exchange rate fluctuations, tariff risks, and risks associated with fluctuations in raw material prices.