As China steps into 2025, it has expanded its consumer stimulus efforts, a move that financial experts anticipate will favor a select group of stocks. Rather than directly handing cash to consumers, China has introduced subsidies for home appliance purchases through a trade-in scheme that started at the end of last summer. This week, the program widened its scope, now covering additional appliances such as microwaves, water purifiers, dishwashers, and rice cookers, all eligible for up to a 20% subsidy on their retail price.
Jeff Zhang, an equity analyst at Morningstar, noted that these changes are likely to benefit top home appliance manufacturers like Midea, Gree, and Haier. Last year, these companies were the leading air conditioner manufacturers by revenue in China. “We’ve increased our revenue forecasts for Midea, Haier, and Gree for 2025-28 by 2-5% to accommodate higher sales expectations,” Zhang mentioned in a note mid-week, while also raising the 12-month price targets for these stocks. Midea’s shares listed in Hong Kong appreciated nearly 38% last year and are projected to rise by about 26% from last Friday’s closing price, with a price target set at 96.70 Hong Kong dollars. Haier’s shares, also listed in Hong Kong, have a potential upside of almost 48% at the same price point, following a 29% gain last year. Gree’s Shenzhen-listed shares, which surged nearly 50% last year, have a price target of 51 yuan, offering about a 10% increase from the last closing price.
Citigroup analysts have reinforced their positive ratings on these three Chinese home appliance stocks following the announcement of the consumer stimulus initiative. Citi’s price targets are even more optimistic than Morningstar’s, suggesting 64.50 yuan for Gree, 50.60 Hong Kong dollars for Haier, and 119.30 Hong Kong dollars for Midea.
Despite this optimistic outlook, Citi analysts also flagged potential risks, cautioning that price wars and further weakening in the real estate market might impact stock prices. According to data from Thursday, home appliance prices in December dropped by 3.3% compared to the previous year. This decline highlights the persistent caution among Chinese consumers, who have been hesitant to spend heavily since the pandemic due to ongoing uncertainties about future income. China is set to release retail sales and full-year GDP figures on Friday, January 17.
This year’s policy allows consumers who received home appliance subsidies in 2024 to benefit again. Last year’s list of eligible items included refrigerators, washing machines, TVs, air conditioners, computers, water heaters, household stoves, and range hoods. Officials have already allocated 81 billion yuan (approximately $11.05 billion) to support these trade-in subsidies through the Chinese New Year’s Spring Festival, spanning late January to early February. Further details about the full year’s subsidies will be disclosed at a parliamentary meeting in early March.
In recent months, leading Chinese e-commerce platforms have been showcasing how they are reaping the benefits of the trade-in subsidies program. JD.com remains Citi’s top pick in the online retail sector for capitalizing on the consumer stimulus initiative in the coming year, according to a note dated January 8. “JD.com is well-positioned to take advantage of this continued supportive program, thanks to its previous experience, prepared systems and procedures, and robust supply chain capabilities,” according to Citi analysts.
Compared to its competitors, JD.com focuses more heavily on electronics and home appliances rather than clothing or food. However, there is increasing product overlap as e-commerce platforms have expanded over recent years. Citi’s second choice is Alibaba, which serves a diverse market through its Tmall and Taobao platforms, catering to both major brands and smaller merchants. “Because of Tmall’s strength with major brands and substantial distributors, Baba is likely to gain from this favorable policy as well,” the analysts added. They also noted that PDD might experience relatively lower benefits compared to JD and Alibaba. Citi has set a price target of $51 for JD’s U.S.-traded American depositary receipts and $133 for Alibaba ADRs, indicating potential increases of 54% and 65%, respectively, from last Friday’s closing price.
