The Zhitong Finance App learned that CITIC Construction Investment released a research report saying that starting in April, channels such as Suning/Jingdong/Douyin will join hands with major electronics companies to launch trade-in activities, and spontaneous activities on the enterprise side are expected to bring in increases. Looking at the specific operational level: Local governments/channels/manufacturers that are in a position to do so will all pay part of the subsidy. Due to the social discussion brought about by this publication at the central level, it will enhance consumers' awareness of change. The enterprise side, on the other hand, can tilt the original marketing budget towards the form of consumer subsidies to achieve a better conversion rate. The total amount of social allowances is expected to remain high, but the target may change to the enterprise side after achieving savings in marketing expenses. As a result, terminal sales are expected to maintain good growth in April.

CITIC Construction Investment's views are as follows:

How do you view Baidian's peak season sales and trade-in implementation path?

Terminal sales were stable overall in the first quarter. There was some accumulation before the peak season, and the overall inventory level was still healthy: according to industry online data, air conditioning production increased 17.3% in March and 20.9% in April, and the growth rate exceeded terminal sales sales; judging from the inventory situation, industry online data showed that Hisense channel inventory was around 2.5-March, and Midea was around 2.5 months. The absolute level was far lower than 15 years when the pressure to remove inventory was high. There is still room for inventory addition before the peak season.

How do you look at sales in the upcoming peak season? —There may be misjudgments in the trade-in implementation path market. In fact, starting in April, channels such as Suning/Jingdong/Douyin will join hands with major electronics companies to launch trade-in activities. Although at present, subsidies from the central government are still not in place, spontaneous activities on the enterprise side are expected to bring about increases. Looking at the specific operational level: Local governments/channels/manufacturers that are in a position to do so will all pay part of the subsidy. Due to the social discussion brought about by this publication at the central level, it will enhance consumers' awareness of change. The enterprise side, on the other hand, can tilt the original marketing budget towards the form of consumer subsidies to achieve a better conversion rate. The total amount of social allowances is expected to remain high, but the target may change to the enterprise side after achieving savings in marketing expenses. As a result, terminal sales are expected to maintain good growth in April.

White electricity export judgement — high growth is expected to continue into the second quarter

Beginning in the third quarter of 2023, the home appliance industry showed high growth in all categories under the influence of a low base and inventory replenishment. The first quarter of 2024 also showed rapid growth. Looking at current orders, there is no worry about revenue growth in the second quarter. Beginning in the third quarter, it is necessary to consider the base effect, and export sales will slow down; however, considering the impact of subsequent US interest rate cuts on existing home sales, it is expected that the US growth rate will increase in the second half of the year.

The trade-in policy is highly positioned, and implementation results can be expected

On March 14, the State Council issued the “Action Plan to Promote Large-scale Equipment Renewal and Consumer Goods Trade-In”. The “Action Plan” proposes that by 2027, the amount of waste household appliances recycled will increase by 30% compared to 2023, and the share of recycled materials in resource supply will further increase; the “Action Plan” clarifies 20 key tasks in 5 areas. The first is to implement equipment renewal actions. Promote equipment upgrading in key industries, speed up equipment upgrades in construction and municipal infrastructure, support the upgrading of transportation equipment and old agricultural machinery, and raise the level of education, cultural tourism and medical equipment. The second is to implement trade-in actions for consumer goods. Develop trade-in of automobiles and household appliances, and promote the exchange of consumer goods for home improvement. The third is to implement recycling actions. Improve the recycling network for waste products and equipment, support the circulation and trade of used products, promote remanufacturing and hierarchical utilization in an orderly manner, and promote a high level of recycling of resources. Fourth, implement actions to raise standards. Accelerate the improvement of energy consumption, emissions and technical standards, strengthen the upgrading of product technical standards, strengthen the supply of resource recycling standards, and strengthen the connection between domestic and international standards in key areas. The fifth is to strengthen policy guarantees. Strengthen fiscal policy support, improve tax support policies, optimize financial support, strengthen factor guarantees, and strengthen innovation support.

E-commerce platforms have successively implemented trade-in policies

With the intensive introduction of a number of favorable policies to promote consumption, policy rules are gradually being implemented. At the sales terminal, platform companies launched a series of trade-in activities to respond. On March 13, Suning Tesco announced an upgrade to the National Renewal Festival promotion, adding 10 billion yuan in trade-in subsidies to fully cover mainstream categories such as major appliances and mobile phones; on March 14, JD announced that it will invest 3 billion yuan in 2024 to continue to increase home appliance and home trade-in subsidies and service experience upgrades; Douyin e-commerce's “trade-in” service already supports door-to-door collection and collection for consumers in more than 2,800 districts and counties across the country; on March 8, Tmall said it will jointly invest 500 million yuan in 2024 to increase trade-in subsidies and expand trade-in subsidies The scope and intensity of product subsidies.

Home appliance companies have successively introduced policies to improve the efficiency of user replacement

On the brand side, home appliance manufacturers simultaneously launched recycling and replacement activities to capture users' replacement needs. Specifically, leading white electronics companies such as Midea, Gree, and Haier have all launched targeted innovative initiatives around alternative needs to provide consumers with convenient and integrated door-to-door services for recycling and renewal to ensure the efficiency of trade-in implementation.

How much potential is the demand for modernization

The bank's anticipated policy implementation method may differ from market expectations, but the total amount of corporate subsidies may be close to previous market expectations. Policy sensitivity calculation: Assuming that air conditioners and ice washers with a usage period of 5 years or more are replaced in 3/4/5 years; the sales CAGR corresponding to the replacement demand for air conditioners, refrigerators, and washing machines during the 3-year period is 31.49%, 34.28%, and 36.42%, respectively; the sales CAGR corresponding to replacement demand during the 4-year period is 9.05%, 10.59%, and 11.76%, respectively; the sales CAGR corresponding to replacement demand during the 5-year period is 0.92%, 1.99%, and 2.80%, respectively.

Hot summer is expected in 2024, and air conditioning sales may be favorable

According to weather forecasts, the forecast for the hot summer of 2024 is increasing. As a widespread wave of warming hit, the Yangtze River Delta and even the middle and lower reaches of the Yangtze River saw a wide range of temperatures around 30 degrees. For example, Lu'an, Anhui reached 31.8 degrees at 15 p.m. on March 29; on March 24, the four provinces and regions of Yunnan, Guizhou, Sichuan, and Guangxi experienced high temperatures above 35 degrees; 23 weather stations broke or leveled the record for the highest temperature in March, such as 34.2 degrees in Huaihua, Hunan and 33.6 degrees; Zhejiang was hotter than 35 degrees., more places have refreshed the highest temperatures in March Record. In the context of the country's early warming, air conditioning sales are expected to be favorable, and we need to focus on continuing hot weather conditions.

Risk warning: 1) macroeconomic growth is slowing; 2) overseas demand falls short of expectations; 3) raw material prices are rising; 4) supply chain operations are blocked.