The National Development and Reform Commission and the Ministry of Finance have issued a notice on several measures to support large-scale equipment updates and the replacement of old products with new ones.
According to Futubull Finance, equipment updates have received a new catalyst. The National Development and Reform Commission and the Ministry of Finance have issued a notice on several measures to support large-scale equipment updates and the replacement of old products with new ones. It proposed to lower the threshold for applying for ultra-long-term special national debt funds, and no longer require a total project investment of no less than 0.1 billion yuan, and support equipment updates for small and medium-sized enterprises; arrange about 300 billion yuan of ultra-long-term special national debt funds, and intensify the support for large-scale equipment updates and the replacement of old products with new ones.
In the field of equipment updates, the focus is mainly on industrial machinery, construction and municipal infrastructure, transportation equipment, agricultural machinery, etc. In the field of durable consumer goods, it will promote more intelligent, digitized, and green high-quality products entering the market, mainly focusing on household appliances, cars, and home improvement consumer goods.
From the perspective of equipment update scale, according to the data from the China Academy of Information and Communications Technology, as of the end of 2023, the stock of equipment assets in the whole society was about 28 trillion yuan, of which the stock of industrial equipment assets accounted for more than 70%, which is the focus of equipment updates. In 2023, the scale of equipment investment in key areas such as industry and agriculture in China is about 4.9 trillion yuan, of which the scale of equipment investment in the industrial sector is 4.4 trillion yuan, a year-on-year increase of 8.7%. Zheng Zhajie, director of the National Development and Reform Commission, revealed that the demand for equipment updates will continue to expand. A preliminary estimate is a huge market with an annual scale of more than 5 trillion yuan.
As of May 2024, the capacity utilization rate of industrial enterprises has rebounded to 74.9%, and the export prosperity index continues to recover. The expectation of improved operating performance is conducive to boosting corporate investment enthusiasm and promoting equipment update iteration.
In terms of the replacement of old consumer goods, the domestic home appliance industry has a large space for replacement. According to estimates, the scale of potential replacement of old five categories of home appliances is about 0.728 billion units, accounting for 25.52% of the year-end stock and 305.35% of the domestic sales volume in 2023. Based on the average sales price of the five types of home appliances published by the industry online, if all the potential replacement demand is released, the total sales revenue is about 2.3 trillion yuan.
Looking back at the performance of the sector during the last round of replacement of old home appliances, under the stimulus of policies and the recovery of industry prosperity, the home appliance sector index achieved higher excess returns and the industry's profitability improved. During the period of the replacement of old home appliances from 2009 to 2013, the home appliance index significantly outperformed the CSI 300 Index.
In addition, the replacement of old cars is expected to drive consumer spending of more than 750 billion yuan. According to the "2023 Chinese Automotive Replacement Consumption Insight Report" released by Autohome, in recent years, as China's automobile market has entered the stock stage, the annual sales of new cars generated by replacement have reached 6 million to 7 million vehicles, with a replacement rate of about 30%.
According to Wanlian Securities' estimate of the replacement rate, the potential total number of replacements is expected to be about 4.364 million vehicles under this round of subsidy policies. According to iFind data, the average unit price of new passenger cars purchased in 2023 is RMB 174,100. Based on this as the average selling price of new cars, the subsidy policy is expected to drive a total of about 759.69 billion yuan of automotive consumption.
Wanlian Securities sorted out the performance of the main subdivision fields involved in large-scale equipment updates and the replacement of old products with new ones. According to Q1 2024 financial data, among the 20 Shenwan second-level industries covered by equipment updates and the replacement of old products with new ones, 13 industries achieved a year-on-year increase in net profit attributable to mothers, and the net profit growth of auto parts, special equipment, and white appliances was higher.
China International Capital Corporation estimates that under the new round of large-scale equipment update policy, enterprises will invest a large amount of funds to purchase new technologies and equipment. This is expected to increase the scale of fixed asset investment and help enterprises transform to higher-end technologies and equipment, accelerating the release of new quality production efficiency.
China Galaxy Research Report also pointed out that this round of large-scale equipment update policy covers multiple fields such as industry, agriculture, construction, transportation, culture and tourism, education, and medical care. Promoting production digitization and modernization through equipment updates is conducive to promoting the development of new productivity, meeting the goal of energy saving and emission reduction, and helping the new cycle of Zhu Gela to open upwards again.
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Zoomlion Heavy Industry Science & Technology Co Ltd (01157): China Construction Bank International pointed out that under the promotion of globalization and product diversification, Zoomlion is entering a period of strong profit growth for many years. In the past three years, the company's global initiatives have achieved key milestones, including a compound annual growth rate of overseas income of 67%, major product breakthroughs in global markets (such as earthmoving and mining), and a strong sales network covering more than 100 countries.
Haier Smart Home Co Ltd (06690): Bocom International pointed out that the digital transformation of Haier has achieved remarkable results, and the significant improvement in expense ratio has led to better-than-expected performance of the first quarter on the profit end. For refrigeration and washing products that have already entered the stock market, combined with the company's strong competitive position in this market and the company's gradually strengthened old household appliance dismantling and recycling capabilities, Haier is expected to benefit from the implementation of the “old-for-new” policy.