China has expanded its consumer stimulus program, aiming to bolster economic growth by including a broader range of home appliance categories. The initiative now covers microwaves, water purifiers, dishwashers, and rice cookers. Consumers purchasing eligible products can expect subsidies of up to 20% off the retail price. The government has allocated a significant 81 billion yuan ($11.05 billion) to fund these trade-in subsidies, which will run through the Spring Festival. This move is anticipated to significantly benefit leading home appliance companies like Midea, Gree, and Haier.
Morningstar equity analyst Jeff Zhang foresees substantial advantages for these manufacturers due to the stimulus expansion. The program will also positively impact e-commerce giants such as JD.com and Alibaba. JD.com, known for selling products from major brands on its Tmall platform and supporting smaller merchants via Taobao, stands out as particularly well-positioned to capitalize on this initiative. Citi analysts have set a price target of $51 on JD's U.S.-traded American depositary receipts, suggesting a 54% potential increase from last Friday's close.
"The new measures should mostly benefit leading home appliance manufacturers like Midea, Gree and Haier," – Morningstar equity analyst Jeff Zhang
Alibaba follows closely behind JD.com in benefiting from the policy changes. Citi has set a $133 price target on Alibaba's American depositary receipts, implying a 65% upside from last Friday's close. The home appliance market has already seen a 3.3% drop in prices this past December, further incentivizing consumer purchases.
"JD.com is relatively better/positioned to benefit from the continuation of this supportive trade-in program especially given its prior experience, prepared system and procedures and strong supply chain capabilities to capture growing demand on this new round of trade-in initiatives," – Citi analysts
The trade-in subsidies are not just a boon for appliance manufacturers but also for consumers who enjoyed similar benefits last year. These subsidies offer renewed opportunities for savings on essential household items. Morningstar maintains a price target of 51 yuan for JD.com, indicating about a 10% upside from recent figures.
For Haier, its Hong Kong-listed shares present nearly a 48% upside from Friday's close to Morningstar's price target of HKD 38.90. Citi's projections are even more optimistic, with higher price targets for all three companies: 64.50 yuan for Gree, HKD 50.60 for Haier, and HKD 119.30 for Midea.
"We lift our 2025-28 revenue forecasts on Midea, Haier and Gree by 2%-5% to reflect higher sales expectations," – Morningstar equity analyst Jeff Zhang
JD.com’s strategic position on platforms like Tmall is expected to leverage these trade-in incentives effectively. Similarly, Alibaba is poised to benefit significantly due to its strong brand affiliations and expansive distribution networks.
"Thanks to Tmall's strength with major brands and their large distributors, Baba will also likely benefit from the positive policy," – Citi analysts
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