The Zhitong Finance App learned that Galaxy Securities released a research report saying that on February 23, the fourth meeting of the Central Committee on Finance and Economics emphasized that speeding up product upgrading is an important measure to promote high-quality development, and that it is necessary to encourage and guide a new round of large-scale equipment updates and consumer goods trade-in. The National Assembly then reviewed and approved the “Action Plan to Promote Large-scale Equipment Renewal and Consumer Goods Trade-In”. The bank believes that with the gradual strengthening of domestic demand expansion and consumption promotion policies in the future, domestic demand for home appliances is expected to be supported. Combined with the gradual elimination of overseas inventories, the export improvement trend is expected to continue, the boom in the home appliance industry is expected to continue to recover, and the current sector valuation still has a margin of safety.

It is recommended to focus on three main investment lines: 1) white electric faucets that are expected to benefit from improved domestic and foreign sales, recommend Midea Group (000333.SZ) and Haier Smart Home (600690.SH); 2) kitchen appliances that are expected to benefit from optimized industry patterns, recommend Boss Electric Appliances (002508.SZ); 3) Clean appliances that actively promote channel expansion and accelerate the launch of new products, and recommend Stone Technology (688169.SH).

Galaxy Securities's views are as follows:

Pre-holiday preparations led to an improvement in domestic sales of air conditioners, and the export side grew strongly.

According to industry online data, sales of household air conditioners in January 2024 were 163.153 million units, up 56% year on year, of which domestic sales were 7.323 million units, up 62.7% year on year, mainly due to sales growth driven by the approaching Spring Festival holiday, the pace of early shipment, and the release of demand for replacement under the homecoming boom; export shipments of 8.9923 million units, an increase of 50.58% year on year, mainly due to strong overseas demand and early locking in preparation. Washing machine sales in January were 7.294 million units, up 17.26% year on year. Among them, domestic and foreign sales were 383.24 and 3.4616 million units, respectively, up 10.63% and 26.43% year on year. In January, refrigerator sales were 7.948 million units, up 34.56% year on year. Among them, domestic and foreign sales were 3.99 million units and 3.958 million units, respectively, up 36.24% and 32.91% year on year.

The sector rebounded strongly and performed better than the general market.

In February 2024, the home appliance index rose 9.88%, and the yield ranked 12th in the Tier 1 industry. The home appliance sector rebounded steadily and strongly, supported by improved domestic and foreign sales, and performed better than the Shanghai and Shenzhen 300 Index (9.35%). As of February 29, the industry's price-earnings ratio (TTM) was 14 times, lower than the historical average since 2008 (17.84 times). The sector's valuation compared to the overall premium rate of A-shares (after excluding bank stocks) was -37.52%, with outstanding allocation value.

The favorable policies have been published intensively, and space for “trade-in” home appliances can be expected.

On February 23, the fourth meeting of the Central Committee on Finance and Economics emphasized that speeding up product upgrading is an important measure to promote high-quality development, and that a new round of large-scale equipment upgrades and consumer goods trade-in should be encouraged and guided. The National Assembly then reviewed and approved the “Action Plan to Promote Large-scale Equipment Renewal and Consumer Goods Trade-In”. As the last round of large-scale household appliances sent to rural areas entered a period of centralized renewal, under the impetus of strong policies, there is some room for imagination in replacing household appliances with new consumption.

Risk warning: Risk of demand improvement falling short of expectations; risk of changes in raw material prices; risk of property recovery falling short of expectations; risk of uncertainty in home appliance exports.