China's economic policy has kicked off 2025 with an expanded consumer stimulus program that analysts expect will benefit a range of select stocks. While the country has refused to hand out cash directly to consumers, since late summer it has subsidized some home appliance purchases through a barter program. Officials on Wednesday added microwaves, water purifiers, dishwashers and rice cookers to an existing list of eight categories of products eligible for a subsidy of up to 20% of the retail price. “The new measures should mostly benefit leading home appliance makers like Midea, Gree and Haier,” Jeff Zhang, an equity analyst at Morningstar, said in a midweek note. These companies were the three largest air conditioner producers by revenue in China last year. “We have raised our 2025-28 revenue forecast for Midea, Haier and Gree businesses by 2% to 5% to reflect higher sales expectations,” Zhang said. He also raised his 12-month price targets for all three stocks. Midea's Hong Kong-listed shares rose nearly 38% last year. Shares could rise about 26% from Friday's close based on Morningstar's price target of HK$96.70. After rising 29% last year, Haier's Hong Kong-listed shares still enjoyed a roughly 48% upside, measured by Friday's close of Morningstar's price target of HK$38.90. Gree, which is traded in Shenzhen, has seen its shares rise nearly 50% in the past year. Morningstar has a price target of 51 yuan, which equates to an upside of about 10% from Friday's close. Citigroup analysts maintained their buy ratings on the same three Chinese home appliance stocks following Wednesday's consumer stimulus announcement. Citi has higher price targets than Morningstar on all three: 64.50 yuan for Gree, 50.60 HKD for Haier, and 119.30 HKD for Midea. Risks to growth However, Citi warned that price wars and further weakness in the property market could also impact share prices. Home appliance prices fell by 3.3% in December compared to a year ago, according to official data released on Thursday. The figures highlight how consumer demand in China has remained weak since the pandemic as households continue to focus on future income. China is scheduled to release full-year retail sales and GDP numbers on Friday, January 17. The latest stimulus policy said that consumers who benefited from home appliance subsidies in 2024 can enjoy them again this year. The eight product categories on last year's list were refrigerators, washing machines, televisions, air conditioners, computers, water heaters, home stoves and range hoods. Officials said on Wednesday that they have already allocated 81 billion yuan ($11.05 billion) to support trade subsidies this year during the Spring Festival, which lasts from late January to early February. The support for the full year is due to be announced at an annual parliamentary meeting in early March. In the past few months, China's major e-commerce platforms have highlighted how they benefit from the trade subsidy program. Among companies, JD.com remains the top choice of Citi analysts for a consumer stimulus play next year, according to a Jan. 8 note. “JD.com is relatively better positioned to benefit from the continuation of this supportive exchange program especially given its prior experience, established system and procedures and strong supply chain capabilities to meet the growing demand for this new round of trade exchange initiatives,” Citi analysts said. More electronics, less food. Compared to its peers, JD.com tends to sell more electronics and home appliances than apparel or food. But there is increasing overlap between products as e-commerce platforms have grown over the years. Alibaba is Citi's second favorite e-commerce play when it comes to Chinese consumer stimulus policy. The online shopping giant sells products from big brands on its Tmall platform, and small merchants through Taobao. “With Tmall's strength with major brands and its big distributors, Alibaba is also likely to benefit from positive policy,” the analysts said. They expect PDD to benefit less compared to JD and Alibaba. Citi has a target price of $51 for American depositary receipts traded in Jordanian dinars, and $133 for American depositary receipts on Alibaba, implying an upside of 54% and 65%, respectively, from Friday's close.
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