Shenwan Hongyuan Group Co., Ltd. released a research report stating that as the second half of 2025 approaches, the high base effect from the 2024 trade-in policy stimulus is becoming more apparent. Production scheduling for major home appliances has weakened, leading to a decline in the sector's overall valuation. However, current valuations are near their lowest levels in recent years, highlighting the sector's attractive investment value. The 2024 trade-in policy had a significant impact, subsidies were expanded and increased in 2025, and the policy will continue into 2026. According to information from the Ministry of Commerce, the central government's enhanced support for the trade-in policy in 2024 led to sales of over 60 million units across eight major appliance categories, directly stimulating consumption exceeding 260 billion yuan. In 2025, consumers participated in the trade-in program for over 129 million appliances. As of March 15, 2026, trade-in sales of home appliances reached 17.13 million units, generating sales revenue of 69.44 billion yuan. The main views of Shenwan Hongyuan are as follows.

Demand Shows Marked Improvement, Valuation Awaits Rebound For the major home appliance sector, industry data indicates that cumulative domestic sales of air conditioners in 2025 reached 105.21 million units, a year-on-year increase of 1.0%. Quarterly domestic sales growth rates for Q1, Q2, Q3, and Q4 were +6.2%, +11.6%, +6.0%, and -29.4% respectively. Entering the second half of 2025, the growth rate of domestic air conditioner sales gradually slowed, with base pressure intensifying. In January 2026, domestic air conditioner sales reached 8.261 million units, a year-on-year increase of 14.5%, returning to double-digit growth, with the absolute monthly shipment volume hitting a new high since 2019. In the kitchen appliance sector, data shows that retail sales value of range hoods in 2024 was 36.2 billion yuan, up 14.9% year-on-year; gas cooktops reached 20.4 billion yuan, up 15.7%; electric water heaters/gas water heaters reached 23.6 billion/29.6 billion yuan, up 1.3%/8.8% respectively. The trade-in policy significantly boosted demand for essential kitchen appliances. In 2025, retail sales value for range hoods/gas cooktops were 34.91 billion/19.45 billion yuan, down 3.6%/4.9% year-on-year. While the trade-in policy continued in 2025, high base pressure from Q4 2024 persisted, yet retail data for traditional kitchen appliances remained stable.

Sector Valuation Rebounds from Bottom, Highlighting Investment Appeal In the first quarter of 2025, the major home appliance sector achieved high profit growth driven by overseas markets, with steady profit growth for the broader home appliance and major appliance sectors over the first three quarters. However, repeated changes in US tariff policies significantly impacted the North American market, increasing external shocks and uncertainty. Meanwhile, entering the second half of 2025, high base pressure from the 2024 trade-in policy stimulus became more evident, production scheduling for major appliances weakened, and the sector's overall valuation declined. Nevertheless, current valuations are near their lowest levels in recent years, highlighting the sector's attractive investment value.

Trade-in Policy Yields Significant Results, Boosting Sales Across Categories The 2024 trade-in policy had a notable impact, subsidies were expanded and increased in 2025, and the policy will continue into 2026. The policy was implemented in late July 2024. Analysis and comparison show that compared to the 2009 policy, the current trade-in policy is significantly stronger, mainly reflected in: 1) Broader category coverage; 2) Higher subsidy ratios; 3) Relaxed subsidy price caps; 4) Greater central government financial support. In 2025, the policy was expanded to include four additional categories: water purifiers, dishwashers, rice cookers, and microwave ovens. The 2026 subsidy policy is more focused, targeting six categories of Grade 1 energy/water efficiency appliances: refrigerators, washing machines, TVs, air conditioners, water heaters, and computers, with a subsidy standard of 15% of the final sales price, capped at 1,500 yuan. According to Ministry of Commerce information, the enhanced central support in 2024 led to sales of over 60 million units across eight major categories, directly stimulating over 260 billion yuan in consumption. In 2025, consumers traded in over 129 million appliances. By March 15, 2026, trade-in sales reached 17.13 million units, driving sales of 69.44 billion yuan.

Focus on Two Main Investment Themes 1) Dividends: Leading white goods and black goods companies possess the attributes of "low valuation, high dividends, and stable growth," offering both high safety margins and significant price elasticity. Domestically, the 2025 trade-in policy implementation continued to exceed expectations, and 2026 is expected to remain stable. For exports, leading major appliance companies have production bases distributed globally, enabling them to effectively manage international trade fluctuations like tariff changes. Furthermore, long-term demand prospects are positive in emerging markets such as Southeast Asia, South America, and the Middle East/Africa, which are expected to drive long-term growth for the home appliance sector. Leading white and black goods companies are currently at a value bottom. Continued recommendation is given to the combination of the three major white goods companies "Haier Smart Home (600690.SH), Midea Group (000333.SZ), Gree Electric Appliances (000651.SZ)" + the two Hisense companies "Hisense Visual Technology (600060.SH), Hisense Home Appliances (000921.SZ)." 2) Technology: Some home appliance companies, while deepening their core businesses, are actively expanding into emerging technology fields such as robotics, data center liquid cooling, and semiconductors, seeking cross-industry transformation and development. Recommendations include: Anfu Technology (603031.SH): stable cash flow from its core battery business, expanding through M&A and investment into a second main business; Huazhijie (603400.SH): ambitious incentive targets, with new businesses like liquid cooling, drones, and robotics poised for volume growth; Minbao Optoelectronics (301362.SZ): acquired Xiamen Zhizhen Precision to enter the high-growth PCB drill bit segment; Ugreen Group (301606.SZ): a new force in consumer electronics going global, with significant potential in AI+NAS.

Risk warnings include exchange rate fluctuation risk and raw material price volatility risk.