On March 1, the National Standing Committee reviewed and approved the “Action Plan to Promote Large-scale Equipment Renewal and Consumer Goods Trade-In”, which states that a new round of large-scale equipment renewal and consumer goods trade-in should be promoted, and that the trade-in of consumer goods such as automobiles and home appliances will be actively carried out to form a large-scale effect of upgrading.
The Zhitong Finance App learned that on March 1, the National Assembly reviewed and approved the “Action Plan to Promote Large-scale Equipment Renewal and Consumer Goods Trade-in”, which states that it will promote a new round of large-scale equipment renewal and consumer goods trade-in, and actively carry out trade-in of consumer goods such as automobiles and home appliances, to form a large-scale effect of upgrading. Furthermore, the Ministry of Commerce has previously proposed that it will focus on stabilizing and expanding consumption of household appliances and household appliances this year. The Tianfeng Securities Research Report pointed out that the emphasis on policies referring to “trade-in” will facilitate the release of demand for home appliance stock renewal. At a time when growth and stock coexist in the domestic home appliance industry, along with the implementation of this round of home appliance trade-in policies, it is expected to bring greater demand and potential for upgrading. Related targets: Hisense Home Appliances (00921), Haier Smart Home (06690), JS Global Life (01691).
According to statistics from the Ministry of Commerce, China's automobile and home appliance market has moved from a simple “incremental era” to an “era of equal emphasis on growth and stock.” In 2023, the number of cars owned is about 340 million, and the number of household appliances in major categories such as refrigerators, washing machines, and air conditioners is over 3 billion. Some household appliances have been in use for more than 10 or even 20 years, and there is great demand and potential for upgrading.
According to the Everbright Securities Research Report, the amount of household appliances and automobiles scrapped has shown a gradual upward trend in recent years, and the market potential is huge. Based on the 20-year scrapping rate of 5%, the number of scrapped cars nationwide reached 16.8 million in 2023; the number of scrapped household appliances is also on the rise, and the amount of scrapped household appliances is expected to exceed 200 million units in 2022.
Looking back at history, “trade-in” has repeatedly been a key factor in activating the home appliance market in the past. In 2009, the country successfully activated the domestic market through “home appliances to the countryside” and “trade-in” strategies.
From June 2009 to 2011, the central financial administration earmarked a total of about 30 billion yuan in subsidy funds for home appliances to local authorities. Driven by this policy, color TV accounts for 45% of the sales structure, becoming the biggest beneficiary, while sales of air conditioners, refrigerators, and washing machines are also relatively balanced, accounting for 13%, 15%, and 16%, respectively.
According to data from the Ministry of Commerce, since the implementation of the policy on June 1, 2009, the home appliance trade-in policy has boosted the consumption of household appliances by a total of 30.42 billion yuan, sold 81.296 million units of new household appliances, and recycled 83.733 million units of used household appliances. By 2011, a total of 92.48 million new household appliances had been sold nationwide, directly driving consumption of more than 342 billion yuan.
“Trade-in” is an important part of promoting the circulation of household appliances and plays an important role in expanding the consumption of household appliances. According to the forecast of the China Household Appliance Service and Maintenance Association, in the next 3 to 5 years, new demand from high-end users in the home appliance market will gradually rise, and the stock conversion, mainly “trade-in,” will increase by more than 50%.
On February 23, the Central Committee on Finance and Economics emphasized the trade-in of traditional consumer goods such as home appliances, demonstrating the importance attached to promoting domestic demand and optimizing the consumption environment throughout the year. Compared with the previous round of trade-in policies, the current domestic home appliance market has a larger stock, and there is room for renewal demand. With subsequent national and local capital investment, demand for industry upgrading is expected to be better released. At the same time, the increase in the concentration of the domestic home appliance industry is expected to enable leading enterprises to fully benefit from favorable policies and seize greater growth.
Starting in 2023, with the gradual relaxation of real estate regulation policies, the home appliance industry has ushered in new development opportunities. In particular, driven by factors such as the renovation of old neighborhoods, changes in real estate market policy orientation, and the relaxation of purchase restriction policies in first-tier cities, the recovery momentum of the home appliance market will become more and more obvious, especially in the field of color TV and kitchen appliances. This not only marks a recovery in the market, but also indicates that the home appliance industry is about to usher in a new wave of growth.
Tianfeng Securities released a research report saying that the emphasis on policies mentions “trade-in” to facilitate the release of demand for home appliance stock renewal. Compared with the previous round of trade-in policies, the current domestic home appliance market has a larger stock, and there is room for renewal demand. With subsequent national and local capital investment, demand for industry upgrading is expected to be better released. At the same time, the increase in the concentration of the domestic home appliance industry is expected to enable leading enterprises to fully benefit from favorable policies and seize greater growth. The bank believes that at a time when growth and stock coexist in the domestic home appliance industry, along with the implementation of this round of home appliance trade-in policies, it is expected to bring greater demand and potential for upgrading.
According to the Guotai Junan Research Report, this new round of traditional consumer electronics trade-in activities is expected to be promoted on a national scale. It is expected that the implementation effect will be superior to scattered local and voluntary subsidies. The combined publicity effect is expected to better drive the vast market, especially consumers in rural areas and third- and fourth-tier cities, to renew their desire to renew. If the policy is introduced, it will bring huge demand for stock renewal to the market. This will also have a positive complementary and driving effect on the domestic home appliance market outside the post-cycle real estate chain.
Related concept stocks:
Hisense Home Appliances (00921): On January 9, the 2024 International Consumer Electronics Show (CES2024) was held in the US. Hisense showcased full-scene display technology solutions such as the world's first 8K screen sound laser TV and the world's first 4000+ zone miniLED TV to break the boundaries of display screens and reshape the future of the scene.
Haier Smart Home (06690): Daiwa released a research report in November last year that Haier Smart Home's net profit for the third quarter rose 13% year on year to 4.2 billion yuan, in line with market expectations. Although it is believed that moderate retail sentiment in overseas markets will temporarily hinder profit margin expansion, it is optimistic about its potential for long-term profit margin improvement. The company's valuation was extended to 2024, and the target price was increased by 3% from HK$29.2 to HK$30.
JS Global Life (01691): On December 15 of last year, Joyang Co., Ltd. announced that the company plans to increase its capital to the company's wholly-owned subsidiary Joyang Hong Kong Company by US$200 million to help enhance the company's competitiveness in the global market through Joyang Hong Kong's investment in the Hong Kong Special Administrative Region to build the Joyang Hong Kong Smart Home Appliance Technology Innovation Center project in the Hong Kong Special Administrative Region. JS Global Life is an indirect controlling shareholder of Joyoung Co., Ltd.