August 18, 2025 11:54 AM GMT M Idea Morgan Stanley & Co. LLC Christopher Snyder, CFA Equity Analyst Chris.Snyder@morganstanley.com +1 212 761-4470 Brandon Knutson Equity Analyst Brandon.Knutson@morganstanley.com +1 212 761-4168 Toby Okwara Equity Analyst Toby.Okwara@morganstanley.com +1 212 761-1693 Christine Yao Research Associate Christine.Yao@morganstanley.com +1 212 761-4193 Multi-Industry Morgan Stanley does and seeks to do business with companies covered in Morgan Stanley Research. As a result, invest ...

Group 1 - The core viewpoint of the report is that the home appliance industry is expected to outperform the market, with positive expectations for major white goods companies in Q2 2025 due to the effective use of subsidy funds and a seasonal increase in demand [1] - Key recommendations include leading white goods companies such as Midea Group, Gree Electric Appliances, Haier Smart Home, and Hisense Visual Technology, along with a focus on TCL Electronics and companies like Bear Electric and Roborock that show potential for operational improvement [1] - The report highlights that the previous phase of subsidy withdrawal saw a resilient growth pattern in the industry, with core product categories maintaining positive revenue growth despite challenges [2] Group 2 - The impact of policy changes on the industry was concentrated in the earlier stages, with a notable adjustment in performance metrics during 2011, followed by a recovery phase where the white goods index outperformed the market [3] - The report draws parallels with the U.S. market, indicating that commercial HVAC systems have shown better performance compared to consumer appliances during economic downturns, suggesting a shift in demand dynamics [4] - Companies like Whirlpool have implemented price increases and enhanced dividend payouts to mitigate the impact of rising costs and maintain stable return on equity (ROE) amidst challenging market conditions [5] Group 3 - The anticipated impact of the old-for-new policy on overall white goods sales is estimated to be around 9% of the 2023 sales volume, indicating a limited effect on the overall market dynamics [6] - The diversification of leading home appliance companies is expected to further dilute the impact of policy changes on financial statements, suggesting a strategic advantage in navigating market fluctuations [6]